Pensions don’t indicate success
Mar 2 2009 By Alun Thorne
The concenpt of performance related pay has been brought into sharp focus in recent months.
As the world’s leading financial institutions have queued up to announce one set of disasterous results after another, so the world has looked on aghast as those at their helms have trousered pay packets way beyond the wildest dreams of mere mortals.
Pandora’s Box was roughly jimmied open by the news that Lehman Brothers chief Richard Fuld had pocketed almost half a billion dollars as he steered the once great company into meltdown and the there have been dozens of revalations since with former RBS chief executive Sir Fred Goodwin the current focus of the nation’s ire.
It has not been a good couple of weeks for Sir Fred. First he was forced to publically apologise at the Commons for his role in driving RBS billions of pounds into the red and now the massive renumeration he enjoyed as the company’s fortunes plummetted is the subject of more than a little conjecture.
But, whereas the previous anger has been aimed at the what banking bosses where paid as they supported reckless spending and lending sprees, the current focus is not so much on what Sir Fred earned but how this will equate in his pension provision. And therein lies a nasty problem for the Government.
Yesterday Harriet Harmen followed previous pronouncements by the Prime Minister and others and suggested that legal action would be taken to try and claw back some of Sir Fred’s payout of £693,000 every year for the rest of his life. She admitted that a special Act of Parliament may even be pushed through the House as a last resort if the former RBS boss continued to stick two fingers up at them. Who is she trying to kid?
Whether we like it or not, there is no such thing as performace related pensions and we can only hope there never will be. Sir Fred’s pension pot is clearly obscene considering the recent peformance of RBS but all this hyperbole is nothing more than a monumental red herring. The issue was and is the amount of money company bosses are paid and how this has been structured – or not as the case may be – against performance.
Sir Fred’s pay package – including pension – was agreed by all concerned and if there were no provisions made within his contract that he would lose these benefits if RBS went to hell in a handcart then it is hard to imagine what the Government or anyone else is going to be able to do about it. A new Act of Parliament sounds like little more than headline-grabbing bluster and should the Government decide that performace-related pensions are the way forward then we should all be very worried.
