Did Labour authorise Fred Goodwin's pension windfall?

Responding to reports that City Minister, Lord Myners, was aware of ex-RBS chief Sir Fred Goodwin's pension deal in October, George Osborne has just issued this statement:

"Even though Alistair Darling said he wasn't told about Sir Fred Goodwin's obscene pension pay off until last week, it now appears his City Minister knew last autumn. We urgently need clarifiaction of who knew, what and when in Government. If Gordon Brown and Alistair Darling allowed Sir Fred to walk off with £693,000 a year for life of taxpayers money, it would be a disgrace."

Earlier today Stephen Hester, Fred Goodwin's successor as CEO, told BBC Radio 4 that "the arrangements for my predecessor's departure were negotiated directly between past directors of this board, and the government, and him."

It is becoming increasingly clear that - on multiple levels - Labour mismanged the rescue of the banks.  This is another big blow to Brown-Darling's reputation for competence.

Comments

[DCMX]

If Labour allowed this bonus it's toxic for Brown politically.

[David Sergeant]

It seemed pretty clear at the time that the bank rescue was expensively mismanaged. Why nobody noticed that it had been rushed out just in time for PMQs, the only one Gordon won, always puzzled me.

[Geoff Middleton]

This is another big blow to Brown-Darling's reputation for competence.

Yes it would be, if they had one.

[powellite]

As one of my colleagues has just pointed out...this is a masterpiece of Downing Street media management. On the day that £325bn of toxic RBS assets are moved onto the UK balance sheet...ta-da! A story has been leaked by the Government which has been known about since late last year. What a coincidence...

I've just checked, and apparently total Government spending on everything is currently around £450bn per year. And we've just taken on liabilities of £325bn. It makes you want to cry...

[Onnalee]

Why are we having this debate now? This is an extract from my thread on Con Home on 13th October, 2009 ?

"On a final note, I am furious that Fred the Shed swans off into the sunset with a pension of GBP587,000 p.a.. There has to be a link between the Bank he managed to "blow up" and his personal earnings. Maybe his pension should be paid in RBS shares? What about an Enron style inquiry? What about some criminal prosecutions? What about the Big Accountants role in this affair? What happens to the Directors of a small company when they post "make believe" results? Yes....they sometimes end up in Jail.

Posted by: Onnalee Cubitt | October 13, 2008 at 12:27
"

What is the new news? Or is it just that Peston raised the subject on the BBC?

[a-tracy]

This is diabolical.

As a customer and saver with the Natwest I just wish they could back away from the RBS to save their reputation.

[Tim Montgomerie]

Fair point Powellite; the toxic assets takeover has the bigger implications.

Sorry Onnalee for not noticing you raising it before.

[Yogi]

ay be I am out of synch here. Until the spring of 2008, everyone thought that Fred Goodwin was doinga great job as he powered RBS up the league. None of the shareholders nor the board nt even the FSA raised anything about RBS. Sir Fred sincerely believed that he was doing the right thing for the bank.

He may have in his contract, approved by the remuneration Committee the level of pension fixed.

The regulators were asleep and so was the board.

If he gets £650k a year and his conscience is clear, then the rest should shut up.

[David_at_Home]

If RBS (also HBOS and NR) had just been allowed to go bust, then Fred the Shred (and those whose contracts allegedly included the payment of bonuses) would have had to take his place behind a long list of creditors.

The taxpayer could have picked up the domestic banking arm from the liquidator and sold it on to HSBC, Standard Chartered or Barclays but without taking liability for all those toxic assets.

[Kevin Davis]

Oh how delicious. Here is labour spinning like mad to disguise this awful RBS loss and there spin operation now falls over.

[Janet]

It is highly likely that Fred Goodwin knows where the bodies are buried. Otherwise why would he not be prosecuted for criminal negligence of his duty of care to the RBS, and why would such a high pension be agreed, which it apparently was.

[Paul J]

Yogi, almost nobody emerges from this with any credit.

Bankers like Sir Fred led their organisations to disaster. Workers lower down the food chain who did somrthing proportionately similar would probably have been sacked for gross misconduct.

Other directors (both exec and non-exec) allowed the banks to not only over expand to do so recklessly.

Institutional shareholders (who really are the only ones with any influence) didn't see the problems and did nothing.

The regulators failed to regulate but whether that was because they weren't up to the job or were directed elsewhere has yet to be determined.

