- guardian.co.uk, Tuesday 3 March 2009 11.14 GMT
The £16m pension pot for former Royal Bank of Scotland chief executive Sir Fred Goodwin is a "reward for failure" and a "golden parachute", the chairman of the body looking after the £37bn of taxpayer funds in the bailed out banks said today.
Glen Moreno, the acting chairman of UK Financial Investments (UKFI), told the Treasury select committee of MPs that Goodwin's pension should not have been doubled when the former RBS board left in January.
"I have to say that I regard this completely as reward for failure and what in America is called a golden parachute. I think it was wrong. I don't think the remuneration committee or the board of RBS should have effectively increased, doubled I guess, a pension benefit in that situation."
John Kingman, chief executive of UKFI, told the MPs that he found the decision by the bank to allow Goodwin to retire early rather than have his contract terminated "extraordinary".
He told the committee that the government had been told the size of the pension pot but had not been told it was discretionary. Kingman made it clear that the terms of the taxpayer injection of funds was on the basis that there were no rewards for failure and that this pension arrangement appeared inconsistent.
Kingman said the decision to allow Goodwin to retire early was taken by RBS, particularly by Sir Tom McKillop the former chairman and Bob Scott, the former senior independent director.
UKFI discovered that the pension arrangement was discretionary on 19 February - a week before the news broke - and had begun to investigate it.
There was "no way" UKFI could have stopped the change to the pension pot and was looking at "every legal avenue" to recoup it. UKFI is also looking at whether it has any grounds to recoup payments paid to other bankers at the banks bailed out by the taxpayer.
"We are pressing our banks to conduct a full review of what took place to see what opportunities there are for legal redress," Kingman said.
He said Lloyds Banking Group had been asked to look at whether the payments to departing executives from HBOS, the bank it rescued, were more than they were legally entitled to.
UKFI is looking at "Sir Fred and other actors in the drama at RBS and HBOS" to establish that payments were only the minimum entitlement under the law.
Kingman defended Lord Myners, the City minister who has been involved in a public row with Goodwin over the pension. Kingman told MPs: "I think the mistake was made by the RBS board and those on that board (who took a decision) which was clearly inconsistent with the principle (of no rewards for failure)."
Kingman said it was not reasonable to have expected Lord Myners to have sufficient understanding of the RBS pension scheme to have realised that the entitlement would have doubled.
"It's not obvious to me that it was obvious there had been a change (to the pension pot)," Kingman said.
"The board was not sharing with him (Myners) material facts that it ought to have shared with him given that the arrangement they were putting in place was clearly inconsistent with the principles Lord Myners had set out."
John McFall, chairman of the committee, told Kingman he had got off to a "bad start" and shown discourtesy by failing to respond to the MPs' requests for details about pay banks inside RBS, Lloyds Banking Group, Northern Rock and Bradford & Bingley, the four banks under its remit.