Why Adulterous Failed Banker Sir Fred Goodwin’s Covered-Up Workplace Affair is a Matter of Public Interest

By Richard Smith, a recovering capital markets IT expert

We will probably see in the next few days whether the newspapers manage to get the super-injunction by Sir Fred Goodwin, the CEO of failed bank RBS, lifted. Since the facts of the matter, or “speculation” if you will, are now all over the Internet, keeping the super-injunction in place seems pretty pointless, as the Telegraph confirms in Sunday’s Links.

So what’s the real point of this circus? A demonstration of the superiority of the Web over the tabloid press as a mechanism for transmitting salacious tittle-tattle? A grandstanding MP working parliamentary privilege to get a bit of banker-bashing publicity? Naked Capitalism getting into the regulatory arbitrage game and thumbing its nose at the UK court order from the relative safety of its NYC-hosted web server? Or perhaps it is blogger Guido Fawkes sarcastically pointing out that the law is now officially an ass:

So there was this ****** bloke who worked closely with another ****** colleague, they apparently began an adulterous affair not long after the ****ing crisis of 2008. He went to Court to stop it getting out that he had been banging her. Because he is the most notorious ****** of his generation he also banned references to his profession lest he be identified. Guido would be in contempt of Court if he told you his name or profession…

Indeed, the law should not be mocked; but who’s mocking it? The UK certainly needs major overhauls of its privacy (and libel) laws, rather than the current abusive shambles, but in this particular case, one might contend that it’s Sir Fred who’s doing the mocking. This part of a kieronam post calling for a proper privacy law is dead wrong:

So I hope the papers never get to publish any irrelevant details of Fred Goodwin’s private life. Instead they should write about his greed, his irresponsibility and his ultimate failure as a banker, and the harm that he has done to ordinary people. That is all worth publishing again.

Well, I’ll do that, then, by way of a reminder. In the process, you will, I hope, grasp why Fred’s sex life, and this superinjunction nonsense, is very relevant indeed to “his greed, his irresponsibility and his ultimate failure as a banker, and the harm that he has done to ordinary people”, and, indeed has a wider relevance.

Let’s recap the “ultimate failure as a banker” first, in bullet points (a couple of easy sources here and here for the following):

  • A good 90% of shareholder value was destroyed by dilution and losses during Sir Fred Goodwin’s tenure as Chief Executive 2001-2009, some of it new money introduced via a £12bn share issue in April 2008, a few months before the crisis.
  • A £24.1Bn loss, the biggest in UK corporate history, in FY 2008.
  • Cumulative losses, FY 2008-2010, £28.8Bn (~$48Bn) . They’re still coming.
  • Now RBS is 83% owned by the taxpayer.

Now for the greed. Here’s his remuneration history, from the annual reports

Year Salary Options Exercised Performance Bonus
2000 £582,000
2001 £733,000 £825,000
2002 £832,000 £1,700,000
2003 £898,000 £990,000
2004 £990,000 £1,700,000
2005 £1,090,000 £1,760,000
2006 £1,190,000 £2,760,000
2007 £1,290,000 £2,626,000 £2,860,000
2008 £1,297,000
Totals £8,902,000 £2,626,000 £12,595,000

I make that £11,528,000 in cold hard cash, in nine years, plus the “performance bonus”: Fred’s remaining 2 million-odd options, which presumably expired worthless.

By way of consolation, his pension pot, which started 2008 worth a mere £8,370,000, was boosted by an additional £8,260,000, granted by the remuneration committee after it was clear that he had failed miserably and would resign; and, on the other hand, negotiated by Fred, once it was clear to him that his options weren’t going to be in the money any time soon; and then signed off by Lord Myners, the somewhat clueless Treasury minister of the day. So Fred thought that if £12Million in shares wasn’t was the ballpark for his entitlement for the services rendered (listed under “ultimate failure as a banker”), then £8Mn in pension benefits was. One damn way or the other, he’ll get his hands on that cash…

The members of the remuneration committee will be able to say what combination of contract, blandishments, threats, capture and supine habit led to that outcome.

The pension pot was quite a bone of contention: it was going to spit out a £2,700,000 lump sum, plus an income of £555,000 per annum; not too dusty for a 51-year old early retiree with such an eye-popping track record. This didn’t seem quite right to those pesky populists. But it took a cornered Prime Minister with a wave of anger at his back, and voting shares at his disposal, and four months (Feb-June ’09), to unwind the submissiveness of the remuneration committee that had been contentedly “motivating” Fred for a decade, and to overcome a rearguard action by the determinedly entitled Fred himself, who argued, perhaps somewhat insensitively, given his own delivery record, that a contract was a contract.