Labour politicians on whose watch this happened failed to notice the problem and seem to have encouraged it as a means of funding their social engineering projects.

What we actually need here is a clean sleep. People like Sir Fred have fallen on their sword (and in the absence of any disciplinary proceedings) he's entitled to his pension. Other senior bankers have gone and the regulatory regime is subject to a shake out.

However, that just simply isn't enough. We need to see senior regulators go. We certainly shouldn't see bonuses awarded to the relavant staff at the FSA as is currently being suggested (if their contracts permit it then those contracts need to be be amended at least for new employees and those who developed the contracts need to be investigated, disciplied or sued as appropriate).

What is really needed though is heads to role at a political level. Frankly, the Government should resign. It had led the country over the edge of an economic abyss. I'm not just saying this because I want to see a Tory government but rather we need as a country to be able to give political legitimacy to politicians who are going to be making decisions as we move forward. Brown has no legitimacy and we need a general election.

[David_at_Home]

Good point, Janet. Fred the Shred will certainly know where the bodies are buried and, if exhumed, these could well come back to haunt Gordon et al.

[snegchui]

From the BBC
"But Sir Fred rejected that request in a letter to the Treasury in which he also says ministers agreed to the deal. Mr Darling says that the government had thought the deal was legally binding when it was agreed in October, but now realised they could have blocked it. "
Fred the Shred exhibiting all the compassion and flexibility of HMRC tax demand. See how you like it back, Gordo. Hahahahaha.
Hee heee. I think this is going to run deliciously

[James Hopkins]

I am getting sick and fed up of this. The British public as a whole are getting sick and fed up of this. Another day, another failed banker walking away with a bloody big pay rise/bonus/pension (delete as appropriate)whilst our so called government sits there fiddling whilst Rome burns. Another day, another bank announces a record loss/redunancies/prize winning cock up (again, delete as appropriate), and whilst the government quite happily pours out money into these banks, like Speaker Lenthall in 1642 they seem to have neither eyes to see nor tongue to speak, but as the banks are pleased to direct them , whose servant they are. It is beyond pathetic.

[michael m]

No one has pointed out or remembered that Paul Myners was once a NatWest Director!!

[Leo Enticknap]

When the story about Darling asking Goodwin to hand the loot back surfaced, I thought at the time that he was making himself a hostage to fortune. If Goodwin were to invite Darling to perform an impractical act upon himself in response, it would shine a glaring spotlight on the extent to which Labour is in office but not in power. That is precisely what happened, but with the added twist of it emerging that one of Darling's own colleagues was complicit in agreeing to Goodwin's obscene pension pot in the first place. That level of naivety from someone who is effectively the no. 2 in government plumbs a new depth of incompetence, long after I thought NuLab had already hit the bottom with a resounding thud.

[pp]

I agree that on the surface it is stupid to argue over eight million when billions are being given away -- but it should give massive weight to the argument of the incompetence of brown/darling.

Prudence says: "Look after the pennies and the pounds will look after themselves"

Profligate says: "Let millions slip through your fingers, and soon trillions will be lost"

The pathetic image of darling begging to get a few million back, while he is giving away billions elsewhere must not be allowed to slip from the public mind.

[steve foley]

If there is any justice in life he will not have the health to enjoy it.

[pp]

The select commitee asked how many of the bosses had 'banking qualifiations'.

Why not ask brown/darling what their qualifations are for their jobs?

One thing you can be sure of - the top bankers clawed their way to the top through natual selection, fighting off worthy adversaries along the way.

MPs/Ministers are entirely with out competence when it comes to dealing with these 'uber sharks'.

Goodwin has shown the 'class' he was rewarded for by getting RBS into its current position - old share holders paid off in full, borowers not foreclosed on, lenders money guarenteed, his pension massively enhanced etc, etc...

The Bank doesn't have a worry in the world - for RBS he has done a fantastic job and is worth every penny.

Only a genius could have found a sucker to take the crock of dust that was RBS and treat it like gold - Goodwin is that genius, brown/darling are the suckers. The taxpayer are (unfortunately) the money men.

Brown/Darling have been rolled by a superior mind - they were told again and again, but they did it anyway. Now they are mugs and angry about their own stupidity being revealed - but not as angry as the taxpayer should be.

