Co-op's Paul Flowers yet to return his Golden Goodbye

Paul Flowers yet to hand back Golden Goodbye - but why did he get it in the first place?

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Paul Flowers interview

Paul Flowers, the disgraced former Chairman of the Co-op bank, has yet to hand back the £31,000 he received as a Golden Goodbye from the bank after its near-death experience in his hands. The bank confirmed they had contacted him about it nine months ago, but were yet to receive a penny.

Flowers stepped down as Chairman in June last year when the full extent of the bank's woes became clear. While he was given the money on his departure, the bank wrote to him in November in an attempt to get it back.

The Telegraph revealed that on a conference call yesterday - announcing the banks disappointing half-year results - a spokesman confirmed: "We are not aware that he [Flowers] has paid up. If the cheque's in the post, we haven't received it yet."

Flowers appeared in court in May, where he was fined for possession of Class A drugs. At the time a fairly bleak picture was painted of his current lifestyle. The Guardian reported that he was not working at the time, and was living off a £510-a-month pension, and the income from a rental property he had inherited. Given the state of his affairs, it may not be terribly surprising he's not found the spare £31,000 to return to the bank.

Similarly - although depressingly - it's no surprise that the bank offered him the £31,000 payoff in the first place.

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Common practice
It's a sign of how engrained the practice is in the City. When a senior member of staff leaves, often a Golden Goodbye is considered par for the course. In some cases some sort of payoff is a contractual obligation. Even the regulator does it: the Financial Conduct Authority paid out £2.8 million in exit packages for 2013/14.

It's not just the City either. They are rife through the public sector too, and in November last year the Telegraph reported that 489 executives had been given six-figure golden-goodbyes when two layers of NHS management were abolished earlier in the year.

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Why?
Even when the circumstances in which they are departing are less than ideal, companies face legal obligations. This was the reason Northern Rock gave when it awarded departing Chief Executive Adam Applegarth a payoff worth £760,000 in 2008. Roger Lawson, chairman of the Northern Rock Shareholders Association Group, told The Guardian at the time : "Had Mr Applegarth taken the company to court then it could have ended up having to pay him even more, so perhaps it has got away with having to pay slightly less than its legal obligation, so I have to be philosophical about it."

In other cases, when businesses are trying to part with a high-profile member of staff - especially when that person doesn't really want to leave - the Golden Goodbye is used as a negotiating tool to persuade them to go quietly in return for a bigger payoff.

In many cases it may be judged to be morally right to stand your ground and insist an executive leaves with just the shirt on their back, but legally they would go straight to the nearest lawyer and launch a case. The resultant cost of fighting it - and perhaps having to pay up anyway - is just not worth the risk to business.

But what do you think companies ought to do: pay the executive off or stick with the moral high ground and risk paying far more in legal fees?

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