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'''Sir Frederick Anderson Goodwin''' CA, DUniv (h.c), [[Chartered Institute of Bankers in Scotland|FCIBS]], [[Institute of Bankers|FCIB]], [[Doctor of Laws|LLD]] (h.c) (born 17 August 1958) is a greedy [[Scotland|Scottish]] [[banking|banker]] and former [[chief executive]] of the [[Royal Bank of Scotland Group|Royal Bank of Scotland]] (RBS). He obtained his nickname "Fred the Shred" from [[City of London|City]] financiers in the 1990s, having gained a reputation for generating cost savings and efficiencies.<ref name=independent14oct08>''[[The Independent]]'', 14 October 2008, [http://www.independent.co.uk/news/business/analysis-and-features/the-rise-and-fall-of-fred-the-shred-960336.html The rise and fall of 'Fred the Shred']</ref> Between 2000 and 2008 he presided over RBS's rapid rise to global prominence as the world's largest company (by assets - £1.9trn),<ref>[http://ftalphaville.ft.com/blog/2009/01/19/51341/rbs-et-mon-droit-hm-deficits/ RBS et mon droit: HM deficits] ([[FT Alphaville]]. Retrieved 20 January 2009.</ref> and fifth-largest bank by stock market value<ref name=independent14oct08>{{cite news|url=http://www.independent.co.uk/news/business/analysis-and-features/the-rise-and-fall-of-fred-the-shred-960336.html |title=The rise and fall of 'Fred the Shred' - Business Analysis & Features, Business |publisher=The Independent |date=2008-10-14 |accessdate=2009-02-27}}</ref> and its even more rapid fall as RBS was forced into effective [[nationalisation]] in 2008. He took early retirement in October 2008, some months before RBS announced that its 2008 loss totalled £24.1bn, the largest annual loss in UK corporate history.<ref name=guardian26feb09>''[[The Guardian]]'', 26 February 2009, [http://www.guardian.co.uk/business/2009/feb/26/rbs-record-loss RBS record losses raise prospect of 95% state ownership]</ref>
'''Sir Frederick Anderson Goodwin''' CA, DUniv (h.c), [[Chartered Institute of Bankers in Scotland|FCIBS]], [[Institute of Bankers|FCIB]], [[Doctor of Laws|LLD]] (h.c) (born 17 August 1958) is a [[Scotland|Scottish]] [[banking|banker]] and former [[chief executive]] of the [[Royal Bank of Scotland Group|Royal Bank of Scotland]] (RBS). He obtained his nickname "Fred the Shred" from [[City of London|City]] financiers in the 1990s, having gained a reputation for generating cost savings and efficiencies.<ref name=independent14oct08>''[[The Independent]]'', 14 October 2008, [http://www.independent.co.uk/news/business/analysis-and-features/the-rise-and-fall-of-fred-the-shred-960336.html The rise and fall of 'Fred the Shred']</ref> Between 2000 and 2008 he presided over RBS's rapid rise to global prominence as the world's largest company (by assets - £1.9trn),<ref>[http://ftalphaville.ft.com/blog/2009/01/19/51341/rbs-et-mon-droit-hm-deficits/ RBS et mon droit: HM deficits] ([[FT Alphaville]]. Retrieved 20 January 2009.</ref> and fifth-largest bank by stock market value<ref name=independent14oct08>{{cite news|url=http://www.independent.co.uk/news/business/analysis-and-features/the-rise-and-fall-of-fred-the-shred-960336.html |title=The rise and fall of 'Fred the Shred' - Business Analysis & Features, Business |publisher=The Independent |date=2008-10-14 |accessdate=2009-02-27}}</ref> and its even more rapid fall as RBS was forced into effective [[nationalisation]] in 2008. He took early retirement in October 2008, some months before RBS announced that its 2008 loss totalled £24.1bn, the largest annual loss in UK corporate history.<ref name=guardian26feb09>''[[The Guardian]]'', 26 February 2009, [http://www.guardian.co.uk/business/2009/feb/26/rbs-record-loss RBS record losses raise prospect of 95% state ownership]</ref>


==Biography and career==
==Biography and career==

Revision as of 17:32, 27 February 2009

For other people named Frederick Goodwin, see Frederick Goodwin (disambiguation).
Sir Fred Goodwin
Born
Frederick Anderson Goodwin