[tonic]

Its all very well people seeking to challenge Mr Goodwins' pension entitlement (no doubt agreed in contract). I can understand many peoples views on the matter, both RBS savers, shareholders, staff and just about any taxpayer - given that the bank is now largely state owned/backed. However, if a challenge is mounted and a loophole found whereby some of his pension entitlement can be "clawed back" due to aactions taken & decisions made which in hindsight appear flawed, then the same rule should perhaps be exercised against Messrs Blair, Brown & Darling for leading the economy to this point ..... and get THEIR pension entitlements reduced by the same percentage. No doubt if this was to be suggested, the issue would suddenly "go away" thanks to the political spin machine

[Scallywag]

"Brown-Darling's reputation for competence."

Are you 'avin a larf?

Amongst which section of the population did these two ever acquire a reputation for competence?

[William Selka]

Unfortunately, it seems to be normal practice for large pension payoffs for incompetence throughout the public sector. It is, however, horrifically predictable that the negotiation for Goodwin's severance seems to have given him more than he was contractually entitled to! Why should the apparatchiks be allowed to steal from the public? Bring back the stocks!

[Adam]

Time for an MP to call for the introduction of the "Sir Fred Goodwin Pension Expropriation Act 2009".

I have a strong suspicion it would be very popular with the public.

[Matthew Cain]

Am I alone in finding the government's treatment of Fred Goodwin a little unedifying? It appears to be bullying him: http://blog.matthewcain.co.uk/government-bullying-fred-the-shred/

[John Moss]

I'm sorry, I thought the Government legislated to ban pension pots larger than £1.4m?

If SFG had accumulated his pension rights before this legislation passed in to law then those rights are fixed and can't be touched. Anything after this is surely caught by the new law so it is irrelevant whether this was discretionary or not, it ought to have been illegal.

That Myners approved this, or allowed it to go through as part of a deal to give up other severance rights, makes him culpable, not the bank. That they are trying to row it back now is another great example of them bolting the door after the horse has long since bolted!

[pp]

Adam @ 7:07

Your proposal for a "Sir Fred Goodwin Pension Expropriation Act 2009" does not go nearly far enough.

The people who have benefited from the trillions of pounds we are lumbered with, have that money right now - it is unfair for future income taxpayers to make up the difference.

Socialist inspired problems require socialist inspired solutions.

We need a windfall tax on the rich - they have to make their contribution.

Any pension pot over a certain amount, any personal assets over a certain amount, any deposit over a certain amount etc...

This should be done as a one off act to put things back on track.

It would not scare off any new 'talent', but may scare off future shysters like those that the government mistook for 'talent' over the past decade.

Socialist actions lumbered us with this debt, socialist action is required to draw a line under it before we move forwards.

[GB£.com]

We have an incompetent government in terminal decline with an unelected leader at its head, spending billions and billions of taxpayers' money as it there is no tomorrow whilst blaming everything on anyone but themselves.

If it was all America's fault, why are UK bankers being forced to apologise and hand back bonuses? If some fault lies on these shores, then how was it allowed to happen? Of course, we know the blame lies with Brown.

Brown's actions on City regulation are equivalent to introducing an inadequate 'lightouch' policing policy then expecting the public to pin the blame solely on the burglars when their homes keep getting turned over.

[a-tracy]

How long did Fred Goodwin work for the RBS?
How on earth did he accrue such a large pension, was he earning a million pounds per annum for over ten years?
He is only a middle aged man, I thought new laws said you could only draw a pension after 55 years of age?

[Mark]

I think this person is being greedy and should not be rewarded for failure, Govt says it wants the money back as failure should not be rewarded, do I take it then that failed Govt Ministers like Brown, Darling et al will also give up their pensions? After all what is sauce for the Goose..............

[A Hutchinson]

The kettle was calling the fryingpan today! I heard John Prescott on radio 4 slating the ex RBS boss for taking money for failure. How on earth can John Prescott have the barefaced cheek to attack "Sir" Fred when he has had his snout in the public trough for years, and doesn't feel the slightest guilt for helping to run the country, not a bank, into the ground!

[A Hutchinson]

Remind me again; who makes the laws in this country? Oh yes, Parliament does. They could simply legislate that taxpayers money that is pumped into failed banks is not to be doled out to the inept, perhaps criminally negligent, bank bosses who have run the businesses to the point of bankruptcy and then get big fat pay offs. It's unlikely though, as the soon to be Ex-MPs of the Labour party will be looking for jobs and banks are a traditional next stop for them. Hmmm....

