The Royal Bank of Scotland said Thursday that its former chief executive Fred Goodwin has agreed to halve his annual pension after outrage at the size of the payout and threats by the government to take legal action.
The decision, which RBS said was voluntary, means that Goodwin — who was blamed for aggressively expanding the bank before the government was forced to step in and rescue it — will collect 342,500 pounds ($555,470) each year.
He had been granted a 700,000-pound annual pension when he left RBS in October after the government bailout despite leading the bank to pile on debt, causing its near collapse, partial nationalization and record losses.
Goodwin became a high profile target of public anger at excessive bonus payments for senior banking executives in the wake of the financial crisis.
He made a public apology for his role in the bank's downfall, but vandals attacked his home in Scotland, prompting police protection. Prime Minister Gordon Brown threatened legal action in an attempt to cut the pension.
RBS Chairman Philip Hampton said that the 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."
Goodwin was blamed for pursuing a financially disastrous takeover of the Dutch Bank ABN Amro, which plunged RBS into a British record loss of 24.1 billion pounds ($36.2 billion) in 2008.
The government now has a 70.3% stake in the bank, which it runs at arms length through a company set up specifically to oversee state investments taken in banks under the October industry bailout.
The Treasury office also came under fire for the pension when it emerged that a junior minister had approved it. The deal meant that Goodwin could access the pension after recently turning 50, instead of waiting until he reached 60.
Hampton said he had been in discussions with Goodwin about reducing the pension since he became chairman of RBS in February.
Goodwin wanted to wait until the conclusion of an internal inquiry into his pension arrangements, conduct, expenses and the use of company assets, he said. That internal inquiry concluded that there was no wrongdoing or other misconduct on Goodwin's part that would justify reducing the pension.
"Fred Goodwin was a respected CEO of RBS during its sustained growth over many years during his time in office," Hampton said. "He expressed his deep regret over the position RBS found itself in when the global crisis hit last year and fully accepted his share of responsibility as Chief Executive."