LONDON, Feb 23 (Reuters) - Royal Bank of Scotland cut Chief Executive Ross McEwan's pay package by 6 percent to 3.5 million pounds ($4.88 million) in 2017, when the bank reported its first profit in a decade but still overshadowed by its treatment of small businesses.
McEwan, appointed in 2013 and tasked with overhauling a bank loaded with toxic assets, has seen his pay grow from 378,000 pounds since then. In 2016, he was paid 3.7 million pounds.
The decline in his 2017 payout was due to a fall in long-term incentive awards calculated on the executive's performance, with his fixed pay and other benefits unchanged.
The Chair of RBS's pay committee Robert Gillespie said the payout reflected that the bank performed well on financial measures but missed targets to improve customers' trust.
McEwan has waived his annual bonus since joining the bank, still 71 percent owned by the taxpayer after its 45.5 billion pound bailout in 2008.
The bank said its group bonus pool for 2017 was 342 million pounds, compared with 343 million the year before.
Bankers pay has become a point of contention in Britain, particularly for banks receiving government bailouts that the public blame on reckless lending and poor corporate governance.
Another issue still hanging over the bank is a multi-billion dollar case with the U.S. Department of Justice over RBS's sales of toxic mortgage-backed securities.
The case is an example of historic misconduct that New Zealand-born McEwan has struggled resolve. Another is a saga over the bank's Global Restructuring Group, a turnaround division accused of cashing in on troubled clients.
But RBS has rid itself of some of past problems, including closing a "bad bank" it set up to sell more than $2 trillion in unwanted assets.
($1 = 0.7176 pounds) (Reporting by Emma Rumney, additional reporting by Lawrence White, editing by Sinead Cruise)