The “lynch mob” mentality that cost Fred Goodwin his knighthood and fellow banker Stephen Hester his bonus will damage British business, Lord Jones of Birmingham has warned.
Digby Jones, the former CBI Director General, said foreign entrepreneurs will be discouraged from doing business in this country because of the way high-profile bankers had been treated.
Giving evidence to a Commons inquiry, Lord Jones, who received a knighthood before becoming a peer, also called for reforms to the honours system to remove references to the British Empire.
He said the use of titles such as Commander of the British Empire caused embarrassment overseas, where the empire was not remembered fondly.
Speaking to the Commons Public Administration Committee, Lord Jones criticised the way former Royal Bank of Scotland Chief Executive Fred Goodwin was stripped of his knighthood following a wave of public anger over his role in the banking crisis.
It was not clear what rules Mr Goodwin had broken, if any, and there did not appear to be any process in place giving Mr Goodwin a chance to defend himself, Lord Jones said.
He said: “The problem of course is this was no way to go about meting out any form of discipline or sanction or punishment. It had the whiff of the village green lynch mob about it.”
He added: “The biggest pressure of all was the headlines in the newspapers and a government that said ‘I’m going to listen to that to satisfy the mob’ . . . it was nothing less than punishment, and punishment in our nation should be meted out after due process and a proper trial.”
The public outcry that caused Royal Bank of Scotland Chief Executive Stephen Hester to turn down his £1 million bonus, at around the same time that Mr Goodwin lost his knighthood, was also bad for business, said Lord Jones.
He compared the way the two men were treated to reign of terror which followed the French Revolution and the storming of the Bastille on July 14 1789.