The publication of the Annual Report of Bank of Ireland for the nine months ending 31 December 2009 provides the first opportunity to see how the Bank is complying with the recommendations of the Covered Institutions Remuneration Oversight Committee (CIROC).
Their recommendations were contained in the report made to the Minister for Finance on 27 February 2009, two days after the appointment of insider, Richie Boucher, as chief executive of Bank of Ireland was announced.
Recommended by CIROC – adjusted for 9 month period
|R Boucher Chief Executive|| |
including a pension fund top-up of €1,490,000
for six months from 3 July 2009
Chair of Major Committee
Deputy Governor and senior independent director
Group Remuneration Committee
Court Risk Committee
Pension Fund Trustees
|Ordinary board member|| |
1 @ €26k for 3 months
Directors’ of the Bank of Ireland are members of the Bank Staff Pension Fund, a defined benefit plan, which is a contributory scheme at the rate of 2½% of salary. Benefits are based on an accrual rate of 1/60 of pensionable salary for each year of a Director’s pensionable service with a maximum of 40/60th payable on normal retirement, at age 60.
Boucher became joined Bank of Ireland in December 2003. He was appointed an executive director on 6 October 2006; chief executive on 25 February 2009.
His normal retirement should be in 2017 at which time he would have accumulated 13 years of pensionable service providing him with a pension of 13/60th of his final salary - €261,625 based on prevailing rates. But the impact of this deal is that can take a hop, skip and jump at the age of 55 with close to €400,000 in his pocket. That is over twice the salary of the Minister for Finance and significantly more than all top-level office holders whose positions are of systemic importance.
Pension Fund Deficit
The Bank Staff Pension Fund is running a deficit of €1,631,000,000 and its assets are only capable of meeting under 70% of the present value of its obligations amounting to €5.3 billion. How is it possible for a pension fund with a deficit of this order to take on additional burden? What tone does this decision indicate to staff and stakeholders’ generally?
This pension fund was closed to new members from 1 October 2006, five days before Boucher became an executive director and the only exception was in respect of entry-level employees who joined Bank of Ireland between that date and 21 November 2007. All others are obliged to become members of the Bank of Ireland Group Pension Fund of the group’s UK pension fund – both of which are hybrid schemes which include elements of a defined benefit and a defined contribution scheme.
The CIROC Report is scathing in its criticism of bank top-management who make little, or no, contribution for their pensions and advocated that pension arrangements for senior executives should be at least broadly similar to those applicable to the generality of the staff. How many staff in Bank of Ireland can retire at the age of 55 with 11 years’ service and a pension based on 59% of their salary?
Share Ownership Policy
The Annual Reports of Bank of Ireland for 2005, 2006 , 2007 and 2008 states that ‘executive directors are expected, over time, to build a Group stock ownership equivalent to a minimum of 100% of salary’.
Boucher owns 33,127 ordinary shares in Bank of Ireland. If he were as attentive to this policy as he expects the Bank to be to his pension he would own a minimum of 543,307 ordinary shares.
Perhaps Boucher and Molloy could approach the Boucher pension issue with the same level of indifference that he displays towards the share ownership policy.