[steve foley]

I wonder how the thousands who will lose their jobs with RBS and who were coerced into taking their annual bonus which was far lower than Mr Goodwin's in RBS shares rather than cash and now have worthless paper feel about his "loads a money" pension?

The vile arrogance of this fool beggars belief. There should be a cap on such huge bonuses or pensions and a Windfall Tax on any over £250,000 a year.

If ever anyone deserves to be on the street selling "The Big Issue " it is Fred Goodwin. Alas he will live the life of Reilly whilst his former employees sign on the dole. I don't normally use profanity on a site such as this but all I can say of Goodwin is "What a little shit!"

[A Hutchinson]

If anybody should have his title stripped, it should be "Sir" Fred. He is a disgrace. What happened to failed business people falling on their swords? Where has the honour gone?
I wonder if he feels sorry for the good people of RBS who are about to go on the dole?
I wonder if he trusts the British banks to hold his stash, or whether he's moved it off-shore?

[Edward Huxley]

If Fred refuses to give up his pension he should be locked in a room with a bottle of whisky and a loaded revolver.

[James]

but but but

We live in a country that believes in the rule of law, including contract law and private property rights.

It is clearly the case the the Board has agreed what look like a pretty bloddy P**s poor deal with Fred the Shred.

BUT

It was agreed, and it was agreed legally. At the time it was agreed, the bank was a private institution.

I am very uncomfortable with the idea of the government wading in to retrospectively amend the details of privately and legally agreed remuneration deals of which they disaprove.

And certainly the idea ofg a specific law aimed at a specific individual is abhorrent. It would be a gross abuse of power.

I do not like these pension arrangements one little but.

The Board should be ashamed of themselves.

The Remuneration Committee should be bollocked and sacked.

But we should not respo0nd by tearing up contract law and private property rights.

[steve foley]

Edward Huxley, in 1929 his then equivalents threw themselves out of the windows of high buildings. How high is the top floor of the RBS HQ?

[Nick Cooper]

Why can't we all just have a bipartisan pop at Goodwin. He clearly has no shame, and I think all would accept a halving of his pension and the matter would probably go way.

http://thestupidtimes.blogspot.com/2009/02/ex-rbs-chief-goodwin-sends-government.html

[steve foley]

Unfortunately James you know, or should realise, that the ordinary small shareholder is of no consequence. It is other big financial institutions who hold the majority of the shares and who dominate the vote at Company AGMs. They will usually back on the nod such generous pension or bonus packages for their peers in the expectation of a quid pro quo on the "you scratch my back" rule.

In a case such as this I feel that the Government-of any colour-should take action, "pour encourager les autres".

[Jake]

Its pretty clear this is "toxic for brown politically"

yep!

its also pretty clear the Tries will just let Labour get away with the whole thing as they usually do.

[A Reformed Labour Voter]

The BBC reported that The Labour Government Goodwins pension wrong and that they were going to see if it could be clawed back (ha ha - as if, but another 'blow softening' headline), Vince Cable apparently considered the pension award 'grotesque'.

But the BBC could find nothing from the Shadow Chancellor or any comment from HM Opposition.

Strange that...

[A Reformed Labour Voter]

"This is another big blow to Brown-Darling's reputation for competence".

I must have bee out of the country the day they established that reputation.

And besides, since when were headless chickens renowned for competence?

[James]

"But the BBC could find nothing from the Shadow Chancellor or any comment from HM Opposition."

Very funny, considering Osborne has been touring the studios all morning accusing the Govt of ****ing this situation up.

[steve foley]

I am in the process of closing my two RBS Bank Accounts, they were not my main account and I no longer wish to be associated with that bank.

[A Hutchinson]

The only person in the country benefiting from this mess at the moment is good old Gordon Brown. The heat has been temporarily taken off him, as 99% of the people in the country focus their fury on "Sir" Fred.

[David Cooper]

A.Hutchinson @ 12.35: "The only person in the country benefiting from this mess at the moment is good old Gordon Brown. The heat has been temporarily taken off him, as 99% of the people in the country focus their fury on "Sir" Fred."

