Ex-Rock chief's pay-off 'reward for failure'

A £760,000 (€954,721) pay-off for the former chief of nationalised bank Northern Rock was today branded a “reward for failure”.

Adam Applegarth, who stepped down as chief executive in December, will receive the sum despite leading the lender into a taxpayer-funded bailout.

The bank, which is set to cut its workforce by 2,000 employees, sunk to a £167.6m (€211m) loss last year as it incurred costs in the battle to fight off nationalisation, according to annual accounts released today.

Northern Rock said Mr Applegarth’s termination payment was “substantially less” than he was otherwise due, but it attracted heavy criticism.

Vince Cable, the Liberal Democrats’ Treasury spokesman, said the pay-off was “outrageous”.

He said: “This is a straightforward case of reward for failure.

“The chief executive who led the disastrous business strategy is being generously rewarded for failures of leadership whereas shareholders get nothing and large numbers of workers are being made redundant.

“It’s an outrageous way to treat people and it gives the wrong signals to British business.”

North Durham Labour MP Kevan Jones, local MP for many of the bank’s 6,000 workers, called on Mr Applegarth to give up the sum.

“I think many people who are facing job losses at Northern Rock will be very angry,” he said.

“I find it incredulous that a man who has already made millions will be paid this amount of money. It will appear to the average person that he is being rewarded for failure.”

Under the terms of the severance deal, Mr Applegarth’s payment is reduced if he gets another job before November 16. And £75,000 (€94,211) of his mortgage will continue to be charged at the concessionary staff interest rate until November this year.

It was also revealed that Mr Applegarth, who was chief executive for nearly seven years, had around £5,000 (€6,280) worth of extra security measures installed at his home after the bank’s collapse.

The bank’s annual report showed that the £167.6m (€211m) loss was incurred after a £410m (€515m) writedown for investments linked to the credit crunch, and after £51m (€64m) of fees paid to professional advisers in the wake of last summer’s collapse.

Meanwhile, the Rock’s new executive chairman Ron Sandler unveiled details of an operating plan under which the bank has promised to repay around £24bn (€30bn) in government loans by the end of 2010.

The recovery strategy includes the bank halving its balance sheet to £50bn (€63bn) by the end of 2011 by stopping all business lending and accelerating mortgage redemptions for existing customers.

Mr Sandler warned of “significant losses” this year as the credit market turmoil continued, adding that the earliest the bank could become profitable was by the end of 2012.