The price of failure
The man who took the blame for failing to foresee – never mind prevent – the collapse of Northern Rock was given a payoff of more than half a million pounds. Seven times as much as he could have got for doing it well.
Clive Briault, 50, was one of three Managing Directors at the Financial Services Authority and at one time tipped for the top job. But shortly after Chief Executive John Tiner quit in July 2007 to return to better paid work in the City, the Government had to bail out Northern Rock. Briault’s division supervised the retail banks and that scuppered his chances of taking over from Tiner. And when the FSA confessed in March to "a lack of adequate oversight" over the banks Briault had to go. That happened "by mutual consent" at the end of April.
It was reported then that his pay off was about a year’s salary – £330,000. But the FSA’s Annual Report published this week shows it was far more – £528,952. With his salary and benefits, including pension contributions and the increased value of his accrued pension rights, his total reward for the year was £978,711. Not bad considering the "failure of the supervisory team" he led.
His year’s pay included a performance related bonus of £30,000. The maximum bonus Briault could have earned was £105,000. If his department had foreseen the problems at Northern Rock and sorted them out that is what he might have got. So doing his job well would have earned him an extra £75,000. For doing it badly he got £528,952. It is a perverse pay structure that gives someone seven times as much money for failing as succeeding.
Briault is not the only one who had a good departure from the regulator last year. The former Chief Executive John Tiner is now reported to be filling his time with at least three jobs in the City. But the Annual Report reveals he was kept on the FSA payroll for six months after he stopped work last July. He was paid until January this year because until then he "was not allowed to work for any other financial services business". For that 26 week paid holiday he got £227,500.
No wonder the total bill for the FSA’s directors rose by 22% to £3.2 million in 2007/08. But even that is dwarfed by the 15.6% rise in its total net costs to a staggering £305 million. The FSA may be doing a better job nowadays – despite Northern Rock – but it comes at a hefty price. Which ultimately we all pay through higher charges for financial services.
Go back to Paul Lewis front page