AIB ‘move on incentive pay plan’

AIB has approached the Government about setting up an incentive plan to retain top executives before the Government starts selling the lender, according to three people with knowledge of the matter.

Chairman David Hodgkinson has led exploratory talks with Department of Finance officials on reintroducing long-term awards for senior staff at the bank when it returns to profit, according to one of the people, who asked not to be identified, as the matter is private.

Salaries were capped and bonuses banned at the lender after its rescue.

An Allied Irish spokesperson declined to comment on the matter.

In an e-mail response to questions, the Department of Finance declined to comment and said it has no plans to change compensation policy in bailed-out banks.

Chief executive David Duffy, in the job for just over two years, plans to return the bank to profit this year for the first time since 2009 as he completes more than 2,500 job cuts, rebuilds lending margins and bad-loan losses ease.

Allied Irish has replaced its entire board and most of its senior executives since its initial bailout in 2009. Eleven bank executives had total compensation of between €400,000 and the €500,000 cap in 2012, according to a Government- commissioned bankers’ pay report by consultants Mercer, published in March. Some 116 executives at the lender were earning above €400,000 in 2008.

Irish senior bank executive salaries are generallybelow European peers and publicly-quoted Irish companies, the report said.

While it highlighted a reintroduction of long-term incentives as an option in the future, Finance Minister Michael Noonan ignored this as he published the report on March 12 with an order that lenders cut compensation costs by as much as 10%.

“Each of the banks has now met the target,” a spokesman for the Department of Finance said, in the e-mail statement.

“There has been no change in policy since then nor are there any plans to do so.”

The Mercer report said that incentives could be put in place “when the institutions look likely to return to profitability and hence have the opportunity of coming out of state ownership.”

Bloomberg