by Iain Martin
The Clydesdale Bank tie was another obsession. Goodwin always wore his to work, regarding it as a badge of corporate pride. He thought that his colleagues should do the same, although he stopped short of making the wearing of it and a white shirt mandatory. Some executives thought the bank tie looked cheap and avoided putting it on whenever possible. One manager who was summoned for a dressing down over mistakes made by a subordinate in handling an account arrived minus the Clydesdale neckwear, sporting a tie of his own. As he got to security at head office he discovered that his pass no longer worked. This, the receptionist told him, was because Goodwin’s secretary wanted to know the instant he was in the building so that Fred could be alerted. Understandably unnerved by this, he made his way to Goodwin’s recently extended office. It seemed vast, the size of a cricket pitch, and on a much larger scale than the previous chief executive’s office. The manager sat down and Goodwin entered the room from behind. ‘I tried making some small talk but he didn’t want to know. He didn’t sit down, he stood gripping the back of his chair. I tried to apologise and say that it had all been sorted out as soon as I had found out and that he, Fred, wouldn’t hear anything more about it. I was travelling to meet the customer and to apologise in person for what had gone wrong. I was sorry and it would all be fine. At this he became furious, banging his fist on the table and saying: “It is not fine!” I decided to shut up and take it. It was horrible.’ As the manager subsequently made for the door and safety, Goodwin noticed that his visitor was not wearing the Clydesdale neckwear: ‘“Where’s the tie today? Tie at the dry-cleaners?” I said, “Absolutely Fred, my bank tie is at the dry-cleaners.” What I was thinking was, “Oh please fuck off.”’
His colleagues from that time, even those who are critical or still baffled and fascinated by his foibles, recognise that there was much to admire in his approach. The Clydesdale seemed to be a better-run and more efficient business. Goodwin grasped that the old way in which the branches had excessive autonomy was not sustainable, although perhaps too much centralisation then followed. There was also too little access to up-to-date information technology, or even decent word processing, something he set about changing by forcing the IT team which catered for the Clydesdale and its sister bank, the Yorkshire, to take his demands seriously. ‘There is no doubt that change was needed,’ says a colleague, ‘although the way Fred did a lot of it was so unnecessary. Rather than taking people with him he too often terrorised them. I seriously don’t think I ever saw him be compassionate in that period. I don’t think that compassion is in his make-up.’ Says another member of the then management team at the Clydesdale: ‘He manufactured fear.’
Someone unexpected who was on the receiving end of a dressing down was a very close friend from Glasgow University days. In 1990 when Goodwin had married Joyce, David Thorburn had been best man. Thorburn had joined the Clydesdale in 1978 and by the time of Goodwin’s elevation he had risen to be a district manager at the Clydesdale, responsible for the north-east of Scotland. This led to some awkwardness, with their colleagues knowing of their friendship and imagining at first that it might have protected Thorburn from a shredding. Not a bit of it. At one of the bank’s management ‘away day’ gatherings, Goodwin asked Thorburn, in front of fellow executives, why he had moved a statue in one of the Aberdeen branches and not told him. Goodwin was not satisfied with the explanation. ‘Fred gave David a kicking. He went absolutely mental,’ says a friend. The mild-mannered and well-adjusted Thorburn would later become the Clydesdale bank’s chief executive, although his colleagues said that quite understandably his friendship with Goodwin suffered.
