Britain wants to block former bank chief’s $1-million pension
Amid growing public and political clamor, British Prime Minister Gordon Brown said Friday that he would seek ways to block a nearly $1-million-a-year pension awarded to a banking executive whose stewardship plunged one of the country’s biggest financial institutions into ruin.
Former Royal Bank of Scotland chief Fred Goodwin has insisted that the retirement package provided by the company is rightfully his. He rebuffed calls to forgo the money, even though the bank has been partially nationalized and this week posted the biggest annual corporate loss in British history, $34 billion in 2008.
Brown said the government was looking for legal means of preventing Goodwin from receiving the pension, which will be paid in large part by taxpayers because of the nationalization, calling the amount “unjustifiable.”
“When people make mistakes and when banks fail the public, then the people who make the mistakes cannot and should not run off with entitlements and with additional discretionary payments,” Brown told the British Broadcasting Corp. “This is unjustifiable, unacceptable, and we’re going to clean up the banks so that this doesn’t happen again.”
The British leader’s comments came on the heels of more bad news for the nation’s foundering financial sector. Giant banking group Lloyds announced a loss of about $14 billion in 2008 stemming from its takeover of giant lender HBOS.
Public outrage has ballooned over the compensation packages lavished on banking executives even as the government continues to spend billions of pounds in taxpayer money to rescue some of the best-known names in British banking. In May, small investors roiled a meeting of HSBC shareholders with their unsuccessful bid to block a compensation package that at the time could give the company’s top six executives a total of about $240 million over three years.
Executive pay has become a hot-button issue in other European countries as well, including Ireland, the Netherlands and France. Early this month, the European Commission urged national governments to follow the lead of President Obama, who put a $500,000 cap on annual executive compensation at companies receiving a government bailout.
The Royal Bank of Scotland approved Goodwin’s retirement pay last fall, when the bank’s share price had already plummeted and the extent of its problems was becoming clear. Goodwin agreed to take early retirement, with a pension amounting to about $985,000 a year.
Anger that Goodwin says he’s entitled to a princely sum was evident in headlines Friday that declared “Off with his Fred” and “Obscene.”
Brown, whose poll ratings are sagging, said the government had asked Goodwin to waive his pension. “It’s up to us to protect the public interest in this matter,” Brown said. “The anger that the public have is anger that I have as well.”
Exactly how the government can stop the payout is unclear, even though it owns a majority share in the company. The bank still has its own board and functions independently for the most part.
The opposition Conservatives say the Labor Party-led government should have blocked the pension package before it was approved.
“Gordon Brown’s anger, frankly, is pretty synthetic. They had the opportunity in the autumn to stop this totally obscene pension,” said George Osborne, the Conservatives’ finance spokesman. “This is sapping confidence still further in the government’s handling of the banking crisis.”