Royal Bank of Scotland confirmed Friday that its former chief executive took a tax-free lump sum pension payment of 2.8 million pounds ($4.6 million) earlier this year under an arrangement which the bank had not disclosed to shareholders.
On Thursday, the bank announced that former CEO Fred Goodwin had agreed to a reduction in his annual pension payment, from 703,000 pounds to 342,500 pounds.
Goodwin's rich pension, after leading his company to the brink of collapse, was criticized by the government and has been a focus of attacks on lavish compensation for executives in the financial sector.
Thursday's announcement noted that Goodwin's pension payout had been cut to 555,000 pounds per year in February after he took a lump sum payment, but the bank did not mention at the time the size of the payment or whether it would be taxed.
The option to take a lump sum was a standard pension provision, said a spokesman for RBS, speaking on condition of anonymity in line with company policy.
The pension payoff for Goodwin, who led a financially disastrous takeover of the Dutch bank ABN Amro, has been a major headache for the bank's new management.
The ABN Amro deal plunged RBS into a British record loss of 24.1 billion pounds in 2008. The government stepped in to keep the bank going, and now holds 70.3 percent of its shares.
In March, RBS had told the House of Commons Treasury Committee that any lump sum taken by Goodwin would be taxable.
In a report in May, the committee said RBS had made the agreement with Goodwin at the end of 2007.
Treasury Minister Paul Myners, who was involved last year in arrangements for Goodwin's departure, regarded the tax deal as a significant amendment to his contract.
"It is a matter of judgment as to whether it should have been disclosed; but in my view, on the basis of my experience, it would have been proper to have advised the shareholders," Myners told the committee.
Nor did RBS notify the London Stock Exchange in February when the lump sum was taken.
Myners told the committee that Goodwin's pension "was quite extraordinary in a number of respects," including a provision which credited him with 20 years service when he joined the bank.
RBS Chairman Philip Hampton said Thursday that Goodwin's pension deal had become a "symbolic issue, and the focus of unprecedented media and political attention."
"It had to be fixed to allow everyone to focus our energies where they should be, on getting the company back to health," Hampton said in a statement. "I am very pleased that we have resolved a situation that has been a difficult and unhappy one for all the parties involved, and it is to Fred's credit that he has done this on a voluntary basis."
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