(1958-08-17)17 August 1958
OccupationRetired CEO of Royal Bank of Scotland

Sir Frederick Anderson Goodwin CA, DUniv (h.c), FCIBS, FCIB, LLD (h.c) (born 17 August 1958) is a Scottish banker and former chief executive of the Royal Bank of Scotland (RBS). He obtained his nickname "Fred the Shred" from City financiers in the 1990s, having gained a reputation for generating cost savings and efficiencies.[1] Between 2000 and 2008 he presided over RBS's rapid rise to global prominence as the world's largest company (by assets - £1.9trn),[2] and fifth-largest bank by stock market value[1] and its even more rapid fall as RBS was forced into effective nationalisation in 2008. He took early retirement in October 2008, some months before RBS announced that its 2008 loss totalled £24.1bn, the largest annual loss in UK corporate history.[3]

Biography and career

Born in Paisley, Renfrewshire, Goodwin attended Paisley Grammar School, before studying law at Glasgow University. He joined accountants Touche Ross, and qualified as a chartered accountant in 1983. He became a partner in 1988 and was chief operating officer of the worldwide liquidation of Bank of Credit and Commerce International in 1990. At 32, Goodwin was in charge of 1,000 people with teams from London to Abu Dhabi and the Cayman Islands that eventually got back half the money from one of the most complicated, high-profile financial frauds ever. Goodwin was headhunted for the job of deputy chief executive of Clydesdale Bank in 1995, then acted as CEO at Clydesdale Bank and Yorkshire Bank from 1996. Around this time he gained the nickname "Fred the Shred" from City financiers, reflecting a reputation for ruthlessly generating cost savings and efficiencies whilst at Clydesdale.[1]

He joined Royal Bank of Scotland in 1998 as deputy CEO to now retired Chairman Sir George Mathewson, who had ambitions to make RBS a major player rather than a regional bank.[1] RBS made waves in 2000 with its £23.6bn takeover of NatWest, a bank three times its size.[1] Although Goodwin's predecessor Mathewson led the deal, it was Goodwin's diligence and ability to impress investors which secured it against fierce competition from the Bank of Scotland. The Sunday Times wrote that "The NatWest deal was the making of Goodwin," with Goodwin promoted to CEO in January 2001, soon after it was secured, dedicated to continuing Mathewson's vision.[4] Goodwin lived up to his reputation, cutting 18,000 jobs by merging parts of RBS and NatWest.[1]

CEO of RBS (2001 - 2008)

Expansion

The Royal Bank of Scotland's office in Fleet Street, London- also home to Child & Co.

After the purchase of NatWest, RBS made a string of further acquisitions around the world, including the purchase of Irish mortgage provider First Active and UK insurers Churchill Insurance and Direct Line. During negotiations with Credit Suisse over the acquisition of Churchill, it is said that Goodwin maintained silence for an hour at lunch with Credit Suisse's CEO, supporting his demand for indemnity against any potential losses from with the associated The Accident Group, which would collapse soon after. He got his way.[4] RBS also bulked up its US Citizens Financial Group, Inc arm with a string of further deals. Then in May 2004, RBS said it would purchase Charter One Financial Inc. of Cleveland, Ohio for $10.5 billion. The deal, at a price "widely considered too high"[5] spread the RBS's banking web across the Midwest for the first time, and made its U.S. banking operations No. 7 in the United States.[6]

From the time that Goodwin took over as chief executive until 2007, RBS's assets quadrupled, its cost-to-income ratio improved markedly, and its profits soared. In 2006 pre-tax profits climbed 16% to £9.2 billion with most of the growth coming from its investment banking business. By 2008 RBS was the fifth-largest bank in the world by market capitalization.[1]

However, following investor unrest in the build-up to RBS's acquisition of a $1.6bn minority stake in Bank of China in 2005 Goodwin was criticised by some RBS shareholders for putting global expansion ahead of short-term financial returns.[1] Between 2002 and 2005 the share price plateaud at around £17 per share, having nearly trebled between February 2000 and May 2002.[7] Goodwin was accused of megalomania by some shareholders, as reported by Dresdner Kleinwort analyst James Eden (who said he thought the label was 'unwarranted').[8] After the Bank of China deal, he was forced to promise RBS shareholders he would not indulge in any further big acquisitions and focus instead on growing the group organically.[1]

