Frederick Anderson Goodwin, better known as Sir Fred Goodwin, was at one time the chief executive of the Royal Bank of Scotland Group plc, one of the United Kingdom's leading and certainly most acquisitive banks that had hoovered up the National Westminster Bank, Churchill Insurance, and two American banks in recent years. In the process 'Fred the Shred' as he was known found himself honoured as he was named as the Forbes Global Businessman of the Year in 2002 and also received a knighthood for services to the banking industry in 2004 as the Royal Bank of Scotland transformed itself into a global banking business and one of the five largest banks in the world.

In 2007 the Royal Bank of Scotland (RBS) carried out its most audacious deal to date, when it led the consortium of banks that paid €71 billion to acquire ABN-AMRO, the biggest bank in the Netherlands, with the intention of then carving up the pieces between themselves. Even at the time the deal was done, many believed that RBS, together with its partners Fortis and Santander, had paid far too much for what was commonly regarded as Europe's worst bank, but with the passage of time it came to be regarded as an even worse deal when the size of ABN-AMRO's exposure to US sub-prime mortgages became apparent.

Following the collapse of Lehman Brothers on the 15th September 2008, it became clear that the Royal Bank of Scotland was also likely to go bankrupt unless the British government stepped in to support the bank. On the 7th October Sir Fred was duly summoned to a private meeting at the Treasury where he was firmly told by the City Minister Paul Myners that his dismissal would be the price the government would demand for providing its support.

Sir Fred was unhappy with this turn of events. He was later to describe the meeting as a "drive-by shooting", being particularly upset when the news was leaked to the Daily Telegraph on the following day, since it clearly indicated that his long, and up to that point, prestigious career in banking was about to come to an end. What no doubt made matters worse was that Fred had once been a regular visitor to No 11 Downing Street when Gordon Brown was Chancellor, and had been regarded as being "close" to Brown, so from Fred's point of view it all may have come as something of a surprise. There was not, however, much that he could do about it in the circumstances and over the 'crisis weekend' of the 11th and 12th October a deal was hammered out between Sir Fred and the remainder of the board of RBS.

Sir Fred agreed to waive his entitlement to a year's notice, together with various "share related awards" (i.e. bonuses), which would otherwise have given him a pay-off of between £1 million and £2 million, and agreed to take early retirement at the age of fifty, rather than wait until he was sixty to start drawing his pension. This "compromise agreement" was signed off on the 12th October and so Fred's departure was announced on the 13th October as the government unveiled the details of its Great British Banking Bailout. As it was, this was rather a good deal for Sir Fred. Born on the 17th August 1958, he had already celebrated his fiftieth birthday; and so on leaving RBS could now immediately start drawing his pension. Since this amounted to the sum of £693,000 a year, it was clear that Sir Fred faced what most people would regard as a very comfortable retirement.

Of course the details of this arrangement were only known to a few people, until that is the 25th February 2009 when the details of Sir Fred's pension arrangements became public when RBS duly published its financial results for 2008. The RBS announced a loss of £24 billion, the largest loss ever made in British corporate history, at which point there was understandably some public anger that the man regarded as having been responsible for losing this terrific amount of money should have been so handsomely rewarded with a salary of £693,000 per annum for doing nothing whatsoever.

This opinion was shared by the Government as the Chancellor of the Exchequer Alistair Darling came forward to claim that he had only become "aware of this deal a few days ago" and that the government was now asking Sir Fred to hand back the money. It turned out that Paul Myners had indeed telephoned Sir Fred on the 25th and asked him to give up his pension. Sir Fred eventually countered by writing a letter to Myners (a copy of which he released to the media) which explained that over the weekend of the 11th-12th October the topic of his pension was "specifically raised" at a meeting between Myners and the RBS chairman Tom McKillop together with a non-executive director named Bob Scott. Therefore as far as Fred was concerned the government already knew and approved of the arrangement and he absolutely refused to 'give the money back'. For his part Myners confirmed that he was aware of the arrangement, but denied that this amounted to an approval of the arrangement, and argued that had he been aware that the award was in any way discretionary then he would have objected.

Described as "a long-time friend of Gordon Brown", Paul Myners was created the Baron Myners on the 16th October 2008 so that he could take up the post of Financial Services Secretary and become a member of Gordon Brown's economic 'war cabinet', otherwise known as the National Economic Council. Mr Myners had previously enjoyed a long career at such City institutions as N. M. Rothschild & Sons, and particularly Gartmore whose business largely consisted of managing institutional pension funds, whilst he was last seen advising the government on pensions before accepting Gordon's kind offer of a post in government. It was therefore scarcely credible to believe that he was not aware that any early retirement offer was likely to be 'discretionary', and at the very least should have been sufficiently well informed to have known what questions to ask. Even former Deputy Prime Minister John Prescott felt there was something amiss as he told BBC Radio 4's Today programme that it was "something to address ourselves to as to whether there was due diligence in this matter". Which was Prescott's way of saying that someone really should have asked exactly what deal Sir Fred was being offered.

