Friday, April 22, 2011

Gravy train for top echelons in Irish State companies

UCD economist Colm McCarthy published a review of the Irish commercial State companies this week as a prelude to the Government considering their possible sale.  The media have been commenting on the high level level of pay at the top of these organisations.  The average employee remuneration in all of them is €54,600 but I thought it would be interesting to set out the the average pay in each of them and the multiple of that average which the chief executive receives.  The data relates to 2009.

Entity CEO Remuneration in 2009
Average Employee Remuneration in 2009
Multiple of employee average received by CEO
CIE 251,160 49,100 5.1
ESB 752,568 75,500 9.9
Bord Gais 394,000 67,300 5.8
EirGrid 407,000 83,400 4.8
Bord na Móna 392,000 44,800 8.7
Coilte 417,000 54,267 7.6
Dublin Airport Authority 568,100 49,300 11.5
Irish Aviation Authority 324,000 95,600 3.3
Dublin Port 317,000 67,900 4.6
RTÉ 326,000 59,700 5.4
An Post 500,000 43,300 11.5

The Minister for Finance, Brian Lenihan,  announced in his Budget speech last December that ‘there should be a maximum salary rate of €250,000 in the public sector and that the position of the Minister for Finance as a shareholder or the statutory shareholder can be used to enforce the objective of the maximum salary within a reasonable timeframe’.

Lenihan’s ‘capacity to enforce’ was not apparent when the former managing director when he demanded the resignation of the former managing director of AIB just weeks earlier and he departed having pocketed benefits worth €3 million after one year in that role

Tuesday, April 19, 2011

Pay Day at AIB

When the Covered Institutions Remuneration Oversight Committee reported to the Finance Minister in February 2009 they stated that ‘pension arrangements for senior executives in banks should be at least broadly similar to those applicable to the generality of the staff of the institution’ This Report also recognised that the top management of banks make little or no contribution for their pensions and recommended an appropriate balance between personal employee contributions and the employer contributions and the extent to which they employee contribution may need to be increased needed to be immediately reviewed

Why did the Department of Finance tolerate an agreement nine months later, in November 2009, to facilitate the payment to Colm Doherty, the former managing director of AIB, a cash payment of €2 million in lieu of a contribution to his pension? Given the trading results for 2010 and the overall circumstances of AIB, how is it possible, for this nationalised bank, to fully discharge such extravagant payments to a departing managing director - while thousands of AIB employees are facing the loss of their jobs and great uncertainty about their termination packages?

During his 1-year tenure from mid November 2009 AIB lost €10.2 billion and total assets decreased from €174 billion on 31 December 2009 to €145 billion at the end of last year. It was obliged to take a 54% haircut on the €18 billion of property loans taken over by the State. It lost its listing on the Irish and London Stock Exchanges and a taxpayer investment of €7 billion means that with 92% of the equity owned by the State it is effectively nationalised. Its shares now trade on the Enterprise Securities Market alongside the mom and pop operation.

Loans outstanding are €94 billion, of which €56.8 billion are either in residential mortgages or property and construction and almost 30% of them are wither vulnerable, impaired or under scrutiny. Customer accounts have dropped from €84 billion to €63 billion in a year and the Irish banks are generally unable to tap funding markets.

Tuesday, April 12, 2011

Former United States Presidents retirement packages

Outgoing Irish TD’s from the last Dáil received more than €13 million in pension lump sums and termination payments and on top of these outgoing TD’s aged 50 and over will receive more than €4 million annually in pension payments. Seven ministers of state shared close to €250,000 in severance payments, including three who were returned to the Dáil – (McGuinness €25,276, Browne €24,952 and Micheál Kitt, now Leas Ceann Comhairle €25,276)

Former US Presidents

Former Presidents of the United States have only qualified for a pension since 1958. The current value of a former President’s pension is €138,366 and it is aligned to the salary of the Head of an Executive Department (e.g. Cabinet Secretary / Secretary of State, Secretary of Commerce etc.)

