Firefighting the bankers

Outer Circle

If Goodwin repudiates his pension then Brown must do likewise. Then the BoE, FSA, Treasury and Cabinet.

Chuck Unsworth

Does anyone seriously believe that a) Darling was entirely unaware of Goodwin's pay-off and b) that he couldn't get Myners to extract instant answers from Goodwin or the Board?

Firefighting? I don't think so. This is much more like just hoping that no one will find out - by all parties to this scandalous behaviour.

Mike, Brighton

It's laughably pathetic.
Is our government finally reduced to begging rich bankers not to embarrass them?
"Sir Fred, please please don't take all the pension you are contractually and legally entitled to because it looks politically bad". No wonder Fred hasn't replied!

Next - "The Sir Fred Goodwin Pension Appropriation Bill 2009" to seize his pension which would get overturned by the ECHR!

Ivy Eileen

"Lord Myners has left a message" - wowee, that'll tell him what's what!

Why hasn't anyone in or around the Treasury summoned him to a meeting and told him a few facts of life (viz, his pension (on top of his millions in earnings over the years) stinks in view of what has happened under his Chief Executiveship).

oldtimer

It is certainly embarrasing but not as damaging as the remarks made yesterday by Lord Adair, Chairman FSA, on the politicians desire (insistence?) on light touch regulation of bank lending. This subject deserves a thread of its own as it deals with an issue fundamental to the Spectator`s wiki enquiry.

JohnAnt

What sort of government eejits manage to aid and virtually nationalise an entire bank without checking the outgoing CEO's emoluments? Does anyone believe even they, remedially thick as they are, might have been ignorant of the terms of his pay off? So both stupidity and deceit are at work. No change there.

Plato-says

Whilst I don't think Freddie should have got this massive platinum eff-off, it's laughable that this is the best the Gov can do.

Completely agree that this is a much more politically awkward story. The zillion pounds given to the banks means nothing to the chap in the street but 650k a year is footballer pay.

Sally Chatterjee

I thought one of the first things the new City minister Paul Myners did was approve Goodwin's retirement package? In other words, hasn't Treasury already given its blessing to this cosy deal?

mac

And these pantomime dames are going to instruct the G20 how to save the World? Ha!

I imagine that the London embassies and high commissions of the other G20 member report back to their capitals on this endless pantomime. The news must provide belly-laughs aplenty: "Sir/Kanzler/Mr President, here's the latest despatch from London; you'll never guess what Brown's claiming now . . ."

Mick

can we have clawback on the pensions of failed politicians please?

GeoffH

"Sir Fred, please please don't take all the pension you are contractually and legally entitled to because it looks politically bad".

It's time these contracts were tested in law.

Someone who's reckless mismanagement of his company can hardly be said to have fulfilled his side of the contract.

In fact, it looks more likely that the Sir Freds of this world have been guilty of gross misconduct in office and should have been summarily dismissed.

With some clawback from his earnings and his pension pot.

HFC

For God's sake, How does anyone need £650,000 per annum? It is more than most people will earn in a lifetime. After tax, it'll leave around £1,000 per day to spend - on what? The man must have millions stashed away from his income pre collapse. He doesn't need (or deserve) any pension.

mike livingstone-evans

George Reynolds , ex owner of Darlington Football club and former safe breaker stated:-
the biggest crooks he ever met wore expensive suits in the City of London.

Tiberius

Brown has now said the courts will be used if necessary to pursue such arrangements.

But as Sherriff Woody said to Buzz Lightyear (when he said he wanted to save a fellow toy from the boy next door), "I sure would like to see you try".

cuffleyburgers

HFC - who are you to determine how much he needs?

I happen to agree that he should have been sacked in disgrace along with half a hundred other senior people, the same goes for Brown, Darling, and the CEOs of rating agencies and auditors.

Fact is these banks were "too big to be allowed to fail" ergo, the state was always going to have to bail them out, ergo this was effectively a sizeable liability that was accruing over a number of years which was not picked up on or commented on at the time.

When the brown stuff finally did hit the fan Mr Goodwin did what some people do in these circumstances, he resigned, and a package was agreed with him.

