Royal Bank of Scotland shareholders have criticised the appointment of Sir Fred Goodwin by the architectural firm RMJM in Edinburgh. The consultancy role will be his first job since leaving RBS after the government bailed it out 15 months ago.
Roger Lawson, from the RBS Shareholder Action Group, said it was “ironic” Sir Fred got a job when others were losing theirs in the recession the banks made…
Michael Connarty, Labour MP for Linlithgow and East Falkirk, said it was a “very odd appointment”.
Sir Fred, who was born in Paisley, was in charge at the bank for nine years and steered it from being a bit-part player to one of the top five in the world. He built up the bank with numerous acquisitions but the problems started when RBS bought the Dutch bank ABN Amro at the height of the boom in 2007.
Mr Lawson’s shareholder group is pursuing a legal claim against RBS for its £12bn rights issue in May 2008. That RBS share sale for 200p per share was made five months before the near collapse of the bank and its rescue by taxpayers. The bank is now 83% controlled by the UK government, with shares having collapsed by 95% since their high point in 2007.
Sir Fred retired from RBS in September 2008, aged 50, with a controversial pension of £700,000 per year – a figure which has been subsequently reduced.
Mr Lawson said: “It’s ironic that he’s managed to get a job when others are being let go – and in a recession which banks are responsible for. One must question whether the folks who are hiring him are prudent – given that his reputation will precede him everywhere he goes.”
Sir Fred – dubbed “Fred the Shred” – has been appointed as a senior adviser with architectural practice RMJM, where he began work just before Christmas. It was involved in designing the controversial Scottish Parliament building, though the current management had no involvement in that project…
Mr Connarty said: “People wonder what he knew about banking and will now wonder what he knows about building.”
The Labour MP added: “There is a deep irony that one the architects of RBS’s downfall is now working for the architects involved in the Holyrood building fiasco.”
- BBC News
17 Comments
The dude is a one man boom in his own right. He paid $70 billion for the Dutch bank!!!! If he goes on acquisition spree real estate will keep doubling each month.
Yes but the horror is that he paid $70 billion for AMN Amro sight unseen! Without due diligence or full disclosure of their books (which isn’t required under Dutch law in the case of a hostile takeover). I’m not an economist, but even I know that’s really irresponsible.
Actually, your judgement is most likely to hold from a legal/regulatory perspective.
From an economic perspective, ie balancing various costs including that of time against the benefits (which may not have been that closely tied to the ABN loan book) it may well (may,!) have been perfectly justified.
Would you buy a second hand car without being allowed to look at the engine?
I’m pretty risk-averse, so probably not. But I’m a member of a legal-regulatory profession and not a businessman or yet less an entrepreneur.
Critically, what I was trying to get across is that it depends on what I wanted it for. If it was the only second-hand car on the market, or one of only three, even I might consider it.
Patrick, you’re reminding me of the old joke about what businesspeople call lawyers: ‘roadblocks’.
There’s an element of truth in that.
SL@6. Not “roadblock” so much as “tollgate”. (and totally worth every penny i might add)
You’re very kind, Dave, especially as not all lawyers are worth every penny. However, that said, many of them are, and people should be aware that some money spent on good legal advice up front is generally money well spent, particularly as it often means more expensive legal outlays are averted in the future.
Nah, skeptic is right, a lot of lawyers are just roadblocks. It is practically the definition of a poor lawyer in fact.
When I was a banking lawyer, I once had a case where I had gotten to the stage of issuing a warrant for possession against a mortgagor. The poor mortgagor rang me and said, “What’s all this about? Our lawyer told us he’d sorted it out!” His confidence in the lawyer shone out from the phone. I had to break the news that I didn’t even know he had a lawyer, no contact had been made and no appearance had been made on the record. “Oh, but [X] will sort it out, he told me so,” said the poor guy with utter confidence.
Later that day I got a call from [X]. He was rude and unpleasant, but he also didn’t have a clue what he was doing. “I hear you’ve filed a warrant for possession,” he said aggressively. Then there was a pause. “So what do I do now?” he asked. I told him coolly that as the bank’s lawyer, I certainly did not see it as my job to advise him what steps he took.
It’s people like that who give lawyers a bad, bad, bad name. And it’s people like that who make me HOPPING MAD. Not so much a roadblock as a pile of dung. No, sorry, that’s insulting to dung – it is useful for fertilizing plants.
“I hear you’ve filed a warrant for possession,” he said aggressively. Then there was a pause. “So what do I do now?” he asked.
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HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA
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Did he make a motion for a bad court thingy?
LOL, yes, Adrien, it was laughably pathetic. Unfortunately for his poor client he did precisely zip. Not that there’s much you can do once things get to that stage. If he was going to do something, he should have done it a month or two earlier.
Well there’s more. One of the big investment banks – UBS or Merrill Lynch, I think – just bought the ten-man RBS trading team, costing about $70 million in salaries and guaranteed bonuses. I am a big fan of markets and entrepreneurialism, but this whole circus really does stink.
Peter, amen to that. Stinks to high heaven.
LE, what gets my goat is that these bankers and traders are not risking their own money, so it is wrong they should take the upside benefits, but have no responsibility for the downside.
I equally do not think legislation will make a squat of difference. The issue here is a principal/agent problem. With all this money that government’s have compulsorily mandated be channeled into huge super/mutual funds, the REAL owners – ordinary people like us – are so many steps removed from how that money is invested, including remuneration committee policies, that this racketeering has been able to flourish.
Somehow, we have to organize to cut through all the middle wo/men – such as the pension funds – to make our voices heard, and votes matter at shareholder’s meetings. I suppose government could help in that respect.
It is not that hard: allocate your pension to cash, cash products, Australian shares and foreign shares, in proportion to your risk tolerances and profile.
If you have an SMSF use exchange-traded funds. For non-super investment do the same and gear moderately.
Don’t invest in banks.
That said, investment bankers certainly do have downside – if the deal fails to go ahead, they generally don’t get paid. Of course, they don’t have downside in the deal itself – ie if it does go ahead they get paid whether or not it is ultimately proved to be a lemon – but that is partly because the business judgment part is really incumbent on the management and not the bankers.
It’s certainly a sign of the times when even a shareholder like Warren Buffet can’t stop Kraft from buying Cadbury.