So, under the less offensive pension agreement established by the P.M., Fred gets to live out the 30+ years of his expected lifespan on a mere £342,500 ($570,000) per annum; plus whatever he’s managed to scrimp out of that £12,500,000 Mn ($20Mn) in salary and cashed-in shares. Oh, and the £2,700,000 lump sum, which he hung on to.  All negotiators (except for Fred) declared themselves satisfied with this result. Looks good compared with the standards set by Cayne, Fuld, O’Neal, Prince and Lewis, I suppose.

The harm that he has done to ordinary people? Try RBS’s considerable part in:

  • provoking a recession.
  • driving the UK debt/GDP ratio from 90% to 160% (RBS contribution: something under half of that, perhaps, in funding commitments, guarantees, and recapitalizations).
  • provoking panicky austerity measures that will cost half a million jobs directly, and perhaps the same again indirectly.

So much for greed and failure and the harm that he has done to ordinary people; now for irresponsibility:

How was he able to get away with it? This sums it up (though one might disagree about the exact kind of pathology on display here):

David Buik, partner at City firm BGC Partners, said the demise of RBS was: “All down to a degree of arrogance the like of which you will never see again in your lifetime”.

He added: “Fred Goodwin is a megalomaniac. RBS never had a chance to digest anything they bought and so they’ve never delivered shareholder value. It’s a combination of relentless greed and an inability to deliver shareholder value.

“They were buying companies when their share price was at its peak, rather than when shares were at rock bottom, and they clearly got involved with things they just didn’t understand.

“The ABN Amro takeover was the zenith of their stupidity but the die was cast before that. RBS took over ABN Amro because the mindset was they had to stop Barclays getting their hands on it at any cost, and consequently they paid way over the odds.

“There were people in that boardroom during the ABN Amro takeover who must have thought ‘this is madness’, but no-one was prepared to stand up to Sir Fred. I know people who worked for him, and it was a case of ‘yes Sir, no Sir, three bags full, Sir’.”

Indeed. Fred seems to have been something of a bully. We have public humiliation of the core management team:

He had curious fads, insisting that his executives dress conservatively and that every senior male wear a tie with the RBS logo. Every morning his immediate circle took part in a meeting known as “morning prayers” where on occasions executives could be reprimanded seriously.

We have catering staff and other juniors frightened out of their wits:

Staff lived in terror of invoking the wrath of Goodwin and his colleagues. On one occasion, catering staff were sent an e-mail from senior managers warning that incorrect presentation of tea and biscuits was a disciplinary offence. Headed “Rogue Biscuits”, it railed about the mistaken inclusion of pink wafers in a biscuit selection for executives’ afternoon tea.

A worker who toppled off a ladder while cleaning windows in Goodwin’s office, breaking a small model aeroplane as he fell, received little sympathy from RBS high command. Despite his having written a note of apology to Goodwin, staff simply “went into panic mode” over how to fix the toy.

And in fact according to Ian Fraser’s source just about everyone at the bank is frightened fartless by Fred:

“Most people in the bank were absolutely terrified of him,” said corporate financier Peter de Vink, managing director of Edinburgh Financial & General Holdings. “He treated anyone who had a different view from his own with contempt.”

So it’s not terribly surprising that the board, the non-execs, the remuneration committee and the risk managers had no more success reining him in than the shareholders or for that matter the chorus of journalists who saw the cliff-edge approaching. No one inside the firm blew the whistle.

Does HR ever intervene when the boss is a bully? Seldom; and most particularly not RBS’s Roden, the kind of HR head who says this sort of thing:

Relentlessly, some may still judge him on his views – and they remain strident – on HR’s responsibility for the culture a bank creates. Not so, says a steely Roden: “Culture issues were secondary issues, not primary ones,” he counters. “HR isn’t responsible for the culture of the business; the board and its customers are. It’s the business environment that sets the culture. I’ll take my fair share for some stuff; I’ll take kicks when they’re justified, but I don’t think they’re justified.” Really? “I see all the facets other HRDs won’t have seen,” he argues. “I just think it’s ludicrous putting RBS’s problems down to HR.”