There is no justification at all for clawing back a penny of it.

However, if it can be established that there has been malpractice, dishonesty or negligence, then I would assume there is a case to be made for the biggest malpractice lawsuit of all time, which should beggar the lot of them.

But to return to my original point, it is not for you, or for me or for Brown or HM the queen or the pope to pronounce on how much he needs for his pension.

Alloctaing resources on the basis of some arbitrarily perceived need is the road to ruin.

Darling - what a prize pillock.

jon dee

At the time of the first bank bail-out the Chancellor stressed that taxpayers were "safeguarded" by the "strings attached" and that "credit lines would open".

None of this was true and the money sank into the bankers swamp and was lost.

You are right to suggest that this government could'nt negotiate its way out of a paper bag, as pensions and bonuses further enrich the culprits.

Despite the grand speeches from Brown, and we'll hear more from America, he is not managing the recession, and it shows.

Hereford

See the following for the true article attached to this picture:
http://www.thedailymash.co.uk/news/business/aha-ha-ha-ha-ha%2c-says-goodwin-200902261605/

oldtimer

According to comment on the FTalphaville markets live site, the Goodwin pension deal was a trade off between foregoing his salary entitlement on being fired and getting instead a pension pot as if he worked to 60. This appears to have doubled his pension pot from £8m to £16m! This deal was agreed by Lord Myners, the government minister - who is now asking him to give it back!

Paul Brough-Chisolm

I wonder if Mr Shread maybe forming a union with other ex-execs to make a united stand / hand back, probably doesn't want to act singularily, this isn't just about the RSB results.

John WIlkes

Sorry to sound a dissonant note, but no one seems to have any respect for the law of contract anymore. Having been inspired by this blog to read "Atlas Shrugged" (a good read if only for its resonance with our times) one of the things it emphasises is the need to keep to a bargain rather than have the government going around expropriating everything on the grounds of someone else's need. It may have been a very bad bargain to give him such a pension in the first place but bargain it was. Are all your readers in favour of the abandonment of private property rights? Not the Spectator I know and love.

cuffleyburgers

John Wilkes - my point exactly, rather more neatly made.

C Powell

This is just spin - and pathetic spin at that, sent to us via Peston (breathlessly announcing that he had "just found this out" - yeah, right, told more like by one of his mates at No. 10 or No. 11) to distract us from the much more damaging statements made by Lord Turner yesterday which place at least part of the blame on the politicians in charge who laid down the parameters for what the regulators could and could not do.

See also what Mervyn King says today - http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/4839089/Mervyn-King-Regulators-unable-to-stop-City-banks-taking-risks-due-to-Government.html.

Goodwin is not the sole person responsible for this mess. Furthermore, his leaving package including his pension were agreed last October when the Government was in charge. Are we seriously meant to believe that the Government didn't know about this and agree to it? If it did, then Darling and Brown have no business making the statements they're making. Goodwin should tell them to get stuffed and say publicly that his pension pot was agreed by the Government. And if the Government didn't know then it was negligent; Goodwin should tell it to get stuffed and dare it to take him to court. I doubt if they'd have a legal basis for it or the balls, frankly.

It's all very well going on about greedy bankers but there were a lot of greedy consumers as well, who wanted things they could not afford. The greed was not all on one side and it's about time someone said so rather than this excessive focus on one individual, which is becoming a bit like a lynch mob.

As for the idea that he doesn't "need" such a pension, why is this relevant? And who is going to define "need"? The government? Be careful what you wish for because I'm sure the likes of Harman and her ilk would love to define for us what we "need" and soon we'll have 100% income tax with a few pennies given to us as pocket money because we don't "need" any more.

There is also a more serious point: a contract is legally binding. If we're going to start tearing up contracts because of whatever emotional spasm is afflicting the government or the nation at the time, what on earth do you think this will do to Britain's reputation as a place to do business? What do you think it will do to our belief in the rule of law? We may as well be a banana republic at that point.

This government has done far too much to undermine the rule of law over the last 12 years. We should deplore what is now going on, whatever our views of Goodwin's conduct as chief executive. (My personal view is that there are lots of people who should start voluntarily giving up their pension rights, starting with Ministers, MPs, the FSA etc - who were paid out of our funds for years - before we start getting to chief executives.)

