Business and management
The RBS saga
Fred, shredded
Jan 31st 2012, 21:34 by A.P.
ARISE, Mr Goodwin. Britain’s honours forfeiture committee has ruled that Sir Fred, as he was once, should be stripped of his knighthood after his tenure as chief executive of the Royal Bank of Scotland ended ignominiously with a huge bank bail-out. Mr Goodwin joins a list of ex-Sirs whose members include Anthony Blunt, a Soviet spy, and Robert Mugabe, the president of Zimbabwe.
If you think that is over the top, you’d be right. Galling as it is to imagine Mr Goodwin insisting on being called Sir Fred at his local corner shop, or offering his hand to be kissed at the bus stop, no power flowed from his title. Shame is an important sanction when very well-paid people screw up, but Mr Goodwin’s reputation was already in the gutter, following the bank’s failure and a nasty, public row over his pension entitlement. Knighthood or not, he was not about to walk back into public life.
True, Mr Goodwin had an abrasive management style that made him the dominant figure at RBS when it decided to lead a consortium bidding to acquire ABN AMRO, a Dutch bank. But if he was really that out of control then why not go the whole hog and strip Sir Tom McKillop, the RBS chairman and Mr Goodwin’s boss at the time, of his knighthood, too? More pertinently, poor decision-making was hardly confined to RBS. The battle for ABN began when Barclays announced it would merge with the lender: if ABN had not sunk one British bank, it would have torpedoed another.
News of the forfeiture committee’s verdict comes days after a row involving Mr Goodwin’s successor at RBS, Stephen Hester, who this weekend waived his entitlement to a controversial share award. The differences between the two men are obvious: one deeply culpable for RBS’s fall, the other trying to mastermind its revival. But both stories have lazily focused important debates about the governance of banks, and the compensation of bankers, on to specific individuals. Mr Goodwin was not uniquely reckless; Mr Hester is not exceptionally well-paid compared with his peers. Turning the likes of Sir Fred into pantomime villains lets the industry off the hook.
(Image credit: AFP)
In this blog, our Schumpeter columnist and his colleagues provide commentary and analysis on the topics of business, finance and management. The blog takes its name from Joseph Schumpeter, an Austrian-American economist who likened capitalism to a "perennial gale of creative destruction"
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Absolutely! Society need to recover its capacity to shame those at fault.
For instance, how do we shame the crony journalists that are complicit?
The only part of this article's argument that makes sense is that more people should be stripped of their knighthoods, which I think was unintentional.
Hi’
The RBS saga, Fred, shredded.
It’s not “right said Fred” this is a hammer and nail question. There is more to this.
Regards Terence Hale
The Economist defending the undefendable. The logic that it is unfair to single him out when there were others at fault too is silly. Its obvious that the decision to strip him of his knighthood was a political move that resulted from public pressure. Yes it is true that it has become a bit of a witch-hunt but that is inevitable if our politicians cant stand up and do the right thing in the first place. And as for him being unfairly singled out.... I would dearly hope that this is the first of many. A clear message needs to be sent out that this cut-throat, immoral form of capitalism needs to stop once and for all.
What a beautiful world bankers have created. A world where you have to pay ridiculous amounts of money to undeserving a@@@holes just because otherwise you will lose those diamonds to the competition. If those guys were so talented and so deserving of the millions they earned then how is it that none of them, absolutely none ever saw the storm coming?
They new it and saw it but they had no reason (and still don't) to care.
(Sir) Fred's biggest crime is that he was born a pleb “What was his dad an bluudy electrician…ha, ha, ha!”
Scrape around the city and you’ll easily come up with a whole armful of blue blooded bastards who are a thousand times more incompetent and crooked than Mr. Goodwin ever was, but they all went to Eton or somesuch.
And so not only from the tabloids (also club run) but also from the old boys in the city’s point of view poor old Fred Goodwin is the perfect choice of sacrificial lamb…both as a patsy and as a warning to all other upstarts.
CONCLUSSION: What a stupid country the UK really is.
Freds decision to buy a Dutch bank was the main reason for the UK financial crisis. The other cock-ups being Northern Bank (funding originating from the USA) and Iceland. Perhaps you think it was the hedge funds and credit agencies!!!
Whatever he bought or didn’t buy is beside the point. The main fact here (as has been stated above) is that he was simply part of a culture of assholes, just a part and the rest of who are still sitting smugly in boardrooms and garnering bonuses.
He’s just the straw man and in our twisted class culture one who is perfectly designed to help shelter the old school boys from the heat, not that there was ever any real chance of them facing any anyway, it’s just not the way things are done here is it?
A young girl was walking along a beach upon which thousands of starfish had been washed up during a terrible storm. When she came to each starfish, she would pick it up, and throw it back into the ocean. People watched her with amusement.
She had been doing this for some time when a man approached her and said, “Little girl, why are you doing this? Look at this beach! You can’t save all these starfish. None of this matters."
The girl seemed crushed, suddenly deflated. But after a few moments, she bent down, picked up another starfish, and hurled it as far as she could into the ocean. Then she looked up at the man and replied,
“It mattered to that one.”