Naturally the whole furore was something of an embarrassment for Gordon 'no rewards for failure' Brown who stated that the government were "taking legal advice on this very matter and the legal advice is designed so that the public can get money back" and that they were "considering every legal means at our disposal" to recover the money. Which of course, simply raised the question as to whether there were any such "legal means" available. The answer, according to the Saturday editions of most of the nation's newspapers, were there was a distinct lack of such "legal means" given the Pensions Act 1995 which contained provisions to prevent employers from unilaterally reducing or stopping pensions in payment.

Vince Cable of the Liberal Democrats distinguished himself by suggesting that the Government should simply stop paying Goodwin's pension "and just leave it up to him to sue". Which of course he would, given that there was £693,000 a year at stake. Not that the government was capable of such action, as Fred's pension was actually being paid by the trustees of the RBS pension scheme, whose actions were determined by the provisions of the trust, rather than the whims of politicians. Indeed the whole suggestion that the Government might take the matter to court seemed unlikely given the potential for further embarrassment. In any event as Alex Salmond, the first minister of Scotland told the Reuters news agency, "What is the legal case going to be based on? That a government minister didn't understand what he was agreeing to?" and suggested that the whole thing "would be laughed out of court". Considered legal opinion appeared to be of the same mind, as it was said that the only way of challenging the pension award would be to claim that the RBS had made a mistake, and that it would be "extremely difficult" for the RBS to now claim that it had not understood the terms of its own pension scheme.

None of which prevented Deputy Prime Minister Harriet Harman (in action on the Andrew Marr Show on the Sunday) from announcing that whilst Fred's pension "might be enforceable in a court of law ... it is not enforceable in the court of public opinion, and that that is where the government steps in". She declined to provide any detail regarding how the government would indeed be 'stepping in', but appeared to be hinting at some kind of Disgraced Former Bank Executives Act which would retrospectively permit the state to rewrite contracts as it saw fit. This appeared to be news to her colleagues in government, particularly Prime Minister Brown who came forward on the following day to state that "obviously we are bound by the rule of law", although clearly this had not been that obvious to a qualified solicitor such as Ms Harman. But then Harman's remarks were not necessarily regarded as being anything more than further evidence that she was positioning herself for a future leadership challenge.

In fact there were those who suggested whole row was simply a smokescreen whipped up by the Government to obscure the news that they had felt obliged to launch round two of the Great British Banking Bailout with yet more billions being poured into the financial system to stave off collapse, and was therefore simply part of the Government's 'Bash the Bankers' media blitz that sought to divert attention away from the question of just who was in charge of regulating such institutions as the Royal Bank of Scotland when all the mistakes were being made.

As far as Fred himself was concerned, having refused the Government's request, he then kept his head down. The Sun announced on the 28th February that it had "tracked down" the "world's worst banker". As it was they had simply got hold of his telephone number and Fred had nothing to say anyway. Nevermind, the paper was still given the opportunity to promote its petition calling on Sir Fred to "return his gold-plated pension pot", and gave prominence to the fact that they had attracted the support of both George Osborne and Vince Cable. There was no sign however that Sir Fred was about to take a blind bit of notice.

It has been suggested that given the result of paying Sir Fred Goodwin a multi-million pound package to run a major British bank, paying him £693,000 not to do anything at all might well be money well spent, and that there were a number of other individuals, both inside and outside government, of whom the same could be said.


  • Beth Hale and Ian Drury, Brown under fire amid calls for 'Fred the Shred' lose his knighthood over RBS disaster, 20th January 2009
  • Brown vows to claw pension back, BBC News, 27 February 2009
  • Stand-off over Sir Fred's pension, BBC News, 27 February 2009
  • Katherine Griffiths, Sir Fred Goodwin refuses to give up £693,000 RBS pension, Daily Telegraph, 26 Feb 2009
  • Sir Fred Goodwin's letter to Lord Myners regarding his pension, Daily Telegraph, 27 Feb 2009
  • Robert Winnet, How Sir Fred Goodwin walked away with £693,000 a year for life, Daily Telegraph, 27 Feb 2009
  • Afua Hirsch, What are the legal options?, The Guardian, Friday 27 February 2009
  • David Hencke, Harriet Harman increases pressure over Sir Fred Goodwin's pension, The Observer, 1 March 2009
  • David Randall and Margareta Pagano, The 1.3 trillion pound bank job, Independent on Sunday, 1 March 2009

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