Former Presidents retiring before 1958 often pursued various occupations in retirement and received no federal assistance. The industrialist, Andrew Carnegie (1835-1919), who created US Steel announced a plan in 1912 to offer $25,000 annual pensions to former Presidents but many Members of Congress considered it inappropriate that such a pension should be provided by a private citizen. Legislation was passed to create a presidential pension but it was not enacted until 1955 when the 33rd President, Harry S. Truman (1884-1972), experienced financial limitations in recruiting an office staff.

Today, transition funding is available to former Presidents and Vice Presidents for seven months to facilitate their return to private life. These funds are used to provide suitable office space, staff remuneration, communication services, printing and postage associated with the transition.

The maximum annual rate of remuneration for an individual staff member of a former President cannot exceed the pay of a Level II appointee to the Executive Schedule (e.g. Deputy Secretary of a Federal Government department) and the current rate is just under €120,000. A former President supplements staff remuneration costs with private funds.

A total of €2.6 million is provided for former Presidents, their offices and Presidents widow in the 2010 Budget. This comprises €360,000 for Jimmy Carter, €576,000 for George Bush Snr, €756,000 for Bill Clinton, €907,000 for George H W Bush. The sum of €9 is provided for postage used by widows.

The aforementioned sum covers pension compensation, office rental, travel supplies and equipment.

State Funeral

United States Presidents are also entitled to other benefits. These include a State Funeral at the request of the surviving family. The sitting President officially announces the death of a former President and commander-in-chief by presidential proclamation and offers the nation’s condolences to the former President’s immediate family. Suitable honours are rendered by units of the armed forces under orders from the Secretary of Defence and the Secretary of the Army as his personal representative. In turn, the Secretary of the Army delegates to the Commanding Officer of the US Military District of Washington the overall authority for planning and implementing funeral arrangements for former Presidents. Each living former President has also prepared a formal funeral request which is kept by the MDW. There is a long standing tradition that an officer escorts the immediate family of a deceased military member until burial and the in case of former President’s that duty falls on the commanding general of the Military District of Washington.

Each branch of the armed forces provides personnel and support to a State funeral and, as a former commander-in-chief, each former President is entitled to be buried in the National Cemetery at Arlington Virginia.

Congress honours a former President by allowing his coffin lie in state in the Capitol Rotunda for a State ceremony followed by public viewing of the closed coffin.

Medical Expenses

Former Presidents and their spouses, widows and minor children are entitled to treatment in military hospitals.

Secret Service Protection

The Secret Service provides lifetime protection for former Presidents who entered office before 1 January 1997. Surviving spouses receive lifetime protection until remarriage. Those entering office after 1 January 1997 and their spouses receive protection for 10 years. Protection for the spouse ends upon divorce or remarriage. The widow of a President receives protection for a year following the death of a President. Temporary protection can be authorised at any time. Protection for a former President’s children is available to them until they reach 16 years of age, or for a period not exceeding ten years, whichever occurs first.

Presidential Libraries

With the exception of Richard Nixon, every former President since Herbert Hoover (1874-1964), the 31st President, has had a presidential library managed by the National Archives and Records Administration established in his name.

The process of establishing a presidential library may begin with the establishment of a presidential library foundation – a private organization under the leadership of friends of the President. This usually enjoys tax exempt status and is allowed to receive donations and contributions which are used to purchase a site and construct a library building, that is deeded to the US Government. The Archivist deposits the President’s official records and papers in it and assumes management of the library.

Monday, April 11, 2011

Savings on Irish ministerial transport not as great as suggested

The new Irish Government tell us that substantial savings will be made on Official Cars from 16 June 2011 and on ministerial air transport.

The total cost of providing official transport to 27 Irish Office Holders in 2009 was €31,946,650. This includes €7,500,000 for 27 Garda-driven cars; the two aircraft assigned to ministerial use and four helicopters.

