The curtain starts coming down on the Tom and Fred show BUSINESS

0 Comments | Sunday Herald, The, Apr 27, 2008 | by COLIN DONALD

COMPANY AGMs are a poor form of theatre but there were parts of the show staged by RBS last week that would have brought a tear to a glass eye.

Chairman Sir Tom McKillop, as one would expect from such a tough old pro, rose to the occasion. It was a performance full of contrition for the mess that the bank was in, combined with steely determination to sort it out. At the same time, it gave pointed reminders to shareholders that they had given the board the mandate to proceed with the ABN Amro deal. (With hindsight, this gamble, for all its strategic positives, now seems ill conceived as well as ill- timed. ) Like the trouper he is, Sir Tom played the heckles to perfection, adopting a tone of dignified hurt when a boorish shareholder accused him of being a "pharmacist" and displaying ostentatious patience in the face of the few foolish or tedious shareholder contributions.

Although chief executive Sir Fred Goodwin's departing smile suggested RBS was expecting a worse pasting than it got, in truth, much of the flack was pretty damaging.

Shareholder and businessman John Stein rightly made headlines with his comment: "You guys are paid as though you are superhuman and it is very clear you are not."

All that was missing from the drama was someone to stand up and quote Oliver Cromwell's words to the rump parliament at the board: "You have sat too long for any good you have been doing lately . . .

Depart, I say; and let us have done with you. In the name of God, go!"

The truth is that McKillop and Goodwin did not need to hear that from the sma' folk of the retail shareholder base.

After the most tumultuous months in the bank's history, they are hearing it loud and clear from their major investors.

Part of the pathos of Tuesday's event was the sense that it is likely to be remembered as the positively final command appearance of The Tom And Fred Show.

Indeed, the fact that it is still running at all after the recent reversals is already the subject of considerable amazement in the City.

Executives don't depart when times are good, but it seems they don't go when they are bad either. The question now being asked is: what do you have to do to forfeit a place at the RBS board table?

The eight years' worth of gratitude that shareholders owe to Goodwin and his colleagues for turning RBS into an empire on which the sun never sets - movingly expressed on Tuesday - cannot alter the fundamental facts that the financial institutions will be weighing up in the weeks ahead.

Despite their insistence on the change in global circumstances, the facts are pretty stark: as the share price's long wilt continued, RBS gambled on increasing shareholder dividends in the teeth of an onrushing credit crunch. Their progress through the City has been littered with hostages to fortune about having "no plans" for inorganic capital raisings, and as well as asking for massive cheques from shareholders, they have had to jettison the family silver in the form of the insurance businesses that were crucial to, and symbolic of, the bank's rise.

Goodwin has done an about-turn on dividend payments, and on share buybacks. He overpaid for Charter One and now acknowledges he massively overpaid for ABN Amro. RBS has declined from being twice the size of to being barely larger than Barclays.

City types are drawing unflattering parallels between the continued survival of the RBS board in the face of these disasters and the treatment of the Abbey National board, for example - the group's implosion in 2002 was followed by the prompt exit of chief executive Ian Harley and the head of the treasury division, Gareth Jones.

It is not only the City's illogical and snooty resentment of Edinburgh and suspicion of the "Scottish mafi a" that is fuelling calls for boardroom blood. There is near contempt for the line that the board must stay on to oversee the ABN Amro integration and manage the succession question, an argument that is in truth too flimsy to match up to the standards of global banking that the RBS board otherwise plays by - and is paid by.

Where, then, does the succession lie?

One strong internal candidate - the head of global banking and markets, Johnnie Cameron - is tainted by the fact that the business he ran has just generated a multi-billion-pound write-down.

Another, darker horse, the ex-Nat West head of the manufacturing division and ABN Amro integration supremo, Mark Fisher, lacks the profile in the market, and anyway, the jury stays out on that integration for a few more years.

So far RBS has excelled at grabbing fi rstmover advantage, the high drama of last week's rights issue being a case in point.

With those Cromwellian sentiments gathering force, Goodwin and McKillop could smooth the path of a new team, attuned to their ambitions to earn more outside the UK, and steeped in the exciting growth markets such as China and India that Goodwin's recent acquisition strategy has been gunning for. In short, how about an East Asian chief executive to take over at Gogarburn?