Time for Stevenson to drop his air of injured innocence: he was as much to blame as Crosby

We now know what the price of failure is for the CEO of a wrecked bank. Fred Goodwin at RBS set the tariff: a lost knighthood and a third off the pension. Now James Crosby at HBOS has fallen into line. But what should happen to the chairmen?

Stevenson from 2007 report
Stevenson from 2007 report

Sir Victor Blank was one of the moving forces at Lloyds in making the disastrous acquisition of HBOS; Sir Tom McKillop at RBS failed to stop Fred from making the equally toxic takeover of ABN; and in today’s Guardian Aditya Chakrabortty rightly calls for Northern Rock’s Matt Ridley to be held to account. The first two still have their knighthoods and Ridley has just been “elected” to the House of Lords as a hereditary peer.

The role of Lord Stevenson is especially interesting. As chairman of Halifax he took the same position in HBOS from the merger in 2001 to the bitter end in 2009, in fact he would have stayed on under Lloyds if he could. It was Gordon Brown who made it a condition of the Government rescue that Stevenson and his fellow directors were all cleared out.

As I report in Hubris: How HBOS wrecked the best bank in Britain, Stevenson was furious. He didn’t think he had done anything wrong and didn’t see why he couldn’t stay on. He has kept up this air of injured innocence ever since, clinging to the belief that the closure of wholesale markets post-Lehman was what did for the bank and that he was merely a “non-executive” and therefore, presumably, less culpable.

Three times in his written evidence to the Parliamentary Commission he claimed to have been “non-executive” and therefore not at the heart of the strategy which condemned HBOS to its fate. Yet this was not always how he viewed himself. Andrew Tyrie MP, who chaired the Parliamentary interrogation of Stevenson, speared him with a quote from a letter he had written to the Financial Services Authority on 10 January 2008 in which he said: “Yes, I am part-time (but not non-executive)”

Stevenson at the Commission hearing
Stevenson at the Commission hearing

In the bank he was certainly not regarded in the same way as the other non-executives. It has been widely reported that his final total remuneration was £821,000 – very high for a bank chairman – but less highly reported that he also enjoyed share options under the bank’s numerous executive incentive schemes. He was the only non-executive to benefit under these schemes.

The HBOS annual report for 2007 justifies it thus: “The remuneration policy for the Chairman recognises that, whilst the Chairman was independent of the organisation when he joined it, he is not now regarded as independent. The Chairman plays an active role in influencing the strategic direction of the Group and ensuring overall performance delivery. Therefore we believe that it is entirely appropriate that the Chairman’s reward arrangements continue to be based on a mixture of a base fee and performance-related long term incentive.”

In his chairman’s statement, published in Spring 2008 when markets were beginning to falter, he said: “We are well placed to capture our share of the markets in which we operate. Shareholders can be assured that the perspective that shapes our ambition is the recognition that responsibility for the Company’s performance is ours and ours alone.”