The cap of €500,000 was set in February 2009 following a report on the Republic’s derelict bailed-out banks by the State appointed Covered Institutions Remuneration Oversight Committee (CIROC). This Committee was appointed under the Credit Institutions (Financial Support) Scheme 2008.
Each institution covered by the State bailout was required to prepare a plan to structure the remuneration package of directors and executives so as to take account of the objectives of the Act of 2008. For this purpose remuneration included total salary, bonuses, pension payments, and any other benefits received from a financial institution covered by the State and its group entities, or otherwise received by a director or executive arising from the performance of his or her functions as a director or executive.
The covered institutions included AIB and Bank of Ireland, Anglo Irish Bank, two mutual societies – EBS and Irish Nationwide and Postbank – which in 2008 was a start-up.
The timing of this initiative followed the Government guarantee that was put in place in September 2008, the recapitalisation programmes for AIB and Bank of Ireland and the taking into public ownership of Anglo Irish Bank.
The salary of the Chief Executive of AIB was €928,400 from 1 April 2007. The base salary in February 2009 was €696,300 following reductions in salary, totalling 25% in October 2008 and February 2009. The CIROC recommended a salary cap of €500,000 in the case of AIB.
When Matthew Elderfield, Head of Financial Regulation and Deputy Governor of the Central Bank spoke last Monday at the MacGill Summer School he is quoted as saying that “we will probably need to take a look at the caps on bankers pay” under a headline ‘Bankers’ pay cap could be abolished - regulator’ and “it is better to have a bit of arm’s length between the political system and the banking system and look at the remuneration arrangements in the round” . Unfortunately, for Mr Elderfield, the electorate did not elect a TD to represent Bermuda NW but it did elect a government that is expected to govern.
Does Mr Elderfield’s remarks mean that the Government has abrogated its direct responsibility for such a highly charged and politically sensitive issue to the compendium of high-octane intellectuals that populate the Central Bank Commission? Did they, in turn, mandate policy conception and propaganda on the subject of executive bank pay to Mr Elderfield, who has chosen to communicate his thoughts on the subject, in the first instance, at a provincial summer school, notwithstanding that he opined “I don’t have a view on that” (salary cap for bankers increased)?
The hired gun that, for the time being, sits in the Chairman’s seat at AIB, is clearly as perplexed as I am. Having declared a €2.6 billion loss and a 26% increase in the bad debt provision to €2.1 billion for the first half of this year, he told the public that he raised with Government the possibility linking the salary of the next chief executive (of nationalised AIB) to a recovery for the State of the €20 billion provided by taxpayers’. “The concept”, he advises, “is one that we have discussed and one that we haven’t had a door slammed in our faces”.
Perhaps the proverbial door does not have hinges. The ambivalence would seem to imply once again the Trappist silence, inertia and reticence of the Department of Finance is encouraging the Chairman of AIB to think like a flower arranger foraging for an exotic shade of narcissus in a garden that is barren, on the grounds that the bouquet he is seeking to create for the Bankcentre boardroom will not smell like a rabid skunk.
The salary cap on executive pay in the banks that the US taxpayers kept alive is $500,000 (€345,000) – substantially more that the income of either Timothy Geithner or Ben Bernanke.
If our Government are implementing a cap on the salary of higher appointees in the public sector at €200,000 and it is possible to recruit a distinguished native-born Central Bank Governor at a salary of €276,324, what possible rationale exists to justify the removal of a €500,000 cap on the salary of the next chief executive of a nationalised runt bank that has been suffocated with a blend of self-serving smug arrogance and myopic delusion (“who didn’t think there was a problem and ‘were convinced that there wasn’t much wrong that needed to be changed’)?
Governments are expected to govern and be accountable. Regulators are expected to regulate and prosecute. Administrators are expected to administer - and lucidly communicate. If the Government fail to confront this issue head on there will be serious implications for its reform programme.
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