Privacy laws leave a vacuum, causing "information-jigsaws"

Having revealed the fact that Sir Fred Goodwin - former CEO of RBS - had obtained an injunction to cover up details of his affair with a "senior colleague", Lord Stoneham then provided some information which, for those wanting to know what actually happened and who understand the way public companies are run, was extremely useful.

Let's look at the central part of what Lord Stoneham said.....

"Every taxpayer has a direct public interest in the events leading up to the collapse of the Royal Bank of Scotland, so how can it be right for a super-injunction to hide the alleged relationship between Sir Fred Goodwin and a senior colleague. If true, it would be a serious breach of corporate governance and not even the Financial Services Authority would be allowed to know about it."

After he said it, the High Court was forced to lift the part of the injunction that was hiding Goodwin's name, allowing it to be released into the media. However, the name was unaccompanied by the name of the "senior female employee" not any details of the "alleged relationship". So, in the absence of this information we are left putting pieces of the jigsaw together, because an information vacuum usually has to be filled with something, and in the absence of facts, rumour is King.

But let's take a step back. Why do we need to know anything about the alleged relationship? Just because something is interesting to the public doesn't make it in the public interest, surely?

In the Sunday Times today, Dominic Lawson suggested that the idea that Sir Fred Goodwin's affair distracted him from running RBS properly is preposterous - if only he had been distracted he wouldn't have made so many mistakes Lawson said, and so the affair is irrelevant to the public interest.

But the clue comes in Lord Stoneham's use of the word "corporate governance", and that he felt the Financial Services Authority might want to know about it. Lawson's article didn't mention this, but it is important.

The "senior colleague" is not allowed to be named, but if they are a colleague then they were on the RBS payroll. For this affair to have had corporate governance implications the colleague would have likely been in either legal or compliance or finance. If she was a "senior colleague" she would have been high up in her department and responsible for advising Goodwin on actions he undertook as CEO. If that advice was compromised in any way it IS in the public interest as it could be said to have contributed to the downfall of RBS to the point where they had to be taken into State ownership.

Let me give you a hypothetical example:

In 2007 RBS (as part of a consortium) bought ABN-AMRO, the Dutch Bank, for over 3 times its book value. In the run up to the deal ABN-AMRO had sold its best asset (the LaSalle unit) to Bank of America - leaving RBS acquiring only the ABN-AMRO's underperforming London based investment banking franchise (which had plenty of bad loans on its books) and some smallish Asian operations. Added to this, the credit crunch started to hit in 2007. Put those two issues together RBS should have tried to amend the terms before the sale went through. But they didn't, and the rest...is now history.

So, why did Sir Fred Goodwin push through with this toxic deal? What happened to the trusted financial advisers within RBS? What happened to those within RBS paid to speak truth to power? Was Fred Goodwin in a relationship with one of those advisors? Was that the "senior colleague". If it was, then that is a corporate governance issue.

Ah, you might say, but surely the board needed to agree to an acquisition that large? Don't shareholders have to have a vote? What if the presentations given to try and persuade the board and the shareholders included this "senior colleague", helping the person she was allegely in a relationship with to continue to build his empire to an enormous size? THAT is also a corporate governance issue.

I am actually reasonably relaxed about the current privacy issue. I agree that everyone has some right to privacy. I do believe that if a footballer is earning money from endorsements from his family man image then an injunction to stop details of an affair emerging is not about privacy, it's about protecting those endorsements. I believe that if an actor famed for playing reliable family men uses an injunction to stop details of an affair emerging then that too is not about privacy, it's about protecting their career. But in the absence of ulterior motives I do agree they should have a right to privacy.

But if Fred Goodwin's affair led in any way to the State having to bail out RBS to the tune of as many billion pounds as it did, then it IS in the public interest, and privacy be damned.