THEY were unlikely attackers – pensioners, in the main, with small shareholdings in the Royal Bank of Scotland. Their target was Sir Fred Goodwin, the chief executive they had once lauded, now the man many blamed for the fall of their once-great institution.
He was already reeling from the effects of the ABN Amro deal, multi-billion-pound write-downs, a controversial rights issue and a disastrous economic climate.
And yesterday, in voting to sell up to the government and therefore
remove him from his position at the head of the bank, the shareholders delivered the final blow.
Until now, they had been forced to watch helpless as their share values plummeted. The bank which had to them seemed infallible had slumped so far that they chose to accept a deal that saw the government pump in £20 billion in exchange for up to 60 per cent of the bank.
And each felt the loss personally. In RBS, the meaning of a share is literal. It is a little piece of the 300-year-old bank which may have been passed down through generations and which is a great source of pride.
Fred the Shred – known as such for his relentless job slashing – sat disarmed and defenceless on the right of the chairman, Sir Tom McKillop, who bore the brunt of most of the punches.
Yesterday's meeting in Edinburgh, convened to vote on the government's bail-out offer, was nearly over by the time Sir Fred was called upon directly from the floor.
A small shareholder and former member of staff called for him to make a personal apology – a request which was met with support across the room.
Sir Fred mustered no defence. The man once described as the most powerful in Scotland – above the First Minister – got to his feet and struggled with a microphone. His clearly unrehearsed statement was honest and direct: "I would just like to say I am extremely sorry this has come about. I entirely accept what the chairman expressed on behalf of all the board … I am extremely sorry.
"And I am sad to be leaving the company during this extremely difficult time. There is no question other than I am extremely sorry."
Face drawn, eyes shadowed and shoulders slumped in his last, ignominious moments as chief executive, he glanced across an ocean of accusing faces.
Overwhelmingly elderly, many former bankers themselves, they rely on the dividends paid out on their shares. The government deal some claimed afterwards to have been forced into, means none will be paid for the foreseeable future.
Sir Fred would probably have recognised many of the shareholders from the halcyon annual general meetings of years past – years which had seen him grow RBS from a secure, respected high street bank to a global player. Yesterday's meeting was a far cry from those when the bank was riding high, when he was lauded for his acquisitions of NatWest and ABN – when that was still seen as a triumph.
But the former law student and trained accountant also would have remembered the more recent summits such as the war council in which he had to go cap in hand to beg those upturned faces to buy more in a rights issue he had earlier indicated would not happen.
Those were the meetings which had essentially brought him to this one, deep inside the Kirk's Assembly Hall, just across the Mound from the headquarters of Scotland's other once-venerable bank, HBOS.
The board of RBS began to arrive at the hall at about 1:45pm. Dark people-carriers glided over the cobbles to stop in front of the waiting press. Sir Fred and Sir Tom disembarked together, both wearing the dark blue dotted ties of RBS – the team colours a show of solidarity.
Side by side, with grim expressions, they walked in to ask shareholders to approve a deal which has been foisted upon them in desperate times. Behind them was Stephen Hester, a former finance chief of Abbey, who takes over the chief executive post.
Inside, Mr Hester set about building the new regime. As shareholders filled the sunken room, he walked around introducing himself and shaking hands – a public relations touch which Sir Fred would have been unlikely to embrace. Mr Hester admitted that "these things can be quite hostile and it's good to prevent that".
In the corridor outside, lined with tables of coffee and shortbread, that hostility was mounting. "We feel a bit let down," admitted one elderly couple. A younger man was less reserved. "I blame Fred," he said. "So does everyone."
The board filed in behind a curved panel on a raised stage in front of blue velvet curtains. Ahead of their arrival, choral music played among the panelled walls. It was a scene which jarred somewhat with the image of a group humbled by the results of its decisions and actions.
Sir Tom's opening speech was received warmly, for the most part.
As The Scotsman reported he would yesterday, he said he was "profoundly sorry" for the trouble the bank found itself in.
He explained it was as a result of the world financial turmoil and, in particular, two exacerbating factors.
"First, the group's historic use of an efficient balance sheet meant that we entered the period of significant market dislocation with a capital base that was, with hindsight, low relative to the size of our balance sheet … The second factor was the acquisition of ABN Amro."
He said the purchase of the Dutch bank in October 2007, as part of a £61 billion consortium, had been reasonable at the time because "the cost and revenue benefits it presented, and still present to the group, alongside the opportunity to accelerate our strategic growth, were significant". He admitted that the higher exposure to assets which it entailed "increased the short-term vulnerability of the group to the financial crisis as it intensified this year."
However, his contention that "at all times we have sought to ensure that the best interests of shareholders have been protected" was met with snorts of derision.
"You may laugh," he told them, verging on anger. "I can assure you that is the way the board has conducted itself."
When he opened the floor to questions, there were many.
Alan Jack said a prudent bank should have built up a "buffer of capital" to withstand a recession.
"It could even be said that the board, at times, has adopted a gung-ho attitude … the result has been the frittering away of shareholder's equity," he added.
Brian Peart, chairman of the north-east branch of the UK Shareholders Association, said he believed the situation could have been handled differently so the shareholders would not be "blatantly robbed of their assets".
One of the few women to ask a question highlighted the gargantuan presence of RBS in Edinburgh, and the importance it held for the capital and the country's economy. She asked whether all the bank's buildings at The Gyle and Gogarburn were used. That area of the city is defined by RBS, whose iron logo hangs from a bridge on the outskirts.
Sir Tom insisted that, to his knowledge, they were full of workers. But the worry for them today, with Mr Hester now in charge, is how many of them will remain.
When the questions petered out, not long after Sir Fred's apology, the vote was called. The government package was accepted by 99.28 per cent and opposed by just 0.72 per cent. A second resolution, lifting a banking rule to allow the deal to go through, was passed by 99.3 per cent to 0.64 per cent.
Under the terms of the £20 billion capital raising, RBS will raise up to £15 billion from investors by selling shares at 65.5 pence each. If the shares are not taken up, the government will acquire them. Given that the share price at market close yesterday was 46p, it is likely they will be left for the taxpayer. The government will also directly buy preference shares in the bank – worth a total of £5 billion.
The deal sees Mr Hester replace Sir Fred, although the latter will stay on the board until next year to smooth the transition.
Sir Tom concluded the day's business and the board dispersed, leaving Sir Fred standing alone on the stage as the shareholders and journalists closed in.
He told them in soft tones at odds with his reputation in the city: "It's a very important meeting. None of us are happy. It was important to have the meeting. I thought Sir Tom surmised the position well. I think he got the sense across to people. I think that was as important as the words." He said he would have been sorry to leave the bank in any circumstances but particularly in the ones he found himself.
He added: "It's been important to get through today and get the bank handed over to Stephen. It's very important for the bank to be forward looking and get through this." With that, he walked out towards the darkness of the Mound.