Well, no, it would be, but that’s a straw man, is it not? It was Fred who caused the problems – plus all the people who didn’t stand up to him, including Roden. I wonder what Roden would have to say about the HR, reputational and disciplinary  implications of the affair Fred was conducting with his unnamed subordinate. Nothing at all, on the above showing, despite the utterly cavalier nature of such behaviour, with the creepy, potentially abusive power asymmetry at its heart, and the reputational risk, and the toxic undermining of the formal corporate structure that such dalliances involve, whether or not the affair’s a secret. The whole business is irresponsible, manipulative, a betrayal: all of a piece with everything else Fred did while he was at RBS.

This affair is one more data point pointing to the massive failure of corporate governance at RBS during Fred’s tenure. Which is one reason why it should not be covered up by this super-injunction.

Another reason is that Fred’s protestations about the privacy needs of his family, if that is what underlies the injunction, are disingenuous, and fantastically odious. I assume he means the family he deserted, not the new, smaller one that he’s now established. Well – no-one in the media has any beef with Fred’s kids or betrayed spouse. Fred’s the problem. And the broken happiness of his family is his responsibility: he can’t dodge the blame for that.

And the third reason is the source of the funds for the lawyers who brought Fred’s injunction. Fred’s unclawed-back loot, which properly belongs either with the shareholders and taxpayers who are lumbered with paying for the mess he left behind, now funds legal action to deny those same taxpayers access to facts they have a right to know about, and lands journos with extra expense, too. How the hell did that happen? There is public interest in that, for sure.

Since the UK’s great and good are about to consider the regulation of banks, they should bear in mind how much firmness of purpose is required to deal with the likes of Fred.

This super-injunction is an impudent, outrageous, self-indulgent, narcissistic abuse; the hallmark of the remorseless and unrepentant Sir Fred Goodwin, knighted for “services to banking” in 2004.

Let’s hope the injunction is overturned, pronto.

Print Friendly, PDF & Email


  1. dearieme

    I’ve always said that high pay for CEOs and their like is almost always just looting of the shareholders. I’ve yet to see any decent evidence to the contrary.

    Mind you, I don’t understand why Yves is against looting by CEOs but all for looting by trade unions. Looting is looting.

    1. YankeeFrank

      Please identify the “looting by trade unions” you refer to, and Yves’ support for same…

      1. Paul Repstock

        Frank; the large unions have played the same game that the corporatists played.

        I often cannot believe they got away with monopolist practices like they did. This is probably the best evidence that unions have been part of the problem.

        Can you imagine what people’s reaction would be: to a corporation which had a near national monopoly and enforced it with violence, Or a corporation which negotiated preferential pricing with different customers, or a corporation which ignored the interests of shareholders to benifit the executives?

        Kinda sounds like a modern corporation doesn’t it? Well, unions have done all those things too.

        1. Nathanael

          No, Paul, unions simply haven’t done any of those things. Not in the US anyway, I can’t speak for the UK or the Soviet Union or anywhere else.

  2. toxymoron


    Could you explain what you mean by “looting by trade unions”?
    Or is getting a decent pay for your work now considered “looting” as well?

    1. DownSouth

      dearieme is evidently one of those people who doesn’t comprehend numbers, who doesn’t see any difference between some public worker making $50,000 per year and this banker making $3,700,000 per year. There’s almost two orders of magnitude difference there, but like I say, to those who lack comprehension of numbers it doesn’t matter whether it’s a thousand, a million or a trillion, it’s all the same.

      I suppose if dearieme is a product of public education, we could in some sort of roundabout way blame it on the public education system.

      1. Tao Jonesing

        @DownSouth (and way off topic)

        Something hit me last night. Richard Dawkins coined the term “meme,” or if he didn’t coin it, he certainly gave the word its current popular meaning.

        Meme is just two me’s placed end to end. me me–> meme

        It’s kind of interesting that Dawkins would describe a shared cultural phenomenon solely in terms of the individual, which I think goes to your point earlier that Dawkins is part of a larger movement to break down the broader conception of the common good and society that forms the basis of morality.

        1. DownSouth

          Selfish Memes and Other Theories of Cultural Evolution

          Dawkins’ third claim to fame, in addition to selfish genes and extended phenotypes, was to coin the term “meme” to think about cultural evolution. In its most general usage, the word “meme” becomes newspeak for “culture” without adding anything new. More specific usages suggest a variety of interesting possibilities; that culture can be broken into atomistic bits like genes, that these bits are somehow represented inside the head, and especially that they can evolve to be organisms in their own right, often spreading at the expense of their human hosts, like the demons of old.

