Reward those people who deliver for society

Yesterday’s Irish Examiner carried an article on the report into salary levels in Irish banks.

Taxpayers, through the finance minister, are the owners of two banks and part owners of a third.

According to the Mercer report, there are 2,199 senior management members in AIB on salaries in excess of €100,000, eight on an average €434,000. In Bank of Ireland, there are 103 executives on salaries of €250,000 and eight on €517,000. In PTSB, there are 20 on €220,000 and nine on €269,000. The packages for the CEOs are AIB, €468,000, Bank of Ireland, €776,000 and, PTSB, €460,000.

In any man’s language those are good packages particularly for those above the €200k mark. But because those packages are not akin to the enormous pre-meltdown packages does not mean they are fair or that the number of people getting those salaries merits such consideration.

Pre meltdown packages such as the $108m for one guy alone beggar belief.

For the recipient it was like winning the New York lottery and for what? It would be bad enough if salaries that read like telephone numbers were the exception. However, unjustifiable salaries were and unfortunately are again becoming the rule amongst the higher echelons of the financial services industry and indeed many other public companies.

The world seems to have forgotten so quickly that the financial services industry was the single major player in causing the financial industry to implode.

We have seen the devastation that light touch regulation, banking greed and political expediency has created. Hundreds of thousands of jobs have been lost. People are unable to pay their mortgages. Property prices have taken a massive dive and thousands are in negative equity. Emigration is back to that which prevailed in the 1950s and ‘80s. No house is immune.

Uncertainty and despair abound. Why? Because the citizens of this country have bailed out the banks to the tune of €64bn, for which we will be paying back for what will seem like forever.

Government, in an effort to make up the shortfall in income tax revenue, is adding stealth taxes like they are going out of fashion.

We are borrowing between €12bn and €15bn per year just to stand still. That accumulation for however long we are not making ends meet and the €64bn have to be paid back.

For a couple of years, banks, particularly in the US, kept their heads down, took government support, and rebuilt their companies. Now the financial services guys and gals are off again like nothing happened.

It’s in that context that an agreement was reached in Brussels to cap banker’s bonuses, specifically that individuals could earn a maximum bonus of one times his or her annual salary except where shareholders specifically agreed to permit a payment up to twice the base salary.

There’s only one weakness, and that is corporate shareholders will always agree to pay exorbitant packages because it’s in their own self-interest, as in, what goes around comes around.

Undoubtedly, our wonderful bankers will find ways around this cap. They always do but for now, it’s a start at stopping the rot.

It’s a pity that Mercer ‘found’ that the CEOs were paid less than their peers in other sectors. One wonders if success, as measured by the impact on the rest of us, at running their respective businesses was considered.

We really do need to get back to the real world where people are rewarded for what they deliver to society, not for gambling with other peoples’ money.

It’s not looking good though, as Michael Noonan, when demanding that the banks cut their pay packages further, stopped short of recommending senior executive pay cuts.


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