George Laird

Dear All

What is in it for Fred Goodwin to give up his pension?

Nothing.

Did the banking Minister, Lord Myners also ask his wife if she wants to give up her share of his pension?

Why should she be punished for something that is not her fault so that Labour and Myners can have a few columns inches before a paper gets used as a chip wrapper?

What if Goodwin says yes and asks that the entire cabinet and Labour MP to also give up their pensions?

Anyone see Brown, Straw, Miliband or anyone else doing it?

This was a stupid ask from a Labour Party so out of touch.

Yours sincerely

George Laird
The Campaign for Human Rights at Glasgow University

Paul B

Just tell Sir Fred to foxtrot oscar and we will see him in court.Its disgrace, a bloody bloody disgrace that this man will earn more in one year pension than I will earn in a lifetime and this is after screwing the country.Bow locks to contracts, see you in court, in front of a jury. Its time there was some proper anger and action, the bastard has taken food out of my kids mouths and their, yes THEIR need is greater than his and millions more like him.

GeoffH

"Having been inspired by this blog to read "Atlas Shrugged" (a good read if only for its resonance with our times) one of the things it emphasises is the need to keep to a bargain rather than have the government going around expropriating everything on the grounds of someone else's need."

But Sir Fred did not keep his side of the bargain. That is to manage the Bank responsibly.

He was reckless in pursuit of ABN Amro. He failed in his basic duty to his shareholders.

He broke his contract.

Ergo, there is no contractual duty to meet his salary etc. In fact he was lucky not be dismissed for gross misconduct

Diane E

This was posted on political betting:
Apparently the deal was:

When Goodwin was told he was leaving he said OK, will waive rights to salary etc, but want my full pension as specified in [RBS] accounts. This provided for directors to be paid as if they had worked until 60.

Discussion and agreement took place between Sir Fred, Sir Tom KcK, Bob Scott and Paul Myners [City Minister] back in October.

http://ftalphaville.ft.com/blog/2009/02/26/52969/markets-live

Oops!

by join to choose February 26th, 2009 at 1:24 pm

Ivy Eileen

@ Wilkes and cuffleyburgers -

I don't think the majority of posters are disagreeing with you. What seems to be the complaint is that (a) this man has monumentally b****d up" in steering RBS onto the rocks, without any apparent financial consequence to him and (b) the Govt. is making a right pig's ear of dealing with it and associated matters (e.g. "a message with Goodwin that the pension doesn't look good and asking whether he could decline some of it").

Yes, this man has a contract; yes, he has entitlements under that contract - all fairly negotiated and at arms' length - and, yes, he has had that contract prematurely terminated. But has he broken the terms of that contract, has he been in breach of his fiduciary duties as a director of RBS - he would appear to have bankrupted RBS and he appears not to know the first principle of banking which is that all banks are technically insolvent, which is why there are Solvency and Asset ratios and Capital Adequacy ratios.

Unfortunately, he probably has a "get out of jail card" in that he can plead (i) the Govt. encouraged the banks, (ii) the FSA as regulatory authority didn't object, it seems, (iii) he was able to tick all the boxes and (iv) his fellow directors agreed with his policies.

But today's Investors Chronicle is calling the bail-out a "Right Bloody Shambles".

As regards "no one seems to have any respect for the law of contract anymore" and "the need to keep to a bargain rather than have the government going around expropriating everything on the grounds of someone else's need", have a look at The Bradford & Bingley plc Transfer of Securities etc Order 2009, effective last 20th February,which provides that payments of principal and interest on B&B's dated subordinated bonds "shall not become due and payable" except (i) when B&B notifies that [they] are to be paid (and when) and (ii) only if B&B has first satisfied its liability to the FS Compensation Scheme but also "only to the extent that B&B could make the payment and continue to be solvent"...... and bondholders of other bank and former building society subordinated issues are concerned this will be extended to them.

What's happened is that normally mild-mannered people are becoming exasperated at an increasing and continuing shambles that has enormous financial consequences for the future of the country.

Apologies, I've gone on too long.