          As with religion, Dawkins has not conducted empirical research on cultural evolution, preferring to play the role of Mycroft Holmes, who sat in his armchair and let his younger brother Sherlock do the legwork. Two evolutionary Sherlocks of culture are Peter Richerson and Robert Boyd, authors of the 2005 book Not By Genes Alone: How Culture Transformed Human Evolution. One of the sleights of hand performed by Dawkins in The God Delusion, which takes a practiced eye to detect, is to first dismiss group selection and then to respectfully cite the work of Richerson and Boyd without mentioning that their theory of cultural evolution is all about group selection.

          Consider genetic evolution by itself. When a new mutation arises, the total population consists of one group with a single mutant and many groups with no mutants. There is not much variation among groups in this scenario for group selection to act upon. Now imagine a species that has the ability to socially transmit information. A new cultural mutation can rapidly spread to everyone in the same group, resulting in one group that is very different from the other groups in the total population. This is one way that culture can radically shift the balance between levels of selection in favor of group selection. Add to this the ability to monitor the behavior of others, communicate social transgressions through gossip, and easily punish or exclude transgressors at low cost to the punishers, and it becomes clear that human evolution represents a whole new ball game as far as group selection is concerned.

          In this context, the human major transition probably began early in the evolution of our lineage, resulting in a genetically evolved psychological architecture that enables us to spontaneously cooperate in small face-to-face groups. As the great social theorist Alexis de Tocqueville commented long ago in Democracy in America, “the village or township is the only association which is so perfectly natural that, wherever a number of men are collected, it seems to constitute itself.” As the primate equivalent of a beehive or an ant colony, our lineage was able to eliminate less groupish competitors. The ability to acquire and socially transmit new behaviors enabled our ancestors to spread over the globe, occupying hundreds of ecological niches. Then the invention of agriculture enabled group sizes to increase by many orders of magnitude, but only through the cultural evolution of mechanisms that enable groups to hang together at such a large scale. Defining, motivating, coordinating, and policing groups is not easy at any scale. It requires an elaborate system of proximate mechanisms, something akin to the physiological mechanisms of an individual organism. Might the elements of religion be part of the “social physiology” of the human group organism? Other than briefly acknowledging the abstract possibility that memes can form “memeplexes,” this possibility does not appear in Dawkins’ analysis.


          I recently attended a conference on evolution and religion in Hawaii that provided an opportunity to assess the state of the filed.


          No one at the conference presented a compelling example of a religious belief that spreads like a disease organism, to the detriment of both individuals and groups. The demonic meme hypothesis is a theoretical possibility, but so far it lacks compelling evidence. Much remains to be done, but it is this collective enterprise that deserves the attention of the scientific research community more than angry diatribes about the evils of religion.

          David Sloan Wilson–Beyond Demonic Memes: Why Richard Dawkins is Wrong About Religion

          1. attempter

            The third paragraph is an interesting way of describing class consciousness, and how the criminals keep winning.

            The fourth describes why anarchism is the natural state of humanity.

            The bit about a demonic meme, an ideological “belief that spreads like a disease organism, to the detriment of both individuals and groups”, certainly sounds like the sociopathy of “capitalism” and propertarianism.

            As I mentioned earlier today:

            Indeed, in principle this is the way they are required to act according to the core principle that profit-seeking is the only acceptable value. (The question of what kind of sick society would ever have enshrined such a sociopathic form in the first place I’ll leave for another time. But I’ll say here that the very existence of profit-seeking corporations reflects a self-loathing and self-destructiveness on the part of civilization itself.)


          2. Nathanael

            “No one at the conference presented a compelling example of a religious belief that spreads like a disease organism, to the detriment of both individuals and groups. ”

            Uhhhh… riiiiight. I can think of several off the top of my head, and the most important one is actually rather generic.

            The belief that faith in the doctrines of the group should trump evidence.

            That hurts both individuals and groups in the long run by causing them to become progressively more and more out of touch with reality. It benefits the group in the *short* run, mind you. All manner of insane memes can get attached to this self-propagating meme of “trust the doctrines, ignore your lying eyes”, any set of doctrines from Scientology to Stalinism (to use examples which are less popular than some of the more famous examples of this problem).

        2. kevin de bruxelles

          I think you should really read The Selfish Gene to test this hypothesis. You will find that it fails, and Dawkins is not necessarily trying to break down cooperation.