- indeed, and bark up the wrong tree in doing so. It was open for HM Government via Myners - and ultimately, on the principle of where the buck must stop, Darling and Brown - to state that unless Sir Fred Goodwin resigned without compensation and waived all entitlement to a pension from RBS, there would be no bailout and Sir Fred would thereby be liable in practice for the losses that RBS shareholders (including himself) would suffer as a result of RBS going into liquidation.

It is too late now to try to browbeat Sir Fred as if he was an England football manager with unorthodox views. The rule of law must not be replaced with the rule of the threat of law, especially retrospective law. How Sir Fred can sleep at night is a matter for him alone, but unless Brown, Darling and Myners walk the plank immediately for their gross negligence, this hounding is hypocrisy of the highest order.

[A Hutchinson]

David Cooper.
David, Like you, I actually wondered why the Government didn't dictate from a postion of strength that the money wouldn't be given to bail them out unless all Senior managers bonuses were stopped - they were responsible for the mess through their mis-management, after all. The Government's advisors should have spotted the massive pay-offs and blocked them at that time, too. I don't accept the argument (threat) that the senior managers would leave if they didn't get the bonuses. Where would they go to! There is a world-wide recession, all banks are in the mess together, so they won't take on other incompetant mangers - common sense, really. These people are lucky they still have jobs; If you or I had run our businesses into the ground we wouldn't have been able to rely on the government bailing us out. We'd probably be locked up for trading insolvent, too.
I don't agree with you that it "is too late to brow beat sir Fred..." At the end of the day, "Sir" Fred was the top man at RBS and as the head of the company who just suffered the worst corporate loss in the UK, ever, he should be punished for possible criminal negligence, just as any other industries bosses would be. He had a duty to shareholders, creditors and his staff, many of whom will shortly be unemployed without a mega pay off. These bank bosses must have had an idea what a mess they were getting into, way back; it didn't happen overnight.

[Leo Enticknap]

A. Robertson writes:

If anybody should have his title stripped, it should be "Sir" Fred. He is a disgrace. What happened to failed business people falling on their swords? Where has the honour gone?

Knighthoods are very rarely revoked, and our tradition is that to qualify you need to be evil as well as incompetent. Mugabe's was last year, but AFAIK that was the first for many years. When Labour was baying for Jeffrey Archer's peerage in the aftermath of his conviction I made the point on Any Answers that there are at least tens and possibly hundreds of life peers who have been convicted of similar offences through the ages, none of whom were stripped of their title; and therefore anyone calling for Archer to have his peerage revoked needed to show why his offence justified it but his predecessors' didn't.

The same applies to Goodwin. There are a lot of people who were given knighthoods and then made serious mistakes with serious consequences afterwards. Those who want his knighthood revoked have to show what precedent he sets to justify it.

John Moss writes:

If SFG had accumulated his pension rights before this legislation passed in to law then those rights are fixed and can't be touched. Anything after this is surely caught by the new law so it is irrelevant whether this was discretionary or not, it ought to have been illegal.

Agreed entirely - 'ought' is the important word. As Conservatives we surely agree in the rule of law. If the law proves to be inadequate, we change it to ensure that the inadequacies can't be repeated - we don't just ignore the law when it suits us. Brown's and Darling's cynical posturing is just that - they believe that by making SFG the scapegoat, they can deflect attention from the regulatory regime they set up, one which not only tolerated but actively encouraged SFG's misjudgments.

Some leftie twit on Any Questions just now suggested that the government should arbitrarily decide not to pay him a penny and invite him to sue if he's got a problem. He clearly hasn't got the intelligence to realise that it's a very small step from that to a pension fund with thousands of middle income subscribers to arbitrarily slash its members' benefits and issue the same response to anyone who complains. After all, if the government does it, so can we!

Sadly, if the contractual arrangements by which SFG got his pension are legally watertight, we have to pinch our collective taxpaying noses and cough up. It suits NuLab down to a tee to make SFG the centre of attention, because it deflects attention from the real, and far further reaching incompetence, which can be found at numbers 10 and 11 Downing Street.

[A Hutchinson]

A Robertson - removal of titles
If we relied on precident we could never move forward. Laws need to be adapted to suit the modern world and current circumstances. It was once the norm for the gentry & well off to buy military commissions, thank goodness that precident was changed, even though it took the charge of the light brigade to bring it about. I think the banks just rode into the valley of death and it would be a good place to draw a line in the sand and start modernising a lot of outdated traditions, starting with the stripping of titles for crooks and criminally imcompetant bankers.