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Organisational Behavior

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http://www.theguardian.com/books/2013/sep/16/making-happen-goodwin-martin-review Making It Happen: Fred Goodwin, RBS and the Men Who Blew up the British Economy by Iain Martin – review The truth about the collapse of RBS makes shocking reading John Kampfner The Observer, Sunday 15 September 2013

Fred Goodwin: ‘He was obsessed with the executive car fleet. Each vehicle had to be a particular blue called Pantone 281.’ Photograph: Murdo MacLeod Do not read this book if you have high blood pressure. The collapse of RBS; the multibillionpound bailout (courtesy of you and me), and the smug indifference of the guilty men is one of the parables of the ills of contemporary capitalism. Iain Martin tells it brilliantly, mixing furyinducing narrative with an acute eye for the broader conclusion. Of all the many tales about the global financial crash, I have not read a more compelling one. The star of the show, the pantomime villain, is Fred Goodwin, aka Fred the Shred (a nickname he apparently quite liked), a man who made up for his ignorance about the complexities of banking with hubris and bullying. His story (in a nutshell): modest home in Paisley (although not nearly as "salt of the earth" as he would have people believe), trains as accountant, moves into banking, takes over the Clydesdale, is head-hunted for RBS… and the rest is opprobrium. The bank's story (in a nutshell): formed shortly after the acts of union, expands into England to exploit the wealth from empire in the late 19th century, known for centuries for its canny

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management of money, following the Thatcher "big bang" it wants to join the global league. Cue Fred. In 1998, Goodwin was brought in as deputy chief executive and, together with his board, set about the great aggrandisement of the Edinburgh-based bank. He had already acquired a reputation as someone not to be messed with. One former employee tells the author "he manufactured fear". In the first months of the new millennium, RBS succeeded in a hostile takeover of NatWest. It was an extraordinary coup, redolent with political as well as economic messages. Bonnie wee Scotland could invade London and get away with it. In one swoop, RBS had become Europe's second largest bank and the fifth largest in the world by market capitalisation. Just five years earlier he hadn't even been a banker. At the age of 42, he was now one of the most powerful in the world. It got better and better: in 2003, Forbes magazine made him its global businessman of the year, putting him on the cover and running a gushing interview with him. Harvard Business School was equally fawning in a report it produced the following year. Goodwin's ego was going into orbit. He ordered that a new headquarters be built, conveniently close to Edinburgh airport and his private jet. He spent hours on the architectural plans, focusing on the idea of a large fountain and an external reflection pool. He was obsessed with the executive car fleet. The colour of each car had to be a particular blue called Pantone 281. Everyone wanted a slice of him. The royal family loved him. He was a big name behind the Prince's Trust, later to be appointed to the Queen's Silver Jubilee Trust. When the request went to Buck House for Her Maj to open his egotistical folly, acceptance was swift. The knighthood was in the bag. The only thing that mattered to Goodwin was growth. He was on the prowl for the next takeover. The hapless board waved through each plan (in so far as he bothered to tell them). Their lack of curiosity or knowledge of complex issues was, as the author points out, a disgrace, but an inevitable consequence of the "you scratch my back" culture of corporate life. Goodwin's own knowledge of collateral debt obligations, credit default swaps or overleveraging against US sub-prime mortgages was equally rudimentary. Anyone who aired doubts was shouted at or sidelined. Senior politicians were credulous and indulgent. Back in 2000, the Cruickshank report on banking competition said banks should be prevented from becoming too big. The Treasury quietly shelved it. In Scotland, Alex Salmond and the others mounted chippy defences of the underdog north of the border whenever it was challenged. As for Tony Blair and Gordon Brown, they lampooned the indignity of regulation. In his final Mansion House speech as chancellor, in June 2007, Brown praised the "new golden age for the City of London". This, the author notes with a delicious dry wit that permeates this grim tale, was "Panglossian propaganda for a doomed experiment. It was delusional drivel." A few months later, just when the holes in its finances were growing into a chasm, the takeover of ABN Amro tipped RBS over the edge. Brown and his team emerge well from the fevered rescue days, helping to prevent the collapse of the entire financial system. But it was they who encouraged the spiv culture to begin with, hoping that the trickle of taxes emanating from the banks' enormous profits would do some social good. Goodwin has been pilloried. He now spends his time tending to his fleet of classic cars (the annual £700,000 pension softens the blow somewhat). He lost his knighthood and will be the 2

object of historians' ridicule. Yet, as Martin points out, to fixate on him is to let the rest get away Scot free (pun partly intended). Nobody important has gone to jail, stratospheric bonuses are back, and, as the author points out, the changes being introduced into the banking sector are little more than tinkering. Imagine telling a teenager they can walk into a phone or clothes shop and take what they like, knowing that the security guard at the front has been ordered from on high to go on a perpetual lunch break. That was the culture of banking during the so-called boom years. Fred was just one among many.