Last month Alan Shatter, Minister for Justice, Equality & Defence announced new arrangements for ministerial transport in place of the prevailing arrangements which consisted of 27 vehicles and 54 Garda drivers.

The new arrangement will mean that only the President, the Taoiseach, the Tánaiste the Chief Justice, the Director of Public Prosecutions and the Minister for Justice, Equality & Defence will continue to be provided with Garda transport and drivers for security reasons. The fleet of 27 vehicles will be reduced to 7. Cabinet ministers will be required to provide their own cars but will the professional drivers they recruit will be paid by the State. Former Taoisigh will not longer qualify official cars on a full-time basis.

The Garda Office Holders Fleet cost €7.5 million to operate in 2010. The average cost of a Garda-driven official vehicle at almost €280,000 per annum is high. The average cost to the State of a vehicle provided by an Office Holder but driven by a professional driver paid by the State is €120,200. The estimated savings would therefore be €4 million per annum to this budget but the cost of the drivers will remain with the Garda Siochaná.

That maybe the case with respect to direct cost of operating the Office Holders fleet. But the 44 Gardaí who are being transferred from official driving duties will, naturally, remain on the State payroll. They will presumably lose the additional allowance of €17,936 payable to this category of driver – a total saving of €394,592.

The cost of fuel for these vehicles was €183,493; the cost of maintenance was €147,339 and the cost of depreciation was €541,045 in 2009. The salary costs associated with this fleet was €4.2 million in 2009, or average annual earnings per driver was well north of €77,778. The top rate for a Garda in 2009 was €48,695 and those on the ministerial pool qualified for an additional allowance of 40% of basic pay (€17,936) per annum making a grand personal total of €66,631.

This ia an awful lot of money, especially considering that 17 of the 27 users of these vehicles in 2009 were domiciled in Dublin. That cost can also be seen in the context of the Garda Training College in Templemore being effectively mothballed to save the cost of paying recruits. The number of retired members has, incidentally, increased from under 6,000 in 2007 to an estimated 9,750 retirees in 2011.

No vehicles have been added to the Office Holders fleet since 2008 when €509,765 was spent on new cars. 14 of the 27 cars have travelled over 200,000 kilometres and two of them have broke the 300,000 kilometre barrier.

Ministerial Air Transport

Apart from ground transport the cost to the Aer Corps of providing air transport to Office Holder in 2009 was €24.44 million (€17.39 M for the Gulfstream IV and €7.05 M for the Learjet 45). The average direct cost of the Gulfstream IV – maintenance, fuel, support, catering, cleaning and airport handling costs is €4,050 while the remaining costs – mainly depreciation and personnel bring the average total hourly cost of this aircraft per hour to €7,890. The comparable hourly costs for the Learjet 45 are €1,270 and €2,950.

There are also four helicopters available for ministers’ use at a total cost per hour ranging from €1,590 to €3,130 – depending on model.

Comparison with British Government Car Fleet

The British Government operated 78 vehicles in the year ended 31 March 2010 at a total cost of €7,744,889, or slightly less than an average cost of €100,000 per vehicle. The four vehicles used by the Cabinet Office, for example cost a total of €417,000, or €104,250 per vehicle and that particular fleet includes several Jaguar and Land Rover models. The Northern Ireland Office operates two official vehicles at a total cost in 2009/10 of €329,000, or an average of €164,480 per vehicle – that is €120,000 less than the Irish counterpart.

Britain’s Government Car & Despatch Agency employs 177 persons on the official government fleet. The Director of the Government fleet is paid an annual salary of €62,849 - €15,000 less than the typical salary of a Garda driver assigned to an Irish Office Holder. The average staffing cost of individuals assigned to the Government fleet is €59,275.


The foregoing illustrates how much Irish costs are out of line with comparators elsewhere.