If you were startled by a banging noise on Thursday lunchtime, then please don’t be alarmed. It was just the sound of the Prime Minister slamming the stable door shut after the horse had bolted. The particular ‘horse’ in question was erstwhile RBS Chief Executive and tabloid hate-figure Sir Fred Goodwin, and David Cameron had just announced that he might lose his knighthood. In yet another speech on the future of capitalism, the Prime Minister confirmed that the case for stripping Sir Fred of his knighthood was being considered by the Honours Forfeiture Committee – the group of top civil servants who decide in exceptional circumstances whether an individual’s conduct warrants them losing an honour. Sir Fred’s case is only now being heard because a Financial Services Authority report in December officially confirmed what most already suspected – that the calamity which engulfed RBS in 2008 and ended with the UK taxpayer owning an 84% stake in the business, was primarily the result of poor decision-making by the company’s management.
Determining whether or not to deprive Sir Fred of his knighthood is ostensibly an open and shut case. He was one of those who were culpable, as the FSA report confirmed, for the biggest corporate loss and public bailout in UK history. In this country he has become more synonymous with the inequities of capitalism than any other person, and his name still blackens the banking industry. Sir Fred continuing to hold a knighthood for ‘services to banking’ is about as incongruous as Jean-Claude Mas being recognised for services to the plastic surgery industry. Furthermore, the infamously abrasive Fred the Shred (he picked up the now ubiquitous nickname because of his reputation as a ruthless cost-cutter) is without doubt a deeply unsympathetic figure, not least because he is currently drawing over £342,000 a year from his pension pot (almost unbelievably, this represents a reduction on his original entitlement).
There may be other good reasons for removing Sir Fred’s knighthood. Just as regulators have tried to align incentive structures with long-term performance through deferred bonuses which can be ‘clawed back’, so the ability to claw back honours might encourage sustainable success. If those who rise to prominence in public life and hanker after honours know that what society giveth, society can also taketh away, it might prove an extra inducement to act responsibly. The politics of Sir Fred’s knighthood is also clear. Whilst the matter will be settled by civil servants, with the Queen formally rescinding the honour after she has received advice conferred to her via the Prime Minister, David Cameron has a political imperative to back the removal of the knighthood and associate himself with any action taken against Sir Fred. Although Ed Miliband’s current performance is being near universally panned, if the Prime Minister does not fear the man he fears his message: that Cameron is quite content to preside over a lopsided corporate system where at best the captains of industry are rewarded disproportionately, and at worse are rewarded for doing things which are actually harmful to society. That Cameron is taking this attack seriously is confirmed by the recent noises he has made about reforming executive remuneration. It is therefore not surprising that he would seize upon something to remind the public of New Labour’s advocacy of light-touch financial regulation and their complicity in the crisis – it was after all a Labour Government who awarded Sir Fred his knighthood.
Whilst the case of Sir Fred’s knighthood appears to be a no brainer, I cannot however help but reach the opposite conclusion – that he absolutely should keep it. The problem is that the clamour to divorce Sir Fred from his knighthood has the unpleasant but familiar whiff of hypocrisy about it. When Labour knighted Goodwin in 2004 they were reflecting the entire political and financial establishment’s view of him as the golden boy of British banking, and widespread approval of his business practices. Whilst the Labour Government must of course bear primary responsibility for the conditions within which Sir Fred and others of his ilk flourished and were feted, it is worth remembering that the Tories were also celebrating the City and calling for more deregulation of financial services on the eve of the credit crunch. The current furore over Sir Fred’s knighthood is therefore reminiscent of the hypocrisy witnessed when the phone hacking scandal first gained irreversible momentum. In a deeply undignified display, politicians of all parties who had spent years bowing and scraping to Rupert Murdoch (including a Prime Minister who was blithely dismissive of hacking for as long as politically possible) were suddenly falling over themselves in their condemnation of the Murdoch empire. In calling for the removal of the knighthood, one of the most serious indictments politicians have made is of themselves. Let Sir Fred keep his bauble – it should serve as a permanent reminder of the short-sightedness of the British political and financial establishment, and a positive example to politicians that sometimes the prevailing orthodoxy needs to be more rigorously questioned.
An updated version of this post appeared on the Prospect magazine blog on 01/02/2012 in response to the news that Goodwin has indeed been stripped of his knighthood.