Public Outrage at Bank of Ireland extravagant bonuses

Last Saturday I spent a pleasant few hours with fellow hill walkers strolling along the 14KM stretch along the banks of the River Dodder. The controversial topic of Bank of Ireland bonus payments got an airing. These men and women of the world walking with me were aghast at what emerged in a Department of Finance Report on the matter as this Bank gave the Irish public the V sign.

A parliamentary question sought information in November 2010 on bonus payments to staff made by banks since the commencement of the Irish Government guarantee in September 2008. The Bank of Ireland advised the Department of Finance that “no performance-related bonuses were paid with respect to the financial year to March 2009 and December 2009”.

The statement added “a small number of people at middle management level received payments which reflected either guarantees which were agreed on their joining the Group or deferred payments where the historic performance criteria had been achieved and the payment was deferred over several years. For commercial reasons Bank of Ireland do not disclose the amount of such payments. The Bank advises that it had not legal discretion in these matters”

The loss at Bank of Ireland for the 9 months ended 31 December 2009 had risen to €1,813 million compared to €23 million for the year ended 31 March 2008. Impairment charges in this period reached €4,055 million compared to €1,435 in the year ended 31 March 2009. The Irish Government was forced to invest €3.5 billion in preference stock so as to bolster its capital base.

It transpired that the information provided by Bank of Ireland was incorrect and that bonus and quasi bonus payments from September 2008 to December 2010 amounted to a staggering €66.37 million – all linked to performance.

A patina of legal legitimacy is not an indication that any transaction is ethical, moral or affordable.

The hill walkers are utterly mesmerised that Bank of Ireland could be so utterly undermined in the Bank by duplicity, betrayal, self-serving slovenliness and skulduggery. These characteristics are evident not just in grotesque scale of bonus payments, which the Bank (and the public) cannot afford and untruthful answers to parliamentary questions, but there is now also evidence of incomplete and misleading information in the due diligence process prior to the public subscription for shares, in the attempted enhancement of the Group Chief Executives pension terms last year and the tardiness by the Bank in relation to the subsequent impeded and delayed investigation into the November 2010 misrepresentations to Dáil Éireann.

1. These bonuses, especially in the prevailing circumstances, amount to the barefaced looting of society – on a scale commonly seen in Russia, Africa and Asia.
   
2. The explanation that bonuses are ‘open to different interpretations’ and the comment by Arthur Cox that Bank of Ireland “used a restrictive and uncommon interpretation of what constituted a performance bonus” describes a crazy mentality of a type not untypical of occupants of padded cells in a lunatic asylum, whose capacity to communicate in vernacular English is very limited; who have ‘no intention to mislead’ and are likely to recognise this in lucid moments to avoid personal embarrassment.
3. The implication that the Irish people, who have been fleeced of €3.5 billion by Bank of Ireland, can now be bought for €2 million paid by Bank of Ireland to the Exchequer ‘to recognise the difficulties cased by the way the Bank handled the matter’  will simply  create a veneer of indulgence and camouflage to enable them to be further fleeced of, not just €66.37 million, but an additional €21 million in respect of bonuses and commissions in 2011 and other amounts in 2012 is outrageous and abominable.
4. The suggestion that any future parliamentary questions in relation to personnel or other important matters be authorised by the Group Chief Executive beggars belief on grounds of credibility. The Report indicates that overall payments totalling €1.2 million were not disclosed in the due diligence process prior to the public bailout.
5. The Sunday Tribune on 30 January 2011 that the Group Chief Executive of Bank of Ireland directly intervened with the planning authorities in October 2007 in connection with the proposed Sean Dunne development that would have cloned Jurys/Berkeley Court Ballsbridge hotel sites with Calcutta, had it been heeded?

The text of the letter from Richie Boucher to Dublin City Council planning authorities read:

“Dear Sir

Re Jurys / Berkeley Court Site

I refer to the above and write to confirm my strong support for this landmark proposal which I believe will significantly benefit the City of Dublin and its citizens through helping enhance the concept of a living city and providing buildings of significant architectural merit befitting Ireland of the 21^st century. Yours faithfully, Richie Boucher, Chief Executive Retail Financial Services Ireland.”

Dublin City Council granted partial permission for the Ballsbridge development but it disallowed Dunne’s application to build a 37-floor skyscraper.

Inflated, bloated executive salaries at Irish Nationwide Building Society, despite CIROC recommendations

The response by Brian Lenihan to a question posed by Deputy Seán Barrett TD about the level of executive remuneration at Irish Nationwide Building Society was curious.  The question was put on May 12 – asking Lenihan ‘what steps he will take to ensure the Irish Nationwide Building Society complies with the recommendations made by the covered institutions remuneration oversight committee; and if he will make a statement on the matter’.  The response was “I am advised by Irish Nationwide Building Society that the remuneration of Directors and senior staff at the Society is in compliance with the recommendations of the Covered Institutions Remuneration Oversight Committee.”

This wretched building society has already reported a loss of €2.48 billion in 2009.  It devoured €2.7 billion of public money.  Ninety six percent of its €2.7 billion impaired loans relates to speculative commercial property transaction, much of it not even in this country,

The six years of delinquent financial regulation was characterised by what appears to have been a very passive relationship to this Society.  It is astonishing that the Brian Lenihan’s advisers chose to rely on information from Irish Nationwide about the issue of executive remuneration because a casual perusal of the 2009 Annual Report would suggest otherwise.

