By Ian Fraser
Published: The Sunday Times
Date: 22 March 2009
It’s fair to say that neither Peter Sutherland, an Irishman and former European commissioner, nor Sir Tom McKillop, a former chief executive of AstraZeneca, born and raised in Dreghorn, Ayrshire, have covered themselves with glory in recent years.
As colleagues on the board of Royal Bank of Scotland, neither appeared to lift a finger to rein in the bank’s reckless chief executive. During their period of office, which commenced in 2001 for the Irishman and 2005 for the Scot, things at first seemed to go well, but they ended up presiding over an unprecedented amount of value destruction that ultimately led to shareholders being near-wiped out and the bank being rescued from bankruptcy by the UK government.
Yet neither man seemed to bat an eyelid when Sir Fred Goodwin went on his wild and highly leveraged spending spree, nor when he made his spectacularly ill-timed dash for growth in the world of exotic derivatives. The directors also appeared utterly relaxed about rubber-stamping the business plan that wiped out shareholder value.
As a result of these apparent oversights McKillop and Sutherland were effectively removed from RBS’s board by the UK government earlier this year. Not only that. McKillop signed off one of the most egregious pension arrangements in history — Goodwin’s obscene £13,000-a-week number. Last week it also emerged he sanctioned the early retirement, as opposed to the sacking, of the bank’s former head of global banking and markets, Johnny Cameron, who will now get a pension of £70,000 a year.
Not surprisingly, McKillop came under renewed attack last week when Lord Myners, the City minister, accused him of concocting an “elaborate ruse” to deceive ministers about the doubling of Goodwin’s pension, on the very weekend the government was decent enough to rescue the otherwise doomed institution.
Given all this, it is fairly astonishing that both Sutherland and McKillop intend to seek re-election to board of BP at the oil company’s annual meeting next month — apparently with the full support of its board. It almost makes you wonder if BP — which made a fourth-quarter loss of $3.3 billion and is fretting about weakening demand for oil as a result of the global downturn — has some kind of death wish too. Is this disaster capitalism writ large?
McKillop has clearly lost a few bob because of the RBS share price, but after years as the chief executive of AstraZeneca, surely he doesn’t really need the money? And if he doesn’t need the money — and with his reputation as a non-executive director already in tatters — why is he standing for re-election? Wouldn’t he be better advised to retire back to Ayrshire?
Maybe it’s because Sutherland, who has agreed to stay on longer than expected since no replacement as BP chairman could be found, felt it safer to keep his boardroom crony on side.
North Sea turmoil
As recently as last summer the oil and gas sector was considered to be the one part of the Scottish economy that was unaffected by credit crisis — oil and gas were very much in vogue, oil services companies were riding high, the banks were still throwing money at them and Aberdeen was seen as the place to be by aspiring dealmakers.
The slump in the oil price from a high of $147.50 a barrel last July to $51 today has unfortunately taken the air out of this particular bubble too. Now Malcolm Webb, the chief executive of Oil & Gas UK, the North Sea’s main trade body, is pleading with the UK government to give the industry immediate tax relief.
Without this, he says, investment in the country’s oil and gas fields will wither and half of the companies now operating in the North Sea could abandon the basin — rigs would be decommissioned and the last 25 billion barrels left under the sea. He said 50,000 jobs could go if the government doesn’t act swiftly.
Webb issued the warnings to the Westminster energy and climate change committee which visited Aberdeen as part of its inquiry into the offshore oil and gas industry. It remains to be seen if this is sabre-rattling or whether the chancellor, Alistair Darling, will pay any heed to it in his budget speech next month.
Scots are fare game
As a consequence of a few greedy, reckless and incompetent bankers, the reputation of Scotland as a whole has taken a dive — in some quarters at least.
An accountant friend who also happens to come from Scotland was last week instructed to get out of a taxi by a London cabbie. The irate driver said: “I’m not having any of you f***ing Scots in this cab. Not after what your f***ing bankers have done to our economy, and not after the mess your f***ing politicians are making of this country. Get out!”
The journey hadn’t even started and the astonished bean counter meekly exited the cab. He said he suspected the cabbie had a particular bee in his bonnet as taxi business in the City is thought to have slumped by about 35% to 40% as a result of the credit crisis.
I’m afraid that we Scots will probably have to get used to these unwarranted and racist attacks in the coming months. Maybe even years.
This Scottish Agenda column was published in The Sunday Times Scotland on March 22nd 2009. To read it on Times Online, click here