Should RBS revisit Sir Fred's pension?

 

As I wrote here yesterday, the FSA needs to learn what it can from RBS about Sir Fred Goodwin's alleged affair, in case it has an impact on Sir Fred's fitness to exercise what's known as a "Significant Influence Function" in a bank - or whether the alleged affair could have contributed in any way to RBS's collapse in 2008.

Now, for reasons that I can't disclose (as I've said), I have reason to believe that once the FSA has the information - which it will formally ask for in the coming week - it will conclude that Sir Fred's alleged affair is not grounds for a lengthy new investigation of him.

That said, there will be those who will argue that the FSA's important judgement on this could and should have been expedited - and that would have happened if Sir Fred had not succeeded in taking out an injunction to prevent the media reporting on the alleged affair.

Which is why the injunction could be seen to have impeded the FSA in its statutory duties.

There is a second issue, however, which is whether Sir Fred breached Royal Bank of Scotland's internal code of conduct relating to how staff manage their relations with colleagues (for more on the code of conduct, see my earlier post).

Former RBS chief executive Fred Goodwin Sir Fred Goodwin's name was published after a super-injunction was partially lifted

If there were a breach, then the bank's board could consider whether there is a case for revisiting whether Sir Fred is entitled to all of the very large pension he is receiving (£342,500 per annum, on top of a tax-free lump sum of £2.7m), or - depending on the duration of the alleged affair - whether it could and should try to get back bonuses he received in his latter period at the bank.

If all this had happened at a company in the US, where boards are more fastidious about the behaviour of executives and where investors are also pretty hot on punishing executives who cross a putative ethical line, this would already be a hot issue.

So it will be fascinating to see whether the board of RBS - which is facing legal action in the US from investors over its collapse in 2008 - will feel it has to systematically investigate the alleged affair and the associated question of whether Sir Fred sufficiently breached his contractual duties to make him ineligible for some or all of that generous pension.

This may come down to tawdry details such as whether Sir Fred told senior colleagues - especially the bank's then chairman - about whatever relationship he may or may not have had with his colleague (sorry about the inelegant construction of that last point).

 
Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this
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    Comment number 69.

    @63.Robin Joy
    I think that pursuing a claim on his assets is quite a different thing to cutting his pension.

    If the bus driver was taking a bonus for delivering wonderful fuel economy but it was later found that a relationship with the girl in accounts was the cause of the bonus then you might well want it back.

  • rate this
    0

    Comment number 68.

    Yes his pension and bonuses should be taken back - he broke the bank therefore does not deserve them. Further the rest of the board and the leading shareholders should also lose out - after all they appointed him and failed to hold him to account. The government are in charge - let them just make a law that the individuals at fault here have a 110% tax on these payments.

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  • rate this
    -1

    Comment number 66.

    He did a really good job, despite a Labour government that was entirely responsible for all the financial difficulties we are now in and deserves every penny of his pension. I don't care if he was %^&g Ms Gahdia, his personal life is entirely his own. A man of such awesome intellect as Mr Goodwin would only ever work for the greater good, as do all our betters. PS Any chance of a few quid Fred?

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