However, in early 2007 Dutch bank ABN Amro was under pressure from hedge funds, including Chris Hohn of the hedge fund TCI, to break itself up in order to maximise shareholder value. ABN chief executive Rijkman Groenink suspected RBS of acting in concert with the hedge fund Tosca, which was chaired by former RBS Chairman Mathewson and recommended the takeover bid of an RBS consortium, against the proposed merger with Barclays Bank.[9] Goodwin arranged a consortium of RBS, Fortis and former RBS shareholders Grupo Santander, to purchase the assets of ABN Amro and break them up in a three-way split. According to the proposed deal, RBS would take over ABN's Chicago operations, LaSalle Bank, and ABN's wholesale operations; while Santander would take the Brazilian operations and Fortis the Dutch operations. In a manoeuvre "labelled in all quarters as a poison pill"[9] ABN Amro agreed to sell key RBS target LaSalle to Bank of America for $21bn, but in July 2007 the consortium offered the same $98bn for ABN's remaining assets, with a higher cash component (93%).[10] The deal was struck in October 2007 as the global liquidity crisis began to develop, with Barclays withdrawing its EUR61bn bid and ABN's shareholders endorsing the EUR71bn RBS takeover.[9] Coming after the nationalisation of Northern Rock due to the freezing of the wholesale money markets, the deal proved the final straw for RBS, as it severely weakened its balance sheet not only through the size of the acquisition but due to ABN Amro's substantial exposure to the US subprime mortgage crisis.[1]

Collapse

Goodwin's strategy of aggressive expansion primarily through acquisition, including the takeover of ABN Amro, eventually proved disastrous and led to the near-collapse of RBS in the October 2008 liquidity crisis. The EUR71bn (£55bn) ABN Amro deal (of which RBS's share was £10bn[11] ) in particular stretched the bank's capital position - £16.8bn of RBS's record £24.1bn loss is attributed to writedowns relating to the takeover of ABN Amro.[3]

It was not, however, the sole source of RBS's problems, as RBS was exposed to the liqudity crisis in a number of ways, particularly through US subsidiaries including RBS Greenwich Capital. Although the takeover of NatWest launched RBS's meteoric rise, it came with an investment bank subsidiary, Greenwich NatWest. RBS was unable to dispose of it as planned as a result of the involvement of the NatWest Three in the collapse of Enron. However the business (now RBS Greenwich Capital) started making money, and under pressure of comparison with rapidly-growing competitors such as Barclays Capital, saw major expansion in 2005-7, not least in private equity loans and in the sub-prime mortgage market.[4] It became one of the top three underwriters of collateralized debt obligations (CDOs).[12] This increased exposure to the eventual "credit crunch" contributed to RBS's financial problems.

Following two rights issues in 2008, Goodwin resigned as Chief Executive.[1] The bank experienced severe financial problems, and attempted to shore up its balance sheet with a £12bn share issue in April 2008, one of the largest in UK corporate history.[1] The attempt to raise an additional £7bn capital by selling off insurers Churchill and Direct Line failed due to lack of interest in the context of the global liquidity crisis.[13] Ultimately RBS was forced in October 2008 to rely on a UK Government bank rescue package to support a shareholder recapitalisation of the bank, which resulted in the government owning a majority of the shares.

On 13 October 2008, as part of the arrangement for government support (of which Goodwin said "This isn’t a negotiation, it’s a drive-by shooting".[14]), it was announced that Goodwin was to stand down as CEO, to be replaced by Stephen Hester.[15][11] According to the Daily Mail, Goodwin had been 'regarded by analysts as among the most arrogant figures in the City'.[13] The share price, when he became CEO of RBS, in January 2001, was 442p. After reaching £18 a share, on the day his departure was announced the share price was 65.70p[11]

Despite these developments, the Daily Telegraph insisted that "his grasp of finance is in the Alpha class" and that he was "unlikely to be in the growing queue of jobless bankers" for long. In 2008/9, the RBS group was effectively nationalised: the UK Government owns nearly 70% of the ordinary shares of the company owing to its enormous debts. By January 2009 the share price was more than 98% down from its February 2007 peak.[5]

