Lenihan seeks bank chief wage cap

Bank chiefs will have their wages capped at half a million euro, it was announced today.

Finance Minister Brian Lenihan has written to the country’s main financial institutions seeking a salary ceiling of €500,000 or an amount recommended by a new Government committee – whichever is less.

The three-person committee trawled through the remuneration packages of the seven homegrown banks and finance houses covered by the State’s guarantee scheme.

In its first report, the Covered Institutions Remuneration Oversight Committee (CIROC) recommended reductions in basic salary, bonus and pension levels for chief executives, chairs and board members that it considers to be, in many cases, markedly excessive.

It concluded the pay and benefits of senior bankers should be brought into line with the salaries of chief executives of similar sized companies in Ireland.

The Government said it welcomed the recommendation in light of a deepening economic crisis, the current financial position of the covered institutions and the fact that larger economies such as the US and Germany have set lower caps on the salaries of Government aided financial institutions than those suggested by CIROC.

“In that regard, the Government considers that the CIROC recommendations regarding bonuses, pensions, long term incentive plans and board sub-committees are appropriate but that remuneration terms should be lower than those recommended by CIROC,” said a government spokesman.

“Therefore, the Minister has written to the financial institutions seeking a salary cap of €500,000 or the amount recommended by CIROC, whichever is the lesser.

“He has indicated that any deviation from this should take place only in very exceptional circumstances and with his agreement.”

The Government was forced to step in and rescue the banking sector when it fell foul of the global credit crunch.

The three-person CIROC reviewed the pay and bonus structure at each of the seven institutions covered by the €500bn guarantee.

They are AIB, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent, Irish Nationwide Building Society, EBS and Postbank.

The capping follows the publication of Anglo’s annual report last month which revealed its 15 executive and non-executive directors received remuneration totalling €9.54m last year.

Former executive director Tom Browne – who left the business in November 2007 - was paid €3.92m, while shamed former chairman Sean FitzPatrick - whose outstanding directors’ loans exceed €80m – received €539,000.

Former chief executive David Drumm got €2.13m.

Elsewhere, departing Bank of Ireland chief executive Brian Goggin was paid a €1.15m salary in a €2.9m package last year while his AIB counterpart, Eugene Sheehy, is believed to have reduced his pay by over €1m to €690,000.

The Labour Party’s deputy leader Joan Burton said the cap was a step in the right direction, but added many members of the public will still regard these payments as excessive.

Ms Burton has repeatedly insisted no executive should be paid more than the €250,000 salary of the finance minister.

“While the new ceiling will mean a significant drop in the remuneration packages of senior bankers, they will still be among the best paid executives in the country,” she said.

“The Labour Party will be seeking assurances from the government that these are genuinely the maximum levels of remuneration and are fully taxable. There must be no hidden bonuses and no phoney expenses.”

The committee, established in December, included chairman Eddie Sullivan, a former secretary general of the Department of Finance, former comptroller and auditor general John Purcell and Vivienne Jupp, a senior executive with management consultants Accenture.

The Committee had recommended the following salary rates for chief executives: AIB and Bank of Ireland €690,000; Irish Life & Permanent and Anglo-Irish Bank €545,000; EBS and Irish Nationwide €360,000; Postbank €230,000.

Green Party chairman Senator Dan Boyle said he was pleased the Government cap was lower than the figures.

“The move goes a long way towards hauling the banking system back from the obscenely high salaries and bonuses paid to bank executives in the recent past. That crazy system of pay and incentives played a major role in dragging Ireland into recession,” he said.

Mr Boyle said the Green Party also endorsed recommendations that no bonuses should be paid for 2008 or 2009, nor should bonuses apply as long as the taxpayer-funded State guarantee was in place.

“We in the Green Party worked hard with our Government partners to set a generally lower limit for the bigger banks at €500,000,” Senator Boyle added.

“It is perfectly reasonable that the amount recommended by CIROC should apply where it is lower than the Government overall ceiling.”