Former Royal Bank of Scotland Chief Executive Fred Goodwin leaves the Edinburgh International Conference Centre, after the bank's annual general meeting, Edinburgh, Scotland April 23, 2008.
There are few insults that can be hurled at a bank executive these days that haven't already been said. But placing a bank CEO alongside the bloody dictatorships of Robert Mugabe and Nicolae Ceausescu may go down as the most damning of all.
England's decision to strip former Royal Bank of Scotland chief executive officer Fred Goodwin of his knighthood Tuesday – a disgrace that puts his failed run atop the bank in the same category as the former leaders of Zimbabwe and Romania – is a sign of how low the reputation of bankers has sunk around the world.
Hyperbolic? Perhaps. But it's also emblematic of governments and heads of state playing what few cards they have against the executives blamed for wreaking havoc on the global economy. Unable to hold CEOs to account financially for decisions that contributed to the banking crisis in 2008 and the recession it has wrought, countries have resorted to public shaming.
"In a way it's a small gesture but I think it does count for a lot," said Emma Boon, spokeswoman for the U.K. Taxpayers Alliance.
Once considered untouchable in England, Mr. Goodwin was knighted in 2004 for his "services to banking." He led RBS through an era of grand expansion between 2000 and 2007, but the bank became dangerously leveraged under his watch. The bank's balance sheet grew to £2-trillion ($3.16-trillion), with insufficient capital supporting it. When the credit market collapsed, the bank nearly went bust and reported a loss of £24-billion in 2008, a record for a U.K. company.
The British government was forced to step up with £45-billion of bailout funds to stabilize the banking system, and remains the bank's majority shareholder.
"The scale and severity of the impact of his actions as chief executive of Royal Bank of Scotland made this an exceptional case," the British Cabinet Office said in a statement announcing the decision Tuesday. "The failure of RBS played an important role in the financial crisis of 2008-09 which, together with other macroeconomic factors, triggered the worst recession in the U.K. since the Second World War."
The demotion has more to do with public rage and catharsis over Mr. Goodwin's lack of remorse than it does with solving the problems brought about in the financial crisis. After RBS's downfall, Mr. Goodwin demanded his contractual entitlement to an £8-million pension top-up, which predictably enraged the country. Even when subjected to intense criticism, he only relinquished a portion of the bonus.
Reaction in Britain to the loss of his knighthood Tuesday was mixed. Some said the move solved nothing.
"I don't like to see anyone humiliated and this is just another humiliation. I would have been more impressed with the government if they had done something about his pension," Labour MP George Mudie said.
The BBC declared the move, "a very British humiliation." Indeed, it is a British twist on the same kind of government rage that bubbled up in the United States after the credit crisis, when disgraced Lehman Bros. CEO Richard Fuld was grilled in Washington by the U.S. Congress Committee on Oversight. While the exchanges did little to undo the financial damage created by risky lending, it allowed Washington to place the blame squarely at the feet of the banks.
British Prime Minister David Cameron said he supported the decision to strip Mr. Goodwin of the honour – a call that is ultimately made by the Queen. But critics condemned it as misguided and ineffectual. "So far as anyone knows, Sir Fred Goodwin has not committed a crime," the Daily Telegraph wrote. "Morally it is like those Stalin-era photographs in which leading comrades on the Kremlin balcony were airbrushed out once they had fallen from favour. We need to keep the honours we have handed out so that we can carbon-date the folly of each."
Dozens of people have been stripped of their knighthoods for bringing the title into disrepute. Most notable are Zimbabwe's Robert Mugabe, who was knighted in 1994 to improve relations with the African nation, but was removed in 2008 after allegations of killings and corrupt elections in his country. Nicolae Ceausescu, knighted as an effort to build relations with Romania during the Cold War, was stripped of the honour before his execution by a revolutionary firing squad in 1989.
Italian dictator Benito Mussolini, the first Italian to receive the honour in 1923, was also removed when he sided with Nazi Germany in 1940 and declared war on the U.K. Among British citizens to lose the honour, Anthony Blunt is among the most notorious. The servant to the Queen had his status revoked after being exposed as a Soviet spy in 1979.
With files from Financial Times and the Telegraph