There are a few issues tied up in the hoohah over Fred Goodwin's pension. Much as I think the size of many company directors' pensions are completely unjustified, I'm wary of the demand to unpick contractual arrangements, because it may be thin end of the wedge. In short my worry is that if we set a precedent it may get applied further down the food chain when someone is said to have 'failed'.
However, in this case the principal issue as far as I can see is that (if the reports are accurate) he has got an unreduced pension at 50, when the scheme's normal retirement age is apparently 60. If that's the case then this was a serious failure by the company's remuneration committee, and I'm gobsmacked that they suggested it or let it go through. It's also almost certainly not contractual and as such not forced on them. So why on earth should he get any sort of sweetener? This is surely further evidence of just how badly boards have become infested with self-serving attitudes in respect of remuneration. I'm actually less surprised that Goodwin has said he won't voluntarily give up any of his pension.
More broadly, whilst £650k a year is a serious wedge, it probably wouldn't put Goodwin in the top 5 in terms of the highest annual pensions for directors of FTSE100 companies. There's another problem here - the continuing differential treatment of pensions for staff and directors in the same companies. In some companies directors get a better accrual rate in DB schemes, or a better contribution rate in DC schemes, or massive payments in lieu of a pension (50% plus of salary for a couple of directors at HSBC for example). There is absolutely nothing to stop remuneration committees changing these arrangements so that future accruals/contributions are made on the same basis as for other staff. And there should be a maximum limited on payments in lieu.
Unfortunately to date institutional investors have (surprise!) shown very little interest in this differential treatment. Let's hope that, now they are under pressure to up their game, institutions crack down on this unjustifiable double standard.