The Governor of Bank of Ireland, Richard Burrows, has announced his intention to call it a day after the Bank returned a loss of €7 million in the year ended 31 March 2009. He states that accountability for the losses reported in the Preliminary Statement for the year ended 31 March 2009 “accountability for these losses must be taken at the top” and that he will resign from his generously remunerated (€512,000) sinecure following the AGM in July. Dividends have been abandoned and the share price has collapsed and currently trades at €1.55.
Burrows was appointed a non-executive director of Carlsberg A/S, the world’s 4th largest brewery, some weeks ago. Carlsberg returned revenues of €8.05 billion and profit of €430.6 million in 2008. The Carlsberg board of directors split a mere €805,867 in fixed remuneration in both 2007 and 2008 – mere chicken feed when compared to the €1.26 million splashed among the non-executive members of the board of the Bank of Ireland in the year ended 31 March 2008. But Burrow has turned 66 years of age and his free bus pass will enable him to travel, at least as far as Dublin Airport, in a cost effective manner when he is required in the City of the Mermaid. However, he will need spare change if he has to buy a plastic bag at Dublin Airport to transit any liquids and lotions.
But if Burrows walks out of the Bank of Ireland with such elevated standards about accountability does that set a precedent and what will become of the tenure of his recent choice for the position of chief executive at Bank of Ireland, Richie Boucher?
Boucher was recruited to the Bank in 2003 and was the adult-in-charge of the Retail Division. A substantial element of appalling results announced this week is attributable to the Retail Division. The 2009 Retail Division profit of €20 million, is 6% of the much reduced reported group profit of €332 million. An impairment charge of €708 million, 78% of which is attributable to property and construction, arises in the Retail Division.
Boucher also personal advocated with the planning authorities for an enormous commercial and residential development proposed in the Dublin suburb of Ballsbridge. Permission was declined by An Bórd Pleanála, but had the project proceeded, it would have transformed the skyline of Dublin to be somewhat like that of Dubai, overshadowing a dense urban environment.
A compelling lesson from the era of the Irish Celtic Tiger is that it is not possible to sustain a housing sector based on 100% mortgages and residence purchase costs equivalent to 15 times household income, if there is any income. The price for which this site was acquired was equivalent to €50 million per acre, thanks to an abundance of bank funding.
Laurence Crowley, who preceded Burrows as Governor of Bank of Ireland, stated some months after Boucher’s recruitment that “our management are chosen for their ability to deliver outstanding business performance and to inculcate a performance culture in the organization”
That sentiment behind this remark is not evident in 2008/09 performance of Bank of Ireland, nor was it evident when an employee could walk out of the College Green branch last February with €7 million in the boot of his car, as a consequence of a tiger kidnapping, without either human or electronic interception at any stage before the person who took the money reported the matter to the gardaí.
It will be interesting to observe unfolding developments in relation to Bank of Ireland and the restoration of trust with shareholders and the general public.