This post has been corrected. See the note at the bottom for details.
REPORTING FROM LONDON -- A disgraced banker who became the symbol of everything wrong in British high finance was stripped Tuesday of his knighthood from Queen Elizabeth II, an unusually severe move in tune with a public still steaming over the government’s bailout of big banks more than three years ago.
Fred Goodwin, the former head of the Royal Bank of Scotland, became a hated figure for slashing jobs and making disastrous deals that helped propel one of Britain’s largest financial houses to the edge of ruin. Unrepentant, Goodwin walked away from his job with a nearly $1-million-a-year pension even as the bank posted a $34-billion loss in 2008, the biggest annual corporate loss in British history.
In a land where essentially feudal titles and honors still carry great prestige, the annulment of Goodwin’s knighthood Tuesday means that he can no longer use the title “Sir” before his name. Many Britons were more accustomed to calling him by his nickname, Fred the Shred, a reference to what he did to jobs and to the once-proud bank he led.
Having a knighthood revoked is an indignity normally reserved for convicted criminals or those who have been professionally censured. One commentator described it as almost the modern equivalent of being put in the stocks and publicly pilloried.
Other well-known figures who have had their British royal honors rescinded include former Romanian dictator Nicolae Ceausescu and Zimbabwean President Robert Mugabe.
Goodwin’s entry into that august group comes as executives at the Royal Bank of Scotland, or RBS, continue to make headlines with their generous bonuses, even though the bank is now 83% owned by taxpayers after a public bailout. Within the last week, both the bank’s chairman and its chief executive announced that they would give up bonuses worth $2.2 million and $1.6 million, respectively, in the face of surging public outrage.
The planned payouts were a huge source of embarrassment for Prime Minister David Cameron, who chose not to block the bonuses for fear that the RBS board would quit en masse but whose government is busy unloading hundreds of thousands of public-sector workers under the harshest austerity cuts seen here in at least a generation.
The decision to make Goodwin forfeit his knighthood, made by a committee of senior civil servants, was a relief for Cameron. He welcomed the news, as did opposition Labor leader Ed Miliband.
“It’s only the start of the change we need in our boardrooms,” said Miliband, who has hammered on the theme for days. “We need to change the bonus culture, and we need real responsibility right across the board.”
Of course, it was Miliband’s party that made Goodwin a “knight bachelor” in the first place. The Labor government under then-Prime Minister Tony Blair recommended him for a knighthood for “services to banking,” which he was formally awarded by the queen in 2004.
Four years later, undone by ill-judged deals such as the multibillion-dollar takeover of Dutch rival ABN Amro, the Royal Bank of Scotland was on the brink of collapse. The government eventually injected more than $70 billion of taxpayer money into RBS to keep it afloat.
“The failure of RBS played an important role in the financial crisis of 2008-9 which, together with other macroeconomic factors, triggered the worst recession in the U.K. since the Second World War,” the government said Tuesday in a statement. “Fred Goodwin was the dominant decision maker at RBS at the time.”
Goodwin’s knighthood was revoked because he “had brought the honors system into disrepute,” the statement said.
To many Brits, Goodwin’s attitude -- seemingly arrogant and disdainful -- was as distasteful as his actions. Three years ago, after he was forced into early retirement for running his bank into the ground, he resisted pressure to give up his princely pension, insisting it was rightfully his.
The current uproar over executive compensation at RBS has echoes of what happened with Goodwin.
Although Chief Executive Stephen Hester has been praised for helping RBS get back on its feet, the bank has not met its targets for issuing credit to individuals and companies to keep the economy humming, and its share price dropped by nearly half in 2011.
After days of silence and the threat of a public debate in the House of Commons, the lower house of Parliament, over his $1.6-million bonus, Hester agreed Sunday to waive the payout, sparing Cameron’s government further discomfort.
RBS Chairman Philip Hampton, who is also a knight, had announced his decision to forgo his $2.2-million bonus the day before.
Matthew Oakeshott, a member of the House of Lords from the Liberal Democrat party, said he was glad that Goodwin had been stripped of his knighthood.
“It clears the decks,” said Oakeshott (or Baron Oakeshott of Seagrove Bay, if you please). “But what obviously matters now is that today’s bankers behave properly, and I’d nominate [current RBS Chief Executive] Stephen Hester for a peerage happily if he met his lending targets and lent to small businesses as he should.”
For the record, 3:26 p.m. Jan. 31: A previous version of this post said RBS Chairman Philip Hampton, who is also a knight, had announced his decision to forgo his $2.2-million bonus a couple of days earlier. He announced his decision a day earlier.
-- Henry Chu
Photo: An April 25, 2007, file photo of former Royal Bank of Scotland Chief Executive Fred Goodwin, who led the bank into near-collapse. Credit: Danny Lawson / Associated Press