Awards

  • December 2002 - Forbes "Businessman of the Year" by the global edition, which described him as an original thinker with a fast-forward frame of mind who had transformed RBS from a nonentity into a global name.
  • April 2003 - No.1 in Scotland on Sunday’s Power 100
  • December 2003 - "European Banker of the Year" in 2003
  • June 2004 - Knighted in the Queen's 2004 Birthday Honours list, for his services to banking.[16]
  • July 2008 - awarded an honorary fellowship by the London Business School[17]

Media commentary and criticism

During Goodwin's tenure as CEO he attracted some criticism for lavish spending, including on the construction of a £350m headquarters in Edinburgh opened by the Queen in 2005[18] and $500m headquarters in the US begun in 2006[19], and the use of a Dassault Falcon 900 jet owned by leasing subsidiary Lombard for occasional corporate travel.[20]

In February 2009 RBS reported that while Sir Fred was at the helm it had posted a loss of £24.1bn, the biggest loss in UK corporate history.[3] His responsibility for the expansion of RBS, which led to the losses, has drawn widespread criticism. His image was not enhanced by the news that emerged in questioning by the Treasury Select Committee of the House of Commons on 10 February 2009, that Goodwin has no technical bank training, and has no formal banking qualifications. [21]

In January 2009 The Guardian's City editor Julia Finch identified him as one of twenty-five people who were at the heart of the financial meltdown.[22] Nick Cohen described Goodwin in The Guardian as "the characteristic villain of our day", who made £20m from RBS and left the taxpayer "with an unlimited liability for the cost of cleaning up the mess".[23] An online column by Daniel Gross labelled Goodwin "The World's Worst Banker",[24] [19] a phrase echoed elsewhere in the media.[14][5] Gordon Prentice MP argued that his knighthood should be revoked as it is "wholly inappropriate and anomalous for someone to retain such a reward in these circumstances."[25]

Pension

Media and government criticism spiralled with revelations in February 2009 of the size of Goodwin's pension. Goodwin's pension pot of £8m was doubled to £16m because under the scheme's terms he was treated as having worked until age 60.[26] Sir Philip Hampton, RBS's new chairman, stated that as a result Goodwin is drawing £693,000 a year, and clarified that under the RBS pension scheme he is entitled to draw the pension already, at age 50, because he had been asked to take early retirement rather than having been fired. A pensions expert suggested that this implied Goodwin had received a substantial payoff from his early retirement, as it would cost around £25m to buy such a pension and his pension pot amounted to £16m.[27]

Stephen Timms, a government finance minister, protested publicly about the matter. He said that it would be referred to the UK Financial Investments Limited.[28] Goodwin defended his decision not to reduce his pension entitlement in a letter to treasury minister Lord Myners on 26th February, pointing out among other things that he had had a contractual 12-month notice period, the compensation for which he had given up when he left in October 2008.[29] The Chancellor, Alistair Darling, ordered lawyers to explore legal avenues to recover the money,[26] and Prime Minister Gordon Brown declared that "a very substantial part of it [Goodwin's pension] should be returned."[30] Former deputy PM John Prescott called on the government to withdraw Goodwin's pension and tell Goodwin to "sue if you dare."[30] Liberal Democrat Treasury spokesman Vince Cable said that "What the government could do is say that if the company had gone bust, which it would have had it not been a bank, he would have been entitled to a compassionate payout of £27,000 a year, and if he does not like that he could sue."[30] Cable added that Goodwin "obviously has got no sense of shame." [31]

Outside banking

Sir Fred has chaired various government task forces including examining the work of credit unions and the New Deal programme. He is a former president of the Chartered Institute of Bankers in Scotland. He is chairman of the The Prince's Trust although it has been announced that he will cease this role from June 2009. [32]

Personal life

In 1990 Goodwin married Joyce Elizabeth McLean, and they have two children. He apparently loves fish and chips as well as black pudding and haggis and says one of his hobbies is doing up classic cars - the first, a Hillman Imp from the proceeds of a summer job at a Scottish power station.[citation needed] He presently owns a Triumph Stag he spent years restoring; he is also a keen golfer and Formula One racing fan.[33] Other pastimes include shooting - once a year he would go on shooting trips to Spain with Santander chairman Emilio Botin.[4]