          One quick point that supports my view is in the beginning of Chapter 11 (on memes) where he says that humans, because of culture, are unique and do not live under the ironclad rule of the selfish gene. This is because an altruistic meme is possible (but not always realized) in the various human cultures. For example in the recent disaster in Japan, which has a strongly cooperative culture, there has been no looting at all. Other recent disasters, in much more selfish cultures, have been met with lots of looting.

          Another point is the next chapter, which is entitled “Nice guys finish first” where he expands on the altruistic theories of Robert Axelrod.

          1. Tao Jonesing

            I’ve read the portion of the Selfish Gene that discusses memes, and I generally understand Dawkins’ broader thesis that morality and cooperation evolved into part of the human condition. That being said, introducing the concept of a “me me” in a book called the Selfish Gene seems like a pun too good to pass up.

          2. DownSouth

            Richard Dawkins is a celebrity “scientist” created by corporations to prey on the emotional baggage of the victims of organized religion, who certainly must number in the many millions. His purpose is two-fold: 1) to drive a wedge between moral religous folks and moral non-religous folks, and 2) to wage a war on morality itself, proselytizing the “greed is good” fundamentalism. In Dawkins’ highly distorted world, highly moral religionists like Reinhold Niebuhr, Gandhi and Martin Luther King don’t even exist.

            You seem to not be up-to-date on Dawkins, so I’ll repost the following comment here:

            Paul Jackson said:

            Morality and the accompanying emotions to that noble love of justice are simply a varnish for the fires of greed. In other words, everything is about the money, and if you can find a viable angle to make more of it than someone else. And I mean everything.

            Jackson’s claim finds its underpinnings in two philosophical and intellectual traditions: 1) Neoclassical economics, and 2) New Atheism.

            Neoclassical economics, “a utilitarian-based version of radical individualism,” as Amitai Etzion puts it in The Moral Dimension, has “labored long and hard to show that practically all behavior is driven by pleasure and self-interest.” “The neoclassical paradigm,” as Etzioni thoroughly documents in his book, “attempts to show not merely that there is an element of pleasure (or self-interest) in all seemingly altruistic behavior, but that self-interest can explain it all.” According to the neoclassical paradigm, there is no place for “self-sacrifice, as well as to service to others and to the community.”

            In Great Britain, the economist most celebrated for proselytizing the neoclassical economic dogma, according to Adam Curtis in his documentary The Trap, was James Buchanan. Buchanan can be seen espousing his theories in the second part of The Trap, which can be viewed here, between minutes 7:00 and 11:30.

            New Atheism is neoclassical economics’ identical twin, but in the field of biology. It also “attempts to show not merely that there is an element of pleasure (or self-interest) in all seemingly altruistic behavior, but that self-interest can explain it all.” In Great Britain, the evolutionary biologist most celebrated for proselytizing New Atheism is Richard Dawkins. Adam Curtis features him in The Trap, but a much fuller statement of Dawkins’ theory “that individual self-interest explains everything” can be found in a lecture Dawkins gave at the “Beyond Belief” conference sponsored by The Science Network. The lecture can be viewed here beginning at minute 40:00 and continues through about minute 59:00. The part where Dawkins talks about the evolution of morality begins at minute 46:00.

            History has not been kind to the mandarins of self-interest. As Curtis shows in The Trap, when their theories have been implemented the result has been disaster across the board—-economically, socially and politically.

            Science has not been kind to New Atheism either. Neuroscientists like VS Ramachandran and Paul Zak have demonstrated, using new technology that can monitor brain activity (lectures explaining their findings can be found here and here), that empathy and compassion are almost universal human traits experienced by everyone except sociopaths and psychopaths, and are felt towards those who are totally unrelated to us, who live on the other side of the world and are physically unlike us in every imaginable way.

            The New Atheists, however, are unfazed by these new scientific findings. As can be seen in Dawkins’ lecture I linked above, they have been forced to acknowledge, as Dawkins puts it, “the wrenching compassion we feel.” But then Dawkins launches into the most bizarre contortions to “provide a good account of why our ancestors were equipped in their brain with a rule of thumb that we should be good to everyone you meet.” His explanations—-kinship, reciprocation, reputation and handicap principle—-all worked, in the ancient setting, to enhance individual self-interest and individual fitness. Benevolence, or the “good Samaritan” impulse, however, in the modern environment “no longer serves us today.” Empathy, compassion and benevolence, in today’s world, are “misfirings” or “mistakes” that no longer enhance our individual self-interest or survival chances.

