Harsh words for bank boss

Apr 24 2008 by Peter McCusker, The Journal

A RETIRED North East businessman accused bank boss Sir Fred Goodwin of “unbelievable bad management” when he vented his anger at the company’s £12bn rights issue.

Bosses of the Royal Bank of Scotland – the UK’s second-biggest bank – faced tough questions from shareholders at its annual general meeting in Edinburgh yesterday.

The meeting came a day after Sir Fred launched Europe’s biggest rights issue to help the group shore up its finances.

Two months ago he declared RBS’s financial state satisfactory but on Tuesday the bank unveiled a further £5.9bn of investment writedowns from risky US property assets.

Retired County Durham builder Brian Peart, of Witton-le-Wear, voiced fears the plans would drive down the value of current shareholdings.

“It’s unbelievably bad management to have gone down this road,” he told the meeting.

The rights issue will release 11 new shares for every 18 current shares at 200p each.

RBS’s closing share price at the start of the week was 372.5p.

Mr Peart suggested 340p would be more appropriate and said shareholders would dilute their holdings if they chose not to take up the offer.

Chairman Sir Tom McKillop reassured him shareholders would have an opportunity to sell their rights if they did not take up the offer.

But Mr Peart, who chairs the UK Shareholders Association in the North East, countered: “If they sell their rights, they’re obviously going to dilute their holding, which people might have had for years and years and years with the Royal Bank of Scotland.”

Shareholder John Steen told the meeting he would like the board to reconsider its remuneration policy, saying they were paid “above anything the rest of us can only dream of”.

Last month it was revealed Sir Fred Goodwin had seen his pay package rise 5% to £4.2m in 2007, despite billions in losses from the credit crunch. To applause, Mr Steen told the meeting: “You guys are paid as though you were superhuman and it’s very clear that you’re not.”