David Lindsay

No subsidy without equity.

We can win this one.

GeoffH

Ivy Eileen. Spot on!

Here and elsewhere there's been a lot of self-righteous pontificating about contracts and how not paying bankers bonuses or in Sir Fred's case his humungous pension way in advance of pensionable age is just some sort of vengeful, mob-rule inspired by socialism.

I speak only for myself, a Conservative voter of many years' standing, but simply do not believe that bank executives at this level who have trashed their banks and put the UK banking system at risk can claim to have performed their duties in full accordance with the contracts of employment and, hence, withholding bonuses or early pensions can in anyway be said to be a breach of contract.

But, hey, let's put it to the test. Stop the cheques to Sir Fred and let's see him in court as test case for all the others.

Let's be frank, we've been here before with failed executives walking away from the wreckage of their mistakes with little to differentiate their failure from the rewards they would have took if they had not failed.

But that was generally a matter for them and the company's shareholders; if they were content to take the hit for the sake of a quiet life and pin their hopes in recovery under new management, then that was their concern.

In the case of RBS and the others failed banks, it's a different story now. I and the other taxpayers are now involved. And I'm simply not prepared to see my taxes higher for years to come, my company pension weaker, the returns on my savings lower and public services weaker simply while the Sir Freds of this affair can simply take their rewards without risking punishment for their failures.

It offends the law of contract. It offends natural justice.

It is simply not right.

Ian C

If an army or police officer had been sacked for their professional equivalent misconduct they would have departed without any benefits. The same can be said of a great many other walks of life.

Why a senior banker should walk away with a massive pension (even as opposed to just a liveable one) is beyond me. And he should not have been able to draw on it until his Normal Retirement Date under the scheme (60/65). To be allowed to 'retire early' is to imply that he went voluntarily and because his career was curtailed by events beyond his control.

If the excuse is that he won't work again in senior management then he should be told to earn a living the same way anyone else with limited options has to.

This is a prime example of one rule for senior executives of public(ly funded) companies and one for the rest. A legitimate charge of unfairness can be levied and those of who, like me, are not fans of the 'egalitarian lobby' should understand why examples such as this are so damaging.

HFC

Cuffleyburgers.

You ask who I am to have an opinion. Bloody cheek; who the hell are you then, that you have such audacity?

I'll tell you who I am - I am the ordinary bloke who had a modest shareholding in each of the major banks and, without any financial background, saw in June '07 that the party was becoming overheated and sold my shareholdings.

Does this make me smarter than some? Probably.

WRT Goodwin, he ain't much of a banker if he didn't manage to invest some of his income over the years in some sensible places. Thus I care not a jot for his wife and children; they'll be better off than I am or ever be.

Incidentally, I had a pension contract with my long-term employer. But they rewrote the terms to allow hevy disounting of pensions paid on retirement before age 65. Thus, when I was turfed out at age 55 I received a pension rather lighter than I had expected.

Rules? Contracts? It's the arrogant bastards who make the rules and draw up the contracts who feather their nests.

So allow me to have my opinion, however much you may disagree with it.

C Powell

@Ivy Eileeen and Geoff H: the time for taking disciplinary action against Sir Fred was last October when the Government should have said you're out without compensation. Even so, I doubt they could have cancelled his existing pension rights, though it was damn stupid to increase them.

And whose fault was that? The Government for agreeing to all this so it's a bit rich of it now to start complaining.

@Geoff H:
"He was reckless in pursuit of ABN Amro. He failed in his basic duty to his shareholders.

He broke his contract."

Sentence 1: true; sentence 2: may also be true but remember the shareholders - who are the owners of the bank - approved the deal. If they hadn't, the deal wouldn't have gone ahead. Sentence 3: doesn't follow from 1 & 2. But in any case it's too late now to start bringing disciplinary action.

Paul B: if the government takes legal action to cancel Sir Fred's pension and it goes to court, it will go before a judge not a jury. And I can assure you that a judge will look at the law not what people feel or what the papers say. So if the government wants to go down this route it had better take some pretty good legal advice.

Whatever our feelings about how stupid/negligent people have been I don't want to live under a government which takes arbitrary actions on the basis of headlines it has spun to cover up its own sorry role in the mess we're all in.