            So to sum up, due to advances in neuroscience it is no longer possible for the New Atheists to argue that empathy, compassion and benevolence do not exist. So what they argue now instead is that these feelings, although they once served mankind, are in today’s environment “mistakes” or “misfirings,” relics of an ancient past that in the current environment are destructive and counterproductive.

          3. Nathanael

            *eyeroll*. DownSouth clearly hasn’t actually read Dawkins, at least not with an open mind. Instead, DownSouth has read some other guy, perhaps this Paul Jackson, and attributed his views to Dawkins. Dawkins is quite clear about the evolution of and value of cooperation and “altruism”, just like any competent evolutionary biologist is.

          4. kevin de bruxelles


            I think your tendency towards an “anti” mode of thinking is steering you wrong here on Dawkins. Just like anti-Communists and anti-Semitics, the anti-neo liberal mode of thinking basically consists of identifying and denouncing enemies. That’s not to say that it is necessarily wrong to denounce neo-Liberals (as well as communists). But taken too far, there is less and less incentive for reasonable reflection in correctly identifying these enemies, and eventually the range of hate becomes larger and larger until only a small group of true believers are left, and even these guys can become suspect of belonging to the enemy group over the slightest disagreement. We saw this with Nazi’s identifying anything against them as Jewish and anti-Communists defining any sort of democratic socialism as communism. We are starting to see the same thing with anti-Neo liberals.

            I watched the video and saw nothing wrong with what Dawkins said on altruism (I don’t agree with his comments on religion, which has a strong cultural element which means it is perfectly appropriate to classify children by the religion (or lack there of) of their parents). On altruism he was clearly speaking within a DARWINIAN framework which is not the framework humans live in due to memes and culture. He constantly paired the “mis-firing” of altruism with the “mis-firing” of non-reproductive sex. The Darwinian framework can be an interesting way of analysing problems but in no way is he advocating the humans take it up on a daily basis.

            In the Selfish Gene (if I remember correctly) he advocates a tit-for-tat approach to altruism, based on the Prisoner’s Dilemma and other game theory. He also discussed that the opening move should be altruism. What he is strongly against is rewarding cheaters with altruism; kind of like giving Wall Street a huge bailout as a reward for screwing over the country.

            Dawkins brings a lot of this hate upon himself for advocating the religion of Atheism with the same blind faith and vigour as a Wahhabi advocates a medieval form of Islam. But his scientific work is important; especially his discussion of game theory and evolutionary stable strategies and it would be a shame if people were turned away for this work because of Dawkin’s religious views.

          5. MViv

            What seems to happen when people think about this issue is a strong polarization of views. Human behavior is seen as either competitive and “selfish” or altruistic and human. It seems harder for people to grasp that it is both of these simultaneously; but obviously the dominant culture helps tilt people’s behavior one way or the other because the polarization also operates at a cultural level.

            Human behavior can be plotted on two axes that are orthogonal to each other ( http://paei.wikidot.com/leary-timothy-interpersonal-circle-model-of-personality ). The two axes are dominance/submission, and affiliation (or attachment)/hatred. (I know this was invented by Timothy Leary, but it does seem like the most incredibly fruitful idea and I use derivations of it in my work as a psychotherapist all the time.)

            What I think this means is that communist systems can’t work because they do not take account of the human neural system for perceiving, valuing and acting to alter one’s position in the hierarchy relative to others. In other words there is an impulse to dominate over others that is the epitome of the selfish gene.

            Similarly in the capitalist system there is too little taken account of people’s urges to affiliate. In other words, people stick together, even if game theory thinks they should be independent agents. Take the “expert network” backscratching system. Competition cannot be fair under these circumstances, because people affiliate with each other to rig the market in their favour.

            I think the left wing/ right wing polarity is one that is hard wired into our brains because it represents different neural systems of social perception (i.e. being able to register and perceive who one is close to, and who one is dominant over or submissive to.) Because the split between these ways of perceiving is irreconcilable we are doomed to oscillate around a political central point.

            Hope this helps in some way

  3. gregorylent

    same mindset as bezos, selling shares and raking in bucks from investors before amazon ever made a profit. it is the business mindset. entitlement.

  4. jake chase

    What a magnificent rant! It is shameful that a tongue lashing from Yves is the only punishment this creep will get. The kid glove treatment of Sir Fred and his ilk contrasts nicely with Parliament’s response to insider predation after collapse of the South Sea bubble (1720). Back then, members and officials found to have cashed in on bubble scams were stripped of all their wealth beyond a pittance. Incidentally, was anyone else struck by the “performance” comparision between Sir Fred and Robert Rubin at Citi? He received roughly $270 million over nine years as Chairman while the stock arced from $75 to $2.