The annual ‘away days’ organised by Goodwin and held at Gleneagles Hotel in 1996, and Turnberry Hotel in 1997 and 1998, were generally not occasions to be looked forward to. The idea, then very much in vogue, was that the top 150 or so people in the bank would get away from the pressures of the office and ‘strategise’ for a couple of days in the comfort of a five-star Scottish hotel. Having set it up, Goodwin seemed uncomfortable with discussion, which some of his colleagues thought he seemed to confuse with dissent. At Gleneagles an after-dinner speaker had been booked, to lighten the end of a long day with some gentle jokes. One of those present remembers a decent speech being greeted with little laughter. ‘The atmosphere was so awful that hardly anybody laughed because we were so depressed.’ Only Sheena McDonald, the tough-minded Scottish broadcaster and former news anchor at Channel 4 who was booked to chair and facilitate proceedings, seemed able to constrain Goodwin in the discussion sessions, where Goodwin was on stage and executives made contributions from the floor. ‘She was a strong woman who wouldn’t take any nonsense from Fred. He thought she was wonderful and she tried to let other people have their say.’
And then in the bar afterwards Goodwin would be transformed into good company who could comfortably drink others ‘under the table’. He was witty, almost urbane at points, with a dry sense of humour. An executive who that day had been clinically ‘machine-gunned’ by Goodwin in one of the sessions was astonished to be accosted by a cheery chief executive who insisted on buying him a drink as if nothing had happened. It was, his colleagues whispered, as though he had an on/off switch by which he could move at will, quite suddenly, from cold tyrant to jovial late-night companion.
Back in head office in Glasgow, the atmosphere was getting steadily more oppressive. Goodwin’s various trips around the country, involving ‘roadshows’ designed to allow him to explain to staff the latest developments in the bank, meant that he sometimes returned with the names of middle managers who had asked awkward questions. When their names came up at one of the executive meetings, he would declare, with a wave of the hand: ‘Oh, he is toast.’ It was noticed, however, that as much as Goodwin liked talking about people being fired he didn’t like sacking them face to face. He preferred others, such as the human resources manager Neil Roden to quietly arrange an ‘exit’. The nickname ‘Fred the Shred’ comes from this period, despite claims it was invented later. Clydesdale executives remember it being used at the time, after it was coined by a branch manager who got on the wrong end of Goodwin: ‘Fred used to say it was just because Fred didn’t rhyme with nice. But he liked it really.’
At the Clydesdale, some of his colleagues called him names much less polite than Fred the Shred, particularly when they got the most dreaded call on a Friday afternoon. Each week Goodwin’s secretary would ring and ask various frazzled members of the management team if they would like to join the chief executive to wrap up the week with a beer in his office. Some of those invited worked out that the trick was to try to distract the boss, by switching the subject to vintage cars or sport and keeping it there. Sometimes that wouldn’t work and Goodwin would instead start methodically cross-examining one of those present on what progress they had made on a particular item that had come up at the morning meetings. This was not regarded as the ideal way to finish a busy day when the weekend beckoned. ‘After several hours off Fred would go, quite happy, to be driven home by his chauffeur while we went to get the train home to explain to our wives why we were late.’ Perhaps it was Goodwin trying to be friendly. Some thought it a deliberate tactic, to ensure that executives were reminded that another round of morning meetings was less than seventy-two hours away and they should spend the weekend thinking about where they might be vulnerable.
Outside the Clydesdale, others were starting to notice the rising star of Scottish banking. The energetic Goodwin had attracted the attention of George Mathewson at the Royal Bank of Scotland. When the assorted chief executives of Scotland’s banks gathered for lunch several times a year, Mathewson was much taken with Goodwin’s directness, youthful ambition and obvious analytical skills. On the fringes of those meetings in 1997, the pair got talking and liked each other. At a subsequent party held at the National Gallery of Scotland, Mathewson broached the possibility of Goodwin moving to the Royal Bank: ‘I need a finance director, why not come and join us?’ said Mathewson.
Mathewson had effectively been in charge for more than seven years, which amounted to a long and successful spell even by corporate standards of the time. Even though this period had involved remarkable changes – the Project Columbus overhaul and steeply rising profits – eventually there would come a moment when a new chief executive would be required. Rather than waiting for others to suggest it, such as large investors or commentators in London’s financial press that Mathewson had little time for, he would get ahead of the game and choose his own successor. This should be someone young and energetic who shared his vision of growth and turning the Royal Bank into the world’s best financial institution; someone who was committed to the bank remaining Scottish in line with its proud history stretching back to 1727; someone who wouldn’t dream of moving the headquarters to England; maybe someone like Fred Goodwin.