If I was offered membership to an anachronistic, undemocratic, over-privileged, male-dominated club whose membership was made up largely of failed politicians, superstitious old men, the undeserving rich, the descendants of royal bastards and the odd jailbird, I hope I would have the moral fibre to turn it down. Perhaps useless, overpaid and scape-goated Fred is well out of it.
Thinking about the list of pantomime villains - what about Lord Ashcroft. His title confers on him the ability to influence legislation and yet he pays virtually no tax, even after promising to do so. The bare minimum requirement for being a Lord should be paying tax.
Or Jeffrey Archer. Apart from crimes against literature, he was sentenced to four years in prison for perjury. But he still manages to be Lord Archer and an "Honourable", if absent, member of the House of Lords.
Why stop at Sir Tom McKillop? What has Sir James Crosby, the former CEO of HBOS, done to escape scrutiny over his title. He is equally culpable as Goodwin, perhaps more so as he oversaw the rise in the risk profile of HBOS and allegedly ignored warnings from his head of Group Regulatory Risk whereas RBS problems stemmed in large part from one disastrous decision, the acquisition of ABN-AMRO. Goodwin showed a singular lack of judgment, Crosby's error appears both continuing and wilful and therefore more negligent. If he gets away with keeping his knighthood, it really would be one rule for the English and one for the Scots.
Perhaps the old Roman military custom of decimation would be an appropriate lesson for the City, Wall Street, etc. Just as when a legion breaks and runs it is impossible to assign individual responsibility, so likewise in a community of greed and moral laxity and irresponsible risk-taking with the wealth of others, collective punishment is called for.
So choose one in ten by lot, to be clubbed to death by the remaining 90%. Considering the vast harm done worldwide, that would provide both catharsis and a very memorable lesson. I would thereafter do the same for financial regulators, financial lobbyists and the members and staff of all legislative committees that consider financial matters.
Think of it as a sacrifice to the gods of Probity and Prosperity.
Just as a matter of interest, what happened to COMMANDERS of these broken legions (if they survived the rout, that is)?
bamps for president!
Officers were not included in the decimation. Typically, all were executed.
I said "legion" for the sake of being understood. I don't believe there is an entirely reliable record of a decimation of a legion. But certainly of cohorts, 500-600 men, one tenth of a legion.
The reasoned and enlightened response one would expect from a public that happily gorged itself on cheap debt. And yes, as Calivancouver pointed out, comments like that seem certain to lead to political success.
Of course, those stinking liberal judges might stand in the way of capital punishment - I guess they had better be executed whilst all existing legislation is burned in favour of trial by the mob.
They would have been expected to commit suicide...
Almost all home buyers depend entirely upon the professionals involved with the purchase. If a parent gives a loaded pistol to a five year old, and the five year old shoots someone, who is to blame ? But the deepest culpability lies upon those at higher levels of the financial system, who very profitably turned subprime mortgages into essentially fraudulent AAA securities, and who drove the demand for more so that they could continue the game.
Decimation was anything but mob rule. It was stern law that recognized that responsibility is sometimes collective. Of course, I am exaggerating for effect, but I have a serious point. How does one hold to account those who participated in an irresponsible and disastrous enterprise, and whose excuse is that everyone else was doing the same thing ?
I am certain that randomly murdering 1 in 10 of the everyone involved in Finance will fix all the World's problems.
No seriously, its just hysterical shouting that is actually letting people off the hook. Fixing Global Finance is a complex problem that requires serious thought and it shame that there is not much in the way of sensible debate taking place even on a website as serious as the Economist.
Now, a more measured approach is this:
Ex-Credit Suisse traders face US charges
http://www.ft.com/cms/s/0/07a83a7c-4c65-11e1-b1b5-00144feabdc0.html#axzz...
Long Live the Rule of Law!
That anyone could take me literally in the first instance seems strange. But it beggars the imagination that anyone could do so after I replied to a reply with:
"Of course, I am exaggerating for effect, but I have a serious point. How does one hold to account those who participated in an irresponsible and disastrous enterprise, and whose excuse is that everyone else was doing the same thing ?"
I am not taking you literally, but I am challenging the hysteria imbedded in such comments. The thrust of the article is 'Turning the likes of Sir Fred into pantomime villains lets the industry off the hook.' Adding the idea of decimation is hardly bucking that trend.
As for your serious point - How does one hold to account those who participated in an irresponsible and disastrous enterprise...? Surely you can come up with a better proposal in response to the question? And shared responsibility should also fall on those that assumed house prices could rise at 20%pa forever and merrily used their own homes as cash machines.
The absence of reasoned debate on such a crucial topic is a shame.
It is impossible to borrow too much unless someone lends too much. For almost everyone, if the banker is willing, the assumption of the borrower is that the loan must be reasonable. How many were aware that the world had changed so that the lender no longer had to care whether the loan were repaid or not ?
The most grotesque absence of reason comes from the likes of Jamie Dimon, who would have us believe, despite the evidence of the recent unpleasantness, that the financial community is responsible enough to police itself.
Anger under the circumstances is quite reasonable.
"Mr Hester is not exceptionally well-paid compared with his peers. "
I think the point is, ALL of his peers are too well-paid, in the eye of the general VOTING public...
Yes, but who can the public vote for to get the system changed?