    1. Yves Smith

      A tongue lashing from Richard Smith! He did not byline the piece but you see his name in Recent Items. Correcting now.

  5. M.InTheCity

    In the UK, I’ve noticed that intra-office affairs are regular occurences. It’s rare for someone to be kicked-out or disciplined over sex with subordinate.

    However, the HR guy does take the cake. Even my current HR is quite sympathetic to people dealing with bullies – not that they do much, but it is frowned upon in the company.

  6. Kieron

    Thanks for the pingback Richard

    Obviously I agree with the vast bulk of what you’ve written and agree that the principal problems at RBS were a) Goodwin’s appalling behaviour, and b) the failure of the corporate governance system to rein in that behaviour.

    But disagree with this, the central tenet of your piece: “This affair is one more data point pointing to the massive failure of corporate governance at RBS during Fred’s tenure.”

    I’m not defending his affair. I agree with you that it was “cavalier” and he was taking a “reputational risk”. And personally I don’t think I would ever cheat on a partner like that (though I wouldn’t want to be judgmental about someone who has). But that’s all his personal business, not the company’s.

    A “toxic undermining of the formal corporate structure”?? People (married or otherwise) have relationships with work colleagues all the time. Many of those go on to become marriages. As long as it doesn’t affect their work, that’s their business and certainly not their employer’s. And as a shop steward I would fight any attempt by the employer to try and interfere with their personal relationships.

    As for “creepy, potentially abusive power asymmetry at its heart”, that’s really quite some accusation. We can’t possibly know how their relationship worked. You can point to any number of couples who work in the same workplace at different levels of seniority (in my field, politics, there are a few prominent examples) who have perfectly healthy private relationships… er, so far as we know.

    I suppose we could argue that it was a reputational risk for the company, as the press might have published it while he was still CEO, but I was calling for a law preventing the press from doing just that.

    Anyway expecting lots of flames now for defending this loathsome man… but I think we should be concentrating on his horrendous professional exploits rather than his private ones.

    1. Richard Smith

      Really liked your piece – just that one sentence I jibbed at.

      Workplace relationships between peers or near peers happen all the time. Nothing instantly problematic about that at all but it isn’t what I am talking about.

      When it goes up and down the reporting line (which it is bound to when one party’s the CEO) it is bad judgement: neither party has any defence against sexual harassment allegations, for instance. And then, once the affair is widely known about, it corrodes morale and destroys trust within the co: everyone wonders what other little career advancing deals have been done. So yeah, that does undermine the formal structure, just a little bit. And then the reputational risk is for the company, not the individuals.

      And if you think there is no potential abuse in a relationship between a senior (usually male) CEO and a (usually female) junior, you will deserve a good solid flaming. What typically happens in that situation, if there’s any kind of a problem at all, is that the junior is chucked out and the senior sails on.

      And finally, in the case of Fred, specifically, I think there’s pretty extensive documentation that his relations with his other juniors *were* abusive. I linked to some of it!

      Examples of the considerations I am talking about: http://academic.udayton.edu/lawrenceulrich/StonecipherBoeingWSJ030805.htm


      1. Blunt

        The entire bs about “I don’t see any harm” is invariably disingenuous, or at the least, is of the order of the first commenter’s equivalence between Goodwin’s pay and that of a public service union worker in a state office building or at a public school: mind-numbingly naive.

        Yes, yes, we all know the churchly morality that refuses to distinguish between the slaying of one man and the slaying of thirty: they’re all murder and, thus forgiveable in the xtian tradition. But, surely the magnitude of the numbers somehow makes one pause for just a moment and at least wonder: hmmmm? One will hope.

        The power differential itself is enough to warrant the proscription of such affairs, no matter how junior the junior may be. And to suggest that “peer/near peer” is what was going on there given this man’s overall behavior is simply way past reasonable.

        If she’s with him now, then I wish her more luck than she allowed the other wife. If not, then may she have learned a lesson about wealthy narcissists that she’ll not soon forget.

  7. ep3

    Sounds like the mafia at that bank. Yves, you never ask or ponder why people would so fear this guy.
    And it’s good to see that I will be giving up my Social Security to see that guys like him will continue to enjoy their lavish lifestyles.