As for going to court, this won't

Alf Tupper

Fred Goodwin did the deal with the necessary authorities and the money is his by right. All £12,500 per week. AGED 50. On top of his millions already 'earned'.

I would not want him to give up a penny of it.

As it stands, he is a shining example to everyone, of the extent to which the financial sector have gorged themselves to an obscene extent.

Whilst we are left with the £billions of debt that he landed his bank with.

I note the phrase 'Wealth Creators' has lost its vogue in recent months.

giles bovill

I predict anger on the streets in spring.
Anyone know the date for the rally against the government? When will brown step down or go?

Fred

In a police state, it is normally enough to bully people to get them to do things. Brown and Darling are only doing what they think is natural.

EC

Fred Goodwin must be laughing all the way FROM the bank!

GeoffH

C Powell: "But in any case it's too late now to start bringing disciplinary action."

But we are the shareholders now and it's never too late to bring disciplinary action - either against the Directors or the Government.

And stop whining about

GeoffH

C Powell. You say the failures of Goodwin over ABN Amro did not amount to a breach of his contract of employment.

Well, what would have? If breaking the bank is not a breach then it's hard to envisage what could have been.

Take any other job and failure to perform results in disciplinary action and/or summary dismissal.

In Goodwin's case, I just don't see how anyone can argue that the ABN Amro takeover amounted to anything less than gross, reckless incompetence and thus summary dismissal should have followed instanta.

Now as regards the pension, there was no contractual obligation to pay him at 50 at the level he is receiving.

His pot was given a discretionary top-up and he was allowed, again a discretionary decision, to receive it instantly. All this in return for 'waiving' 12 month's notice etc.

Since he should have been dismissed without notice his 'waiver' amounted to nothing.

And I'd be content, if not particularly happy, for him to receive his contractual obligations under the pension scheme; that is no enhancement and paid at normal retirement age under the scheme.

Now let's turn to Sir James Crosby....another who was recklessly incompetent. And all the rest.

It's not just Sir Fred but the whole cohort of the criminally incompetent bankers that got their companies into this mess which we, the taxpayer, are having to pay for.

Paul B

C Powell, you are more than likely right and trouble is we all know that. We could do without noses being rubbed in it though.Its called taking the urine from where I come from and a bit of summary justice sometimes doesn`t go amiss. A contract is a contract and yes we all live by the rule of law, for better or worse. This time its for the worst.

It would just be nice, just now again, for the law to deviate from what is technically correct and do what is morally correct & reflect the feelings of ordinary men and women, many of whom are now learning to manage on 60 squid a week JSA after the Bankers have metaphorically anally raped the country. These ordinary men & woman whose past,present and future taxes are now feather bedding Goodwin's & pals pensions. Sometimes the law is an ass. I hope Goodwin has trouble sleeping at night.

Cis

1) As I've said before, no pension paid out of public funds should exceed the salary of an entry-level senior civil servant - currently around £57,300. This includes ex-Ministers and MPs, local govt bigwigs, etc. If they've had a fatter salary while they were working, they have had a chance to put a bit extra away from that. This figure is still well above average earnings and much higher than most of us can aspire to.

2) Re Fred the Shred's pension, I'd like to think that someone is looking at what is coming out of the woodwork and considering charges (conspiracy to defraud? false accounting?) and that we might get some of the pot back as the Proceeds of Crime.

THX1138

If it was me I'd tough out and keep the cash. He's figure of hate now what ever he does, he might as well be a rich one!

Ruth Keohane

Sir Fred Goodwin
has hoodwin-
ked everyone.
'Fred the Shred'
put RBS in the Red.
New name -
'Fred Badloss'
the bad boss.

Harry Tate

What is the justification for the Board voting the increase in pension?

There is no conceivable way this is in line with their fiduciary responsibility to further the interests of the company.

They need to be held to account for their decision, and have no recourse to negligence insurance to pass the liability on.

Legislation could be framed to deal with this matter, targetted specifically at remuneration issues so as not to discourage normal business risk taking.

It should be made retrospective, and applied to all these useless fakes.