compare to earlier FT article on Frederick Goodwin
Published October 15, 2008  |
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GLOBAL FINANCIAL CRISIS
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RBS's former CEO face of a bygone era
He led US$100b bid to buy ABN Amro which some now say was over-priced
(LONDON) Frederick Goodwin, the Royal Bank of Scotland chief executive who won his nickname - Fred the Shred - for axing jobs, has lost his own. With the government's part-nationalisation of the bank on Monday - and the installation of a far-lower-paid executive to run the bank - Mr Goodwin is now the face of a bygone era in banking. Knighted by Queen Elizabeth II, and perhaps Scotland's best-known businessman, he led a US$100 billion deal to acquire the Dutch bank ABN Amro last year, the biggest banking takeover in history. He presided over construction of the opulent glass-and-steel bank headquarters in Edinburgh. His salary and bonuses totalled about US$7 million in 2007, according to Scottish media reports - low by US standards for an executive of that level but still seen by many people here as far too high. Prime Minister Gordon Brown said the executives taking over RBS and other banks will receive no bonuses. He did not mention Mr Goodwin but said, 'For this government, and I believe the whole country, the guiding idea is fair reward for hard work, effort and enterprise, not incentives for irresponsibility or excessive risk-taking for which the rest of us have paid.'
The bank was founded in 1727 in Edinburgh and for its first six decades operated out of one office in the city's Old Town. In recent times, it carried out a rapid-fire series of acquisitions that made it one of the world's largest financial institutions. Several analysts said RBS found itself this year without enough capital and heavily exposed to the sub-prime loans in the United States. RBS's shares had fallen more than 61 per cent last week. On Monday, despite overall good news in the stock market - the London FTSE 100 index rose 8.6 per cent - RBS stock dropped an additional 8 per cent. 'They bit off more than they could chew,' said Mamoun Tazi, an analyst at MF Global Securities in London, adding that the bank undertook 'one acquisition too many.' Mr Tazi said the RBS deal to acquire National Westminster bank in 2000 was considered wise, but in hindsight, ABN Amro was a terrible deal, acquired at too high price. RBS also bought the Irish mortgage company First Active and Citizens Financial Group in the United States, which had banks throughout the Midwest. 'Leverage is great in boom times, but it can be awfully dangerous when things get difficult, especially if they get difficult very quickly,' said RBS chairman Thomas McKillop, who will also be stepping down. Mr McKillop said the bank had been 'adversely affected by the uncertainty in the market, more so than many.' Bryan Johnston, a director in the Edinburgh offices of investment manager Bell Lawrie, said of Mr Goodwin's fall: 'If you hit an iceberg, the captain gets blamed.' He said Mr Goodwin, 50, was highly regarded but now 'sometimes people require a fall guy without looking at the reason for the fall.' 'He ran his bank successfully,' said Mr Johnston, but RBS was 'caught up in maelstrom of events that aren't unique to any one bank in the UK.' Mr Goodwin won wide praise in 1990, as chief operating officer, on the liquidation of Bank of Credit and Commerce International. Other people now will be trying to clean up the mess left by the current crisis. -- LAT-WP | ||||||||
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