THE FRONT pages have been dominated by former RBS chief Fred Goodwin losing his knighthood, but the business world in London is far more concerned that serving executives will be forced to restrain their pay demands.
Goodwin’s successor Stephen Hester finally announced that he would not be accepting a £1 million share bonus following days of torrid publicity, while Network Rail executives are now facing attack over their incentive schemes.
Hester, his critics argue, should not have qualified for a bonus at all because RBS’s share price halved in the last year, though much of that was accounted for by the slimming-down of the bank’s balance sheet led by Hester on the Treasury’s orders.
Pressed by Labour and some of the British media into sending public signals to Hester not to take the bonus, the British government now finds itself in the worst of all worlds, since its pledges that a bank said to be run at arm’s length from government are now seen as valueless.
Such perceptions have costs. The value of shares in RBS and the other State-controlled bank, HBOS, fell by £900 million in the 24 hours after Hester’s retreat – one announced after he had spent a weekend skiing in Switzerland.
The £45 billion invested by the British taxpayer in RBS, and the money ploughed into HBOS, to save both from collapse is money that the Conservative-Liberal Democrat coalition had desperately hoped to get back in a share sale before the 2015 election.
Such an outcome now appears a far-off dream because of the ongoing credit crisis. Banking executives argue that the bonus row will play its part in keeping investors away from bank shares, thus making the likelihood of a sell-off ever taking place less likely.
“Gordon Brown was the one who said in 2008 that, if civil servants were left in charge of RBS, it could become a basket case,” said the director-general of the Confederation of British Industry, Sir John Cridland.
Fred Goodwin was not popular with many in the world of highly-paid executives when he had the whip-hand, but his treatment may make others think twice about accepting, or seeking, a knighthood or other honour.
Undoubtedly, it smacks of vengeance against a now-defenceless quarry, taken to appease public anger. Three years ago, the Forfeiture Committee looked at whether the knighthood could then be withdrawn and decided that it could not.
The situation has changed, says the British government, since an official Financial Services Authority review of the collapse of the RBS amounted to a censure for Goodwin – one of the grounds on which honours can be withdrawn.
And that report does criticise the RBS board. But does it deliver the killer blow for Goodwin personally?
At the treasury select committee last week, Michael Fallon, Tory MP and aide to the prime minister, asked the authors of the Financial Services Authority report exactly that.
However, the authors of that report disagree. Last week, speaking to the same committee in the House of Commons, they said that they “would hesitate to find a passage in that report” that amounted to “specific censure” of Goodwin.
Even Conservatives are displeased by the summary justice meted out. “I am afraid it’s an empty sideshow, an empty gesture designed to appease public anger,” said a close ally of prime minister David Cameron, Lord Simon Wolfson of the Next fashion chain.
