FF says bill would end ‘rotten’ bank bonus culture

The “rotten” culture of bonus entitlement in banks would be ended under laws which will be proposed by Fianna Fáil when the Dáil resumes in September.

The former minister and now party spokesman on social protection, Willie O’Dea, yesterday published the private members bill to crack down on bonus payments but admitted “it should have been done sooner”.

It proposes that all bonuses to senior management would be delayed for five years. The money would be lodged as part of the capital of banks and therefore be available in the event of any losses.

If, after five years, the executive in question has performed satisfactorily, he or she gets paid that bonus; otherwise they would not.

Mr O’Dea said his bill “is just one short step in changing the rotten culture which has played a very significant role in the economic des-truction of this country over the last 10 or 15 years”.

Asked if it was a hypocritical move given the bonus culture developed during his party’s 14 years in office, he said: “My government was the first government to move to control the amount of money paid to bank executives.”

He said a “culture had prevailed for many years in the country” as well as in other European countries.

“It is now apparent that something has to be done to control that,” he said. “Obviously, it should have been done sooner.”

Brian Lenihan introduced a €500,000 salary cap on bankers’ pay when he was finance minister.

In Dec 2010 he promised a 90% “super tax” on bank bonuses after revelations that the State-rescued AIB was paying €40m in bonuses to executives that Christmas.

However, Mr Lenihan was forced to climb down on the plans in the rush to get the finance bill onto the statute books before the Dáil was dissolved for the general election.

At the time, Fine Gael proposed a 99% super tax on bank bonuses. It has not delivered on this while in government.

Mr O’Dea said his bill would ensure that “bankers who get bonuses actually earn those bonuses”.

He used the example of Ulster Bank chief executive Jim Brown, who recently bowed to pressure to waive his bonus for this year after a technology problem caused major customer disruption.

Mr Brown had earlier been asked during an Oireachtas committee hearing whether he would waive his bonus and said he would think about it.

“His answer implied that he regarded the bonus as an entitlement rather than something you get paid for doing a job well,” Mr O’Dea said.

A process is under way in Germany, Italy, and Britain to change the way bank bonuses are awarded. Mr O’Dea said.

“There is a realisation now that one of the fundamental difficulties with bank bonuses in the way they were operated is that they incentivised excessive risk taking, that has to be controlled,” he said.