Mathewson had initially wanted Goodwin to be the leading contender in a small pool of rivals. Also hoping to be considered for promotion was Johnny Cameron, whose Jacobite ancestor Cameron of Lochiel had provided the guard for the directors of the Royal Bank when they went to Edinburgh Castle to collect money on behalf of Bonnie Prince Charlie. Cameron had just agreed to join the Royal Bank to run the Corporate Institutional Bank and had been given the impression by Mathewson that he was in with a shout for the top job, eventually. There was the young outsider Benny Higgins who had recently joined the bank with a view to running its retail operations. He might be a longer-term prospect.
Goodwin had no desire to be part of a succession race. He stipulated that he would only join the Royal Bank on the clear understanding that he was the heir apparent. He would come if he were deputy chief executive not just finance director. Mathewson, wowed by Goodwin, agreed. The pair would work as a duo. He could not absolutely guarantee the post of chief executive, although if they enjoyed success together in the next few years, it was as close to being a certainty as these things can be. ‘Fred played George like a fiddle,’ says a colleague. ‘He negotiated brilliantly.’ That summer of 1998, early one morning, Goodwin rang the press office at St Andrew Square. He wanted to make doubly certain that the press release announcing his appointment made it plain that he was deputy chief executive, and not simply finance director. ‘Fred was determined that everyone should know. He wanted it to be clear to all of us when he arrived that he was the coming man.’ He was also determined to get a good deal on his pension arrangements, insisting on being able to bring with him the funds he had built up at Touche Ross and the Clydesdale, but being treated as though he had been in the Royal Bank scheme from the start of his career. ‘George said “Oh that’ll be fine”,’ says one of those involved in sorting it out later.
In the Royal Bank, news of the impending arrival was a shock to many of Mathewson’s top staff. Several telephoned friends and counterparts at the Clydesdale to ask what they might expect. Neil Roden, the HR director who had been at the Clydesdale and had moved to the Royal Bank, in part it was said by colleagues to get away from Goodwin, was pressed for information. Another member of the executive team phoned a Clydesdale senior manager and got a worrying response: ‘Fred is the brightest guy you will ever meet and he is also a total bastard.’ One high-flyer at the Royal Bank volunteered the view to a friend at the Clydesdale that Goodwin would find it much more difficult at St Andrew Square, where there was considerable competition and a string of worldly potential rivals who would ‘take care of Fred’: ‘I wouldn’t be sure of that,’ his friend who had been working for Goodwin countered. ‘I don’t think you’ve ever met anyone like Fred.’ At the Clydesdale Bank in August, when Goodwin departed, there was jubilation. Says one senior banker: ‘Oh, when he left we partied for about three weeks.’
5
Battle of the Banks
‘What we’re saying is, “Thank you very much, but bye-bye.”’
Sir David Rowland, chairman of NatWest, November 1999
In August 1998, when Fred Goodwin arrived at St Andrew Square, the inner sanctum of the Royal Bank still ran much as it had for decades. Although Mathewson had radically reordered the bank’s various divisions, the revolution had not yet reached the executive toilets inside the Georgian building. In the washroom designated for the top management there were still individual pegs, with name-tags, on which hung each executive’s towel. If the tags and towels were moved at any point, it indicated elevation or a shift in the balance of power. Of course such facilities were for men only, while secretaries to executives had to trek down a floor to their own toilets. It was never quite clear what that rarest of breeds – a visiting female senior executive (and there were still very few) – should do.