Financial Times http://www.ft.com/cms/s/0/187df660-1a14-11e3-93e8-00144feab7de.html#axzz2fEauOjkr September 11, 2013 4:48 pm Review: A pacy account of the storm before the bailout Review by Patrick Jenkins

Making it Happen: Fred Goodwin, RBS and the Men Who Blew Up the British Economy, by Iain Martin, Simon and Schuster, £20 Towards the end of Iain Martin’s enlightening new book about the 2008 collapse of Royal Bank of Scotland, he mentions the regulator’s own report into the disaster, published with some reluctance two years ago. “It is not a full account of the rise and fall of RBS,” Martin writes. “In a very British way, there [was] no proper wide-ranging committee of inquiry into the UK’s biggest ever banking disaster.” The report, extracted from the Financial Services Authority after it claimed there was no need to publish, did to an extent sate the popular bloodlust for apportioning blame. But in terms of explaining what went wrong, it fell sadly short. Making it Happen , which has been selected for the longlist of the FT and Goldman Sachs Business Book of the Year award, fills the gap pretty well. It strikes a well-researched balance between nitty-gritty technicalities and readability. There is a pacy start to the book that immediately immerses the reader in the drama of October 7 2008 – a day that saw Fred Goodwin start the morning with an upbeat investor presentation and end the afternoon with a share price down 40 per cent. Martin’s hour-by-

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hour account from the perspective of bankers, regulators and politicians ends in the overnight thrashing out of the government’s £50bn bailout package for the banking sector. A fast rewind to RBS’s 17th-century roots is a little abrupt and at times unfathomable. But it does help to contextualise the later details of RBS’s global expansion as a symbol of Scottish chutzpah. Thereafter, the book is largely a chronology of Goodwin’s career. There is nice detail about his initial ordinariness (he started out as an accountant), life-long competitiveness (evident on the university pinball machines as well as at RBS) and his showy side (as a student he ferried friends in a gold Rover 2000) – all attributes reflected later in his personal insistence that the bank’s fleet of limousines should be bespoke-painted Pantone 281, the RBS blue. Martin, a former editor of the Scotsman newspaper and now a commentator at the Telegraph, reminds us that before becoming CEO of RBS Goodwin had spent only three years in banking – a prime explanation for Goodwin’s shortcomings. As a manager of a business, he was impressive – demanding and often bullying, he also achieved notable results. But as a manager of a bank, he was a disaster – little interested in credit control, let alone the complex investment banking products that helped to trigger RBS’s blow-up. His focus on hitting targets ignored a changing world that often made the targets unwisely aggressive. There are great anecdotes about Goodwin’s outlawing of Sellotape to display notices in branches, and his obsession with branch cleanliness – aided and abetted by his mother. After spying a cigarette butt outside a branch, Goodwin’s mother phoned him: “Goodwin thanked his mother and immediately phoned another senior executive, ordering him to have the offending piece of litter removed immediately.” More fundamentally, Martin is good on the fateful build-up of RBS’s US business, particularly its collateralised debt obligations – the ultimate trigger for investors’ loss of faith and the bank’s demise. There is, however, next to nothing on the ill-judged expansion of property loans in Europe, which is a shame. This is not entirely a book about Goodwin’s failings. Board members, executives, regulators all look culpable. The FSA is characterised as absurdly “relaxed” in 2007, as RBS’s toxic loans accumulate and it presses ahead regardless with the capital-destructive acquisition of Dutch rival ABN Amro. New light is shone on Goodwin’s notorious £16.9m pension pot, too – accumulated swiftly only because he had been hired with a bizarre promise that for retirement purposes he would be treated as a life-long employee. RBS today is in finer fettle than it was five years ago but it is still largely government-owned. Anyone with an interest in what exactly happened back then and why will enjoy this book. It is a better account than others published so far – and it certainly beats the regulator’s official version.

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