119. Sir Fred Goodwin's pension has become notorious,
a highly visible emblem of bankers damaging the economy without
themselves being financially penalised. It has to be said it is
not the only example of this. We were surprised to hear that Andy
Hornby, Chief Executive of HBOS as it crashed on to the rocks,
was earning £60,000 a month in helping to manage the subsequent
merger with Lloyds.
120. The scale of the pension itself has raised many
eyebrows. However, other directors or senior board members of
other banks also have generous arrangements. The TUC in its 2008
Pensions Watch survey noted that the most popular rate of accruals
for directors in its survey was 1/30th. The average transfer value
for a director's pension (ie the amount which would be paid from
one pension scheme to another if a director moved all their accrued
benefits) in its survey was just over £3m.
And as Lord Myners pointed out, Larry Fish, who ran RBS's American
operations, left RBS with a larger pension than Sir Fred's.
He also maintained that "compensation across a wide range
of banks" was an issue that shareholders should have been
121. Lord Myners'
account of events on that complicated weekend in October is at
variance with that of Sir Tom McKillop and both have forcefully
presented their perspectives. The truth is that this was an incredibly
pressured 72-hour period in the history of British banking. We
are not surprised that accounts differ. But we do not believe
that Lord Myners' assertion that his precept to the RBS Boardthat
there should be no reward for failurerepresents an adequate
oversight of the remuneration of outgoing senior bank staff. Such
a precept is open to different interpretations, as events have
proved. It would have been far better if Lord Myners had given
a stronger, clearer direction of Government requirements for a
bank in receipt of public funds and had assured himself by demanding
to be kept informed of the detailed negotiations that were taking
place. This task could quite properly then have been subordinated
to an appropriate Treasury official but should not have been neglected
we are not convinced that Lord Myners was right to take on trust
RBS's suggestion that there was no option but to treat Sir Fred
as leaving at the employer's request. It would, we believe, have
been open to Lord Myners to insist that Sir Fred should be dismissed.
Glen Moreno, Acting Chairman of UKFI, told us that in his view
sometimes there came a point when a Board had to agree to dismiss
someone who had failed even if that might trigger law suits. We
think in this case that should have been the response of RBS and
that the Treasury should have insisted on this as a condition
of support. We further are not impressed by the argument that
there would have been a collapse in confidence for the rescue
if Sir Fred had been dismissed and his deputy had taken over as
acting chief executive for that short period, which was the RBS
we are not convinced that the Treasury was right to rely on the
current RBS Board to handle these negotiations without direct
Treasury involvement. The RBS Board had shown itself to be incompetent
in the management of the Bank, steering it towards catastrophe,
and also possibly dominated by Sir Fred; there were no grounds
for trusting them with this operation. We suspect that Lord Myners'
City background, and naiveté as to the public perception
of these matters, may have led him to place too much trust in
the RBS Board. Indeed, in evidence to us he described the RBS
Board as 'distinguished' .
returning to the bigger picture, we accept that the Treasury's
key responsibility was to support the banks at a time when markets
were exceptionally jittery and when a grave systemic crisis was
only hours away.