  8. zephyrum

    Knighted and benighted; how typical in these days where honours are accorded those with raw accumulation, never mind how. I can’t think of an honour that I could accept, without an intolerable association with sociopaths. This begs the question, how will we celebrate members of our society who actually provide true value to civilization?

  9. Mary

    I don’t mind celebrating with financial renumeration when there is proper governance, taxes transparently paid (not offshore), and a true measure of leadership honorably and accountably executed within an organization.

    On the other hand, I just cannot abide abuse of any system or people – collectively or individually. Individuals must be held to collective account, no matter the position or how much money they possess.

    Quaint notion, I know, but it seems to be the prevailing philosophy among human beings who don’t eat their young.

  10. craazyman

    It Must Have Been a Typo

    Just wondering whether his Knighthood was for Services to English “Banging” not Banking. Doesn’t seem like Knighthood is really warranted for the banking part, so I wonder if it was just a typing error.

    There seem to be a lot of Knights around these days so I guess it can get real busy processing all the paperwork.

    And the Admins are probably way underpaid, even for typing up Knighthood certificates. I guess that’s one of those jobs where the connections can be more lucrative than the pay, especially if you’re a hot female and know what to do.


    Ecce Homo said Fred.

  11. readerOfTeaLeaves

    A good 90% of shareholder value was destroyed by dilution and losses during Sir Fred Goodwin’s tenure as Chief Executive 2001-2009, some of it new money introduced via a £12bn share issue in April 2008, a few months before the crisis.
    A £24.1Bn loss, the biggest in UK corporate history, in FY 2008.
    Cumulative losses, FY 2008-2010, £28.8Bn (~$48Bn) . They’re still coming.
    Now RBS is 83% owned by the taxpayer.

    So the bullying, adulterous unBanker was so busy supervising the selection of wallpaper and shtupping his subordinate that he somehow missed the fact that his bank was imploding, eh?

    The corporate board, for letting a bully like this run rampant and fixate on details not relevant to the business, appears to be a disgrace.

    Makes me proud NOT to be British, at least in this one instance ;-)
    Hope Winston’s ghost will forgive my bad manners 8^}

  12. Afford-Anything.com

    The problem with taxpayer money is that it doesn’t have a name, face, or story behind it: it is the aggregate of millions of people’s money, and therefore it seems to belong to no one.

    And therefore, many people think they can misappropriate tax money with a clear conscience … and the misappropriators are not held accountable by any one owner of that money.

    1. Otter

      Those “people” know very well from whom they steal.

      Many of them know what happens to their victims.

  13. Firean

    I curious as to who chose Sir Incompetent Prick for a Knighthood.
    It would not have been Her Majesty, yet some advisor ? (rhetoricaLquestion ) the Prime minister of the day ?
    Some one who had to good reason to render the guilty silent, by way of embellishing with civil dignitary ?

  14. Hugh

    As this and the Assange case show, British justice is highly overrated. As here, it is the puppet of the rich and powerful.

  15. Iain Paton

    An admirable catalogue of misdeeds.

    One interesting fact: Goodwin was Honorary Air Commodore to 602 Squadron of the Royal Auxiliary Air Force, effectively an honorary rank in the Royal Air Force reserves.

    Now, the Royal Air Force expects certain ‘core values and standards’ of its people, especially leaders, with an emphasis on integrity. Contrary behaviour would certainly have been newsworthy, with a legitimate public interest, given this expectation. It’s certainly hit the headlines when serving RAF senior officers have committed misdeeds.

    This is probably academic now, as Goodwin “resigned” the honorary rank after the banking crisis exploded and his mismanagement was evident. So, no more will he sniff around the Royal Air Force Club on Piccadilly, in search of elevated company. I wonder if he ever used the place for (ahem) meetings???

  16. Andrew

    Nobody has yet explained why Sir F’s sex life is relevant to his revolting record in business. And they can’t. Because it isn’t.

    As for looting by unions: if you want an example, look at the failure of the UCW to grasp that the coming of fax then email had permanently changed the terms of trade against its members who no longer have their collective finger on the national windpipe.

    1. Richard Smith Post author

      If it it involves a subordinate at work then yes it is relevant, because such relationships are another way in which proper corporate governance is undermined. And I think you might see from the history that undermining corporate governance was a big part of Fred’s M.O. So the affair is part of the overall picture.

      That is the gist of the post. Simply ignoring the post and saying “tain’t so” doesn’t really advance the discussion.

      Had the RBS board responded in the same way as the board of Boeing, Fred would have gone years earlier, with less damage done.

Comments are closed.