Michael Meacher

Labour Party | Oldham West and Royton

The Government Must Use The Same Razor To Cut A Much Bigger Hole In The Pension Of All Failed Bankers, Not Just Goodwin's

2 March 2009

The Treasury's proposal to reduce Sir Fred Goodwin's £693,000 annual pension by half is a fudge and will satisfy nobody. It is arbitrary (why a half?), it will nowhere near assuage public anger which is still mounting sharply, and it is targeted at just one man who is not alone in his recklessness. Whilst Goodwin is an egregious symbol of greed and arrogance, there are many other bankers, at chief executive and board level, not much less culpable who should not be allowed to escape scot-free by the scapegoating of Goodwin.

Above all, there needs to be a formula which can be applied fairly without arbitrariness or discrimination. That formula should be in two parts:
(i) The pension should be calculated, as is still regular practice in many occupations, on fiftieths of accumulated lifetime earnings (i.e. annual salary, excluding bonuses, stock options and any other forms of remuneration), and then
(ii) Adjusted in the same proportion as the value of the company has changed under their watch.

If, for example, the value of accumulated fiftieths of a person's annual salaries throughout working life came to £200,000, but then (as in Goodwin's case) the market value of the bank had plummeted 90%, the annual pension would be cut to one-tenth or £20,000.

This formula should be enforced, via either primary or secondary legislation, throughout the banking sector at board level. Whereas the Treasury proposal would still leave Goodwin with a pension worth £6,700 a week, 75 times greater than the State pension, and is clearly designed at damage limitation whilst leaving all the rest of banking excesses intact, my formula would be fairer because it would be seen as systematic and not ad hominem, and much more likely to satisfy public indignation.

If Goodwin is exceptionally to be held to account because his recklessness was so extreme, particularly over the disastrous purchase of ABN Amro, then he should be stripped of his knighthood since this was granted for 'services to banking', when his stewardship has done the reverse. But clawing back his ill-earned bonuses and debarring him from any further career at boardroom level in the financial markets, justified though both are, should again be applied not simply to him but also to all who have brought the banking sector into such disrepute.