Lenihan says AIB cap will remain in place

Finance Minister Brian Lenihan tonight threw out plans by Allied Irish Banks to pay its new chief a salary €133,000 above a Government-imposed pay cap.

AIB wants to appoint insider Colm Doherty as its managing director with a contract exceeding the half million euro limit on top bosses’ pay. Mr Doherty, the head of the bank’s capital markets division, is already earning €633,000.

Under the rules of a €3.5bn state prop-up for the bank Brian Lenihan insisted chief executives’ wages should be limited to €500,000.

Mr Lenihan said cabinet ministers agreed not to breach the wage cap despite the finance house’s request, but opposition parties said the bank felt it could do whatever it wanted.

“I can tell you the Government are not willing to break with the established guideline in this case,” Mr Lenihan said.

“That was may position, that was the position of the Government and that’s where the matter stands.”

Mr Lenihan said his department received a letter from the bank at around 7pm last night requesting that the pay cap rules be breached in this case.

Taoiseach Brian Cowen told the Dáil talks between the Department of Finance and the bank were ongoing.

He said it was important to allow the process to develop to find an arrangement that was consistent with the Government position.

But Fine Gael leader Enda Kenny hit out at the Government and asked why the matter had not been dealt with given the state’s 25% stake in the bank.

“This is one of the major institutions that was centrally involved in the debacle that we now find ourselves in, financially and economically,” he said.

“It says to the Government you have no moral authority, you have lost credibility, and you are losing integrity and we will do what we like.”

“Why has this matter not been dealt with decisively by Government giving the control that we have here? Why are we in a position where we don’t know what’s happening, the bank doesn’t know and the Government won’t say.”

Mr Kenny said it was possible someone in the Irish diaspora would be willing to take on the role for the €500,000 salary.

While appointed managing director it is understood Mr Doherty will assume the duties of chief executive as that position remains vacant.

Former AIB chief executive Eugene Sheehy stepped down last April.

Under the management shake-up chairman Dan O’Connor will also take on the role of executive chairman, continuing his salary of €390,000.

Joan Burton, Labour Party finance spokeswoman, said: “AIB’s determination to appoint an insider to the top position is a reflection of the fact that little has changed at the top in the banks.

“Despite the enormous damage to the economy and cost to the taxpayer they want to return to business as usual as quickly as possible.”

Independent Senator Shane Ross said he was shocked.

“Throughout this crisis the banks have scored victory after victory over the cabinet,” he said.

“The concept of culture change is a fiasco, it’s just not happening.”