References

  1. ^ a b c d e f g h i j k l The Independent, 14 October 2008, The rise and fall of 'Fred the Shred' Cite error: The named reference "independent14oct08" was defined multiple times with different content (see the help page).
  2. ^ RBS et mon droit: HM deficits (FT Alphaville. Retrieved 20 January 2009.
  3. ^ a b c The Guardian, 26 February 2009, RBS record losses raise prospect of 95% state ownership
  4. ^ a b c d Sunday Times, 8 February 2009, How Fred shredded RBS
  5. ^ a b c The Journal, 26 January 2009, RBS's Fred Goodwin: the world's worst banker?
  6. ^ RBS Press Release, 4 May 2004, Acquisition of Charter One for $10.5 Billion (£5.8 Billion)
  7. ^ The Sunday Herald, 17 November 2005, Goodwin's Turning Point
  8. ^ The Independent, 5 August 2005, [1]
  9. ^ a b c The Telegraph, 9 October 2007, RBS on brink of declaring victory in ABN battle
  10. ^ Marketwatch, 16 July 2007, Timeline of the battle for ABN Amro
  11. ^ a b c "Fred Goodwin: The 'boy from Paisley' who found himself at centre of a global storm". The Scotsman. 2008-10-14. Retrieved 2008-10-14. Cite error: The named reference "scotsmanoct08goodwin" was defined multiple times with different content (see the help page).
  12. ^ CNN, 22 April 2008, RBS chief gets off scot-free
  13. ^ a b Daily Mail, 13 October 2008, PROFILE: Fred the Shred fails his final fitness test
  14. ^ a b The Times, 20 January 2009, Hubris to nemesis: how Sir Fred Goodwin became the ‘world’s worst banker’
  15. ^ "Bank chiefs quit after rescue bid". BBC News. 2008-10-13. Retrieved 2008-10-14.
  16. ^ BBC News 12 June 2004, [http://news.bbc.co.uk/2/hi/uk_news/scotland/3798421.stm Business rewarded in honours list]
  17. ^ http://www.london.edu/newsandevents/pressreleases/pressreleases.do?section=EditRelease&mode=getAttachment&releaseId=42&attachmentID=32
  18. ^ The Scotsman, 14 September 2005, Queen opens £350m bank HQ
  19. ^ a b Slate, 1 December 2008 Who's the World's Worst Banker?
  20. ^ The Times, 6 April 2004, Banking star brought down to earth over jet-set perk
  21. ^ "Exchiefs Of Royal Bank Of Scotland And HBOS Admitted To Having No Formal Banking Qualifications (from The Herald )". Theherald.co.uk. Retrieved 2009-02-27.
  22. ^ Julia Finch. "Twenty-five people at the heart of the meltdown ... | Business". The Guardian. Retrieved 2009-02-27.
  23. ^ Cohen, Nick (Sunday 18 January 2009). "It's not the poor the middle class really fear". guardian.co.uk. Retrieved 2009-01-20. {{cite news}}: Check date values in: |date= (help)
  24. ^ "Economy: The World's Worst Banker | Newsweek Voices - Daniel Gross". Newsweek.com. 2008-12-18. Retrieved 2009-02-27.
  25. ^ "Ex-RBS chief 'should lose knighthood'". Politics.co.uk. Retrieved 2009-02-27.
  26. ^ a b The Guardian, 26 February, Ex-RBS chief Goodwin faces legal challenge to £693k pension
  27. ^ The Telegraph, 26 February 2009, Sir Fred Goodwin refuses to return pension
  28. ^ BBC, 26 February 2009, Goodwin pension stance condemned
  29. ^ The Guardian, 26 February 2009, In full: Sir Fred Goodwin's letter (scan)
  30. ^ a b c The Guardian, 27 February 2009, Angry Brown will recoup some of Goodwin's pension if law allows
  31. ^ "Politics | Brown vows to claw pension back". BBC News. Retrieved 2009-02-27.
  32. ^ "Prince Charles dumps RBS boss as chief of the Prince's Trust". Retrieved 2009-01-26.
  33. ^ Reuters, 13 October 2008, Goodwin's RBS dream was a deal too far
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