RBS beefs up with boardroom bruisers

Stung by recent criticism, RBS has recruited three City heavyweights to plug the holes in its board...

Last Updated: 31 Aug 2010

Royal Bank of Scotland said today that it had signed up three new non-executive directors, as it looks to placate angry investors following a first-half loss of nearly £700m. Chairman Sir Tom Killop apparently hired headhunters back in January to find some non-execs with international banking experience, in a bid to strengthen the board – and perhaps safeguard his own position...

The highest-profile appointment is Stephen Hester, the well-respected CEO of British Land who’s currently serving as the deputy chairman of Northern Rock. So a big landlord and a failed bank – he ought to know more than most about how to combat the credit crunch… Hester, who also used to be the COO of Abbey National, will step down from the Rock before joining the RBS board on October 1st (apparently the arrival of new CEO Gary Hoffman will make the job unnecessary).

The other two appointments show how keen RBS is to bolster its global business. One is John McFarlane, the former CEO of Australia and New Zealand Banking Group, and the other is Arthur Ryan, the chairman of US finance group Prudential Financial until his retirement in May (he also used to run Chase Manhattan’s retail arm). McKillop said today that the three men’s experience ‘will be of great benefit to RBS given the increasingly diversified and international nature of our powerful banking franchises’.

The question is: do the three new men come to bury embattled chief exec Sir Fred Goodwin, or to praise him? Several high-profile banking CEOs have paid with their jobs for the dismal showing of their firms over the last 12 months, and there's a sizeable contingent arguing that Sir Fred should do the same. Although the new appointments won’t increase the size of the board significantly (two retirements mean that are now 12 non-exec and 5 exec directors, plus Sir Tom), it should provide three more strong voices to mitigate the CEO's dominance of the boardroom. It will also increase the pool of potential successors, an area that many investors have expressed concern about.

Given the difficulties RBS is likely to face in integrating its expensive new toy ABN Amro, it’s quite possible that ‘Fred the Shred’ is still the best man for the job (he should certainly have plenty of opportunity to live up to his nickname). But he and Sir Tom might have slightly more cause to look over their shoulders now...

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