For the most exalted executives there was also still ‘the mess’ – a wood-panelled dining room – where the leading members of staff were expected to lunch together. New arrivals learned quickly that they should only get up from the long table, laid out immaculately and decorated each day with fresh flowers, once the chairman, the charming Lord Younger of Leckie, had finished his lunch and was ready to leave. The gatherings were male and collegiate. There tended to be one polite conversation at lunch, which offered those present a chance to gossip about business, finance and rivals the Bank of Scotland, the favourite topic of all. In keeping with the Royal Bank’s Presbyterian history, the group at lunch was overwhelmingly Protestant.
Despite his fearsome reputation and new nickname of Fred the Shred, the forty-year-old Goodwin slipped in quietly, somewhat baffling his new group of colleagues. One intrigued rival found him monk-like and distant. Others regarded this tall bespectacled figure, bookish in appearance, as puzzlingly quiet for someone who had risen so fast, although he had a dry wit if prodded. At the management morning meetings, when he did have to intervene he was sharp and capable of making his points in a crisp manner. Says a subsequent critic: ‘You very rapidly got the impression that Fred was the smartest guy in the room.’
Initially, for much of his first year, it was unclear exactly what he did with his time each day. He was supposed to be the finance director, as well as deputy chief executive, although he did not seem to do much directing of anything. As it had been early on at the Clydesdale, Goodwin seemed to be waiting for the top post to become available. Mathewson was delighted, though; he had found his successor. The two contrasting types, Mathewson restless and mercurial, and Goodwin disciplined, endlessly logical and somewhat shy, were forming a strong bond. The question was what this partnership might produce together before Goodwin took full control.
In Edinburgh it was a period of excitement and seemingly limitless opportunity. The staid old Scottish capital was suddenly resurgent, with the banks embodying a new confidence, or overconfidence. Inevitably, as both the Royal Bank and the Bank started to make bigger profits it was also good for Edinburgh’s lawyers and the other firms that fed off their growth. Property prices began a steep upward climb. The rises in Edinburgh outstripped anywhere else in Scotland and in terms of the rate of increase the Scottish capital was even competing with London.1 Goodwin moved his family from the West of Scotland and bought a six-bedroom house in the Grange in Edinburgh. The Georgian houses and vast high-ceilinged flats of the New Town, along with the villas in the most expensiv
e suburbs, were increasingly desirable for the most senior bankers who were beginning to be much better paid. For senior executives such as retail banker Benny Higgins, group secretary Miller McLean, communications chief Howard Moody and the others the success of the Royal Bank equalled personal good fortune: ‘These guys were suddenly being paid hundreds of thousands of pounds with the prospect of a lot more. In a place like Edinburgh it meant they had more money than they knew what to do with,’ says an executive. Junior members of staff also started to see their bonuses and share options boom.
New restaurants opened and upmarket shopping improved, reflecting Edinburgh’s reinvention. In this period Harvey Nichols, the epitome of the era’s Absolutely Fabulous approach to fashion, chose the city as the location for its second store in the UK outside London. It opened next door to the Royal Bank’s headquarters on St Andrew Square.2 It felt as though Edinburgh, already one of the most agreeable places to live in Britain, might be on the cusp of another exciting golden age, underwritten by its banks. It wasn’t quite a second Enlightenment, but the city did seem poised to benefit from a boom based on financial services, shopping and rocketing house prices.
The new confidence could also be attributed in part to dramatic political changes in the same period, changes in which Edinburgh took the lead. Scotland in the late 1990s was experiencing a constitutional upheaval bigger than anything since the Union with England of 1707 and the era of the Earl of Ilay, the Royal Bank’s founder. After a campaign by politicians and activists, the Scottish Parliament that had disappeared with the Act of Union was revived. If the Scots did not then want to be fully independent, they did desire the halfway house of devolution, often called home rule. Opponents were swept aside. On 1 July 1999 the Queen opened the new Scottish Parliament in Edinburgh in its temporary home, a building on loan from the Church of Scotland, the austere General Assembly building on the Mound diagonally opposite the headquarters of the Bank of Scotland.