The following article by Mark appeared in today’s Telegraph. Click here to view it online with readers’ comments.
Does it really matter if Sir Fred becomes plain Mr Goodwin again?
Watching senior political leaders this week falling over themselves in casting to the winds the fate of the disgraced former Royal Bank of Scotland Chief Executive you could be excused for thinking that no issue in public life was more critical. Don’t be fooled by the grandstanding. Messrs Cameron, Clegg and Miliband know in their hearts that the dispute over the award of a knighthood to an erstwhile Master of the Financial Services Universe is little more than a sideshow. After all, if they truly cared about the sanctity of the honours system they would have long since found a way of booting out convicted expense fiddlers from the House of Lords.
I should declare that I hold no brief for Sir Fred Goodwin. I have never met the man, but everyone I know who has speaks of an arrogant, dismissive individual whose comeuppance seemed long overdue. That said I do not like the way he is being made a convenient scapegoat: it seems all too easy to kick a man when he is down.
The better plan, as they insist in all the best thriller movies is to follow the money.
In 2004 when Fred Goodwin was awarded his knighthood there was not even the faintest murmur of disapproval. No-one realised then that in common with many other financial services institutions, RBS’s breathtaking success had been built on foundations of sand. By contrast, in February 2009 as Sir Fred’s retiring pension package was being finalised by the last government, we were all well aware of the illusory nature of his, and his bank’s achievements. In the very week that the Brown government brought the taxpayers’ investment in RBS to £45.5 billion (the value of our collective holding has since fallen to around one-third of that sum) Sir Fred was an awarded an eye watering £693,000 annual pension for the rest of his life. Twice over the last three years 83% state owned RBS has reduced this colossal reward for failure, yet Sir Fred still receives an annual RBS pension of £370,000, some fifteen times the average national salary.
I suspect the British public will be far more infuriated that Sir Fred takes home a huge pension for the rest of his life than whether he enjoys the bauble of a knighthood.
No-one should not forget that Sir Fred’s stewardship of RBS was a monumental failure – catastrophically the worst collapse in this country’s corporate history. Had the government not intervened to save his bust bank, Sir Fred – not to mention all the other RBS pensioners – would have had to rely upon some sort of pension protection fund. This would have capped his pension award at around £20,000 per year.
As the economic crisis rumbles on, I reckon we have all become almost immune to shock when we hear of financial losses running into billions of pounds. So it is understandable that public anger today rests on something easier to comprehend. We can all make a direct connection between the hard-earned cash we pay in tax and its destination. When we are directly subsidising Sir Fred’s ludicrously lucrative pension deal or as bonus season in the City gets underway, minds naturally turn to the disparity of treatment between top bankers and ordinary workers; our own financial circumstances and the rewards for failure in the FTSE 250 boardroom. This is why the Goodwin saga is so dangerous to capitalism.
As a former small businessman I unequivocally support the promotion of free markets, enterprise and capitalism. I believe in honouring contracts and recognise the key importance of these concepts in the UK’s global trading relations. Incentives should rightly be offered for good performance. Businessmen who risk their own wealth deserve to keep the fruits of their success.
Over the past three months the Occupy London movement has made its home the steps of St Paul’s Cathedral, in my constituency. I have been struck by the support the protestors have received well beyond the usual suspects on the anarchistic left of politics. Increasingly many middle-class, Tory voting people have come to the conclusion that the operation of capitalism today has become hopelessly skewed against them. Witnessing unwarranted financial wealth being showered on the Sir Fred Goodwin’s of this world taps into a deep unease, impotence and frustration amongst people. Who despite working and saving hard over the years now view themselves as losers in the globalised, capitalist system.
In short, it is Sir Fred’s pension, not his knighthood, that helps undermine capitalism and all that it does to create wealth. For the truth is that we now know that the profits, bonuses and other emoluments for many working in our largest companies and banks have been massively overstated. Where possible shareholders must insist that we restate those earnings to reflect reality and to commence an equitable clawback of those unwarranted rewards.
This week Vince Cable enters the fray with specific proposals for controlling excessive pay. Unless and until the Coalition provides, strong, practical support to those disillusioned by the inequitable rewards for failure, its attacks on crony capitalism and corporate greed will be just warm words.