As the row rumbles on about Fred Godwin’s pension after his disastrous spell in charge at Royal Bank of Scotland, I’ve got to admit I am increasingly staggered and infuriated at the circumstances surrounding this mess.
First off it seems that the Government was in such a blind panic last October, that no-one bothered to check whether or not Godwin was entitled to such a large pension (c. £630,000pa), or, perhaps more crucially, whether he was entitled to take it early (he is only 50 years old). As it turns out it appears that the decision to allow Godwin his pension early, was an arbitrary one to encourage him to resign. Forgetting for a moment that he should have been sacked, the same Government decision makers who missed this are also “masterminding” the largest bailout, this country has ever seen. This oversight is not exactly confidence-inspiring (and I haven’t even mentioned the Lloyds/HBOS debacle).
Next I really want to understand what RBOS’s remuneration committee was thinking when “negotiating” Godwin’s package. Why did they think it a good idea to grant him such generous terms without including clauses to limit them in the event of poor performance? Had such clauses existed, would Godwin have tempered some of his more profligate characteristics? Probably not, but the existence of such generous retirement terms and their early granting, smacks heavily of boardroom nepotism.
With respect to the man himself, Godwin clearly has no honour. If you haven’t read his letter to Lord Myners, defending his pension and declaring that he will not voluntarily give it up you should — http://www.bbc.co.uk/blogs/thereporters/robertpeston/goodwin_letter.pdf. Judging by the tone of his correspondence, this is not a man who feels the slightest bit responsible for overseeing the collapse of a 300 year old institution and the huge strain this has put on the public purse and British economy.
The early award of such a large pension to Godwin is an affront to us all. As I hear more and more stories of RBS abruptly pulling lending facilities from businesses my disgust intensifies.
However it is not only personal feelings of distaste that convince me Godwin must be stripped of this pension and made to fight as long and exhausting a legal battle over it as he has the stomach for.
Quite simply the Credit Crisis needs personal examples, to shape future behaviour.
As the Credit Contraction bites home, it is clear the Global Economy is in dire need of a drastic overhaul. I sincerely hope that this restructuring will lead to a reappraisal of boardroom behaviour. It has long been a problem that many FTSE 350 directors, hold multiple positions in multiple listed companies. This has given rise to the suspicion that these board members are somewhat lax in their oversight of matters relating to pay and performance, in the interests of self-preservation.
Of course proving such suspicions is nearly impossible, but the example of Fred Godwin is difficult to explain in other way.
If the Government now stands fast and makes an example of Fred Godwin, by revoking his pension, this will serve as a valuable lesson for other remuneration committees. As should be plain to all of these people we do not live in a World of no consequences. Success and failure should carry the same relative rewards or penalties. The culture of greed and self-interest, which has corrupted our financial services sector cannot be tolerated again.