[ by Howard Haykin and Melanie Gretchen] Royal Bank of Scotland last week awarded CEO Stephen Hester a $1.5 million bonus.  Government officials and citizens from around the world rose in unison to denounce the award - and C-I admittedly was one of the detractors.  After all, RBS is still on life support from the U.K. government, which continues to hold an 83% stake in the bank.   Mr. Hester responded appropriately, we thought, by announcing the following day he would waive the bonus. Yet, learning on Wednesday, from Mr. Hester himself, that he had authorized to date $60.5 billion to restructure the company, revealed that he inherited a very sick company - no thanks to the ill-sighted Sir Fred Goodwin, his predecessor, who last week was stripped of his knighthood.  And, more restructuring is needed, that will cost additional untold billions.

Imagine, if you will, spending $60.5 billion on restructuring a company - and that's just an interim bill.  It's likely that you can't begin to imagine, in part because it's inconceivable to imagine that this respected financial institution could had fallen so far.  Yet, it did and the institution continues to suffer the pains of prior mistakes by management.  Who is it who said, 'It's cheaper to raze the whole thing and start from scratch?'

Whole new view of RBS Chief Hester. With that in mind, we now have new empathy for RBS chief Stephen Hester - for the work, dedication and effort he's expended.  So much so, that we're inclined to recommend that Britain bestow upon Mr. Hester the knighthood that Britain stripped from his predecessor, Fred Goodwin. Past and Future Costs. After a $71 million government bailout 3 years ago, the Royal Bank of Scotland has had to finance most of the restructuring cost of £38 billion ($60.5 billion).  We learned about this astronomical figure because embattled CEO Stephen Hester stated it in a rallying memo to staff days after he waived the 1 million pound bonus. Given the enormous bonuses that are bestowed on executives at American financial institutions - even when they are reducing hundreds or thousands of jobs at the staff level - we can only ask why should Mr. Hester have been forced to forgo his well deserved bonus that pales in comparison to the costs to return Royal Bank of Scotland to some semblance of its former image.   Composition of the $60.5 Billion Cost to Date. Much of that cost has gone to writing off or writing down bad loans and assets, disposal costs, and restructuring charges taken since the bank nearly collapsed in 2009.  Ultimately, if the U.K. government remains committed to the entire restructuring process, it is estimated by those close to the situation that the final bill can surpass the price paid by the government for its 83% stake. Mr. Hester emphasized these costs in his internal memo to bank employees.  He concluded by exhorting his staff to believe in the bank's mission:  "There is no doubt that our position in the spotlight makes the job harder.  But the best way to deal with it is to prove the critics wrong." Compliance Insights joins those who still have faith in Stephen Hester and RBS, and wish the bank and its staff all the luck in completing its mission.  There's little else for outside observers to watch and support the effort.  It will be a glorious day when the bank and its rank and file staff can rally around CEO Hester's words, "Mission Accomplished." We'll see how it goes. For further details: [CNBC, 2/8/12].