Rather light-touch, I would have thought, on the part of the Minister's advisers. The debacle that Ireland is now in is attributable to excessive reliance on the representations of this entity and its counterparts rather than vigilance, understanding and verification; an attitude more Greek than German.  The two directors representing the public interest, for example, were paid €38,000 more that CIROC recommended they be paid. 

The Covered Institutions Remuneration Oversight Committee (CIROC) report was published by Minister Lenihan on 27 February 2009 and given the crisis that prevailed then and the sense of urgency and caveats which the report  reflects, one presumes that its recommendations were to be promptly effective from 2009 financial year.

The CIROC report recognised that reduced salaries for some executives may require the revision of existing contractual arrangements; that there must be sufficient headroom between the recommended remuneration of a chief executive and the salaries of those reporting to the chief executive, such as the chief financial officer. Any departure had to be justified on case-by-case basis. It also noted that top-level individuals in financial institutions did not generally contribute to their pension funds and recommended that a review should reflect an appropriate balance between the personal contribution of all employees and that of the employer.

The CIROC report recommended the following levels of base annual remuneration in the case of Irish Nationwide Building Society:

• Chairman €144,000 (40% of chief executive's base salary)

• Chief Executive €360,000

• Ordinary board member €29,000 (20% of chairman’s fee)

• Board member chairing major committee €36,000 (25% chairman’s fee)

The Annual Report reveals:

• The role of chairman of Irish Nationwide was remunerated in 2009 within CIROC guidelines.

• The role of chief executive was paid €494,000, that is €134,000 in excess of what CIROC recommended. Mr Fingleton, as chief executive from 1 Jan – 30 April, was paid €221,000 for that period - €101,000 more than CIROC recommended.  The current chief executive, Mr McGinn, received, on a pro rata basis, €22,000 more than CIROC recommended. Mr McGinn apparently has the use of a residence leased by the Society towards which he paid a personal contribution of €6,050 from 15 Jul to 31 Dec. It is not clear if there is an undisclosed subsidy amounting to the difference between this sum and the actual rental for this period.

• Each of the current non-executive directors is a chairman of a major sub-committee of the board of the Society but the remuneration of each of them exceeds CIROC recommendation by a cumulative sum of over €68,000 - details attached.

• The role of chief financial officer which ought to attract a remuneration ‘with sufficient headroom below the remuneration of the chief executive, €360,000’ was paid a total of €539,000. This includes the remuneration of the former executive director and Secretary, Mr Purcell, who was paid €385,000 in 2009. I would question in this instance, that apart from breaching CIROC recommendations, there is information in the public domain that the records of this Society are in such a state that the current chief executive severely criticised the impact of the lending policies and practices of the previous management and that the determination of the final losses of the asset portfolio remain highly uncertain. Does this not raise fundamental questions relating to the corporate governance of this entity as the Government rushed headlong into committing €2.7 billion to it, only to realise that billions more in State funding are needed if it is to be kept on life-support.  Under what circumstances could Minister Lenihan have entertained a derogation from CIROC recommendations in the case of Mr Purcell, if one was sought, against the background of the information now in the public domain?

Readers may not be realise that in addition to the €28 million personal pension fund paid for by Irish Nationwide and received by Mr Fingleton in 2007 that he also remunerated himself in the sum of €10 million from the period our property bubble began inflating, 1 January 2003 until he departed on 30 April 2009.  This puts the €1 million pre-contractual bonus that he paid himself in 2008 in a wider context. 

Incidentally, the pension fund for the 399 staff of the Society, whose average annual pay is approximately €41,000, is €4.4 million - one seventh of the sum Mr Fingleton personally obtained.  The employees pension fund  bore a deficit of €700,000 on 31 Dec 2009.

Is the reformation of our financial system not in some ways comparable to the reform process that Mayor Giuliani deployed in cleaning up New York – where discipline started with the seemingly inconsequential issues, like removing graffiti from the subway system?  But in this instance, is compliance with top-level remuneration CIROC not a most obvious example of a similar discipline?

Political life-cycle of media folk in Irish politics can be fickle!

The political life cycle in national Irish politics of individuals who formerly worked in media is relatively short, although the 9 months that George Lee spent in Leinster House was acutely short.

 

Name	Formerly	Served	Exit
Thornley, David (Lab)	RTE current affairs presenter	1969-77 Dublin NW	Defeated 1977
Cruise O’Brien, Conor (Lab)	Television script writer, commentator and subsequently Editor, The Observer	1969-77 Dublin NE	Defeated 1977 Senator (Ind) 1977-81
Nealon, Ted (FG)	RTE current affairs presenter; Editor Sunday Review	1981-97 Sligo-Leitrim
Kennedy, Geraldine (PD)	Reporter, The Irish Times and subsequently Editor, The Irish Times	1987-89	Defeated 1989
Ross, Shane	Business reporter, Sunday Independent	1981 - University of Dublin
Keating, Justin (Lab)	Presenter RTE agriculture television programmes	1969-77 Dublin County North	Defeated 1977
Cox, Pat (PD)	RTE current affairs presenter	1992-94	Resigned 15 July 1994 to become MEP
FitzGerald, Garret (FG)	Columnist and commentator – currently at The Irish Times	1965-69 (Senator) 1969 – 1992 Dublin South East