- guardian.co.uk, Thursday 18 June 2009 14.36 BST
A newspaper tracked down former RBS boss Fred Goodwin at his French hideaway. Photograph: Murdo Macleod
Former Royal Bank of Scotland chief executive Sir Fred Goodwin has bowed to public anger over the size of his pension by agreeing to give up more than £200,000 a year of the controversial reward.
Goodwin, who left the bank in October when RBS had to be bailed out with £20bn of taxpayers' money, was originally awarded £703,000 a year when the bank was rescued by the government last year.
Despite coming under strong pressure to give up some of his retirement benefits, Goodwin defied the outrage over what was seen as a reward for failure, insisting he was entitled to take early retirement under an agreement with the previous RBS board.
RBS said he would be paid £342,500 a year, down from the £555,000 set in February after he took out an estimated £2.7m tax-free lump sum.
The decision was welcomed by politicians on all sides but failed to appease unions representing thousands of bank workers who have lost their jobs or face redundancy.
Rob MacGregor, the national officer for Unite, said Goodwin's decision would not help RBS employees: "This decision to repay some of the massive pension pot he has taken will do nothing for the thousands of staff who have already lost their jobs within RBS. Also many thousands more employees face an uncertain future, while the person whose misjudgment and greed caused their misery enjoys a life of luxury."
Goodwin's move followed the discovery of his £4m hideaway on the French riviera by the News of the World at the weekend. But it is understood Goodwin finally agreed to bow to public pressure because RBS has now completed its internal inquiry into his conduct and found there was no wrongdoing. The inquiry examined Goodwin's pension arrangements, conduct, expenses and use of company assets during his tenure as chief executive.
Negotiations on Goodwin's reduced payout were led by the new RBS chairman, Sir Philip Hampton, and have been going on since he joined the company in February. An announcement planned for tomorrow was brought forward after details of the deal leaked.
The agreement with Goodwin means RBS will be able to avoid costly and time-consuming legal action against its former chief executive. When details of Goodwin's pension emerged, the bank's chief executive, Stephen Hester, said he would leave no stone unturned to recover some of the money. RBS shareholders vented their fury about Goodwin's pension at the bank's annual meeting in April, where the former chief executive was condemned as a "benefit scrounger" and a "cataclysmic failure".
The company's remuneration report was overwhelmingly voted down, with the government lending its weight of its majority stake to the rebellion.
Known as Fred the Shred for his ruthless cost cutting, Goodwin became the focus of anger over the banking crisis and he fled the UK after his Edinburgh home was attacked.
He was blamed for pursuing the disastrous acquisition of Dutch bank ABN Amro at the height of the credit crunch and loading the company with toxic assets.
Since his departure, RBS has announced 9,000 job cuts as it attempts to recover from posting a £24.1bn loss last year, the biggest in UK corporate history.
Hampton said the deal with Goodwin had "resolved a situation that has been a difficult and unhappy one for all the parties involved".
"This pension arrangement became a symbolic issue, and the focus of unprecedented media and political attention. It had to be fixed to allow everyone to focus our energies where they should be, on getting the company back to health," Hampton said.
"I have been in dialogue with Fred about this issue since I became chairman in February. He understandably wished to wait until the conclusion of an internal inquiry into his pension arrangements, conduct, expenses and the use of company assets, before addressing this question. This inquiry concluded recently, finding that there was no conduct on Fred's part that would justify reducing the pension. Following this, Fred made an approach to revisit the pension arrangements and we have been working with him to change them. A resolution had to be found for the sake of all concerned and we thank Fred that this has now been achieved."
Hampton said Goodwin had expressed "deep regret" about what had happened to RBS as a result of the financial crisis.
Chancellor Alistair Darling said: "I'm very glad that RBS have now resolved the matter with Sir Fred Goodwin. I think that Sir Fred, in handing back part of his pension, is doing the right thing."
Darling, who was speaking during a visit to Sheffield, said: "What I want to do now is to make sure that we rebuild RBS and all its banking operations. That's absolutely essential, not just for the bank but for the thousands and thousands of people who work for that bank and for the economy as a whole."
Vincent Cable, the Liberal Democrat Treasury spokesman, said it was right that Goodwin would be handing back some of his pension.
"This was a grotesque level of incompetence which resulted in a major bank collapsing, having to be rescued by the taxpayer at enormous public cost and a great deal of cost to many bank employees," he told Sky News.
John Mann MP, a Labour member of the Treasury select committee, also welcomed Goodwin's decision. "This is an appropriate reduction and does begin to rehabilitate Mr Goodwin," he told Sky News.
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