Allied Irish Bank bowed to Government pressure today agreeing not to exceed a €500,000 salary cap for its new chief.
Colm Doherty has been appointed AIB group managing director after signing the €500,000 a year contract – a pay cut of €133,000.
AIB said the contract reflected his personal commitment to the bank and its future.
“His contractual remuneration package will therefore be considerably lower than applied in the past to the chief executive officer role, or indeed to Mr Doherty’s previous role in AIB, reflecting his personal commitment to the Bank and its future,” AIB said in a statement.
The bank, bailed out with a €3.5bn state guarantee, was on collision course with Finance Minister Brian Lenihan yesterday after asking for the wage limit to be lifted.
Government has also suggested AIB’s next chief should be an external appointment.
Mr Lenihan warned AIB bosses, however, the salary cap would not be broken.
As AIB backed down over wages yet did not nominate an outsider, Fine Gael’s Leo Varadkar said the appointment was another victory for fat cats.
“This isn’t regime change, it’s business as usual for the banks,” Mr Varadkar said.
“Brian Lenihan is working for the banks, not for us. He’s presenting himself as a strong man by defending the salary cap.
“But he’s giving in on the most important issue: the fact that an insider is getting the top job.”
Outgoing AIB chief executive Eugene Sheehy – paid €2.1m in 2007 and €1.15m in 2008 – is to retire on November 30 with the top banking position changed to group managing director.
Mr Sheehy took a 10% pay cut in October last year followed by a 25% cut in January this year.
Mr Doherty’s promotion was one of a series of changes at AIB’s board and executive level.
Dan O’Connor will move from non-executive chairman to executive chairman on a temporary basis to oversee AIB’s work on raising capital and implementing the Nama bad-bank plan.
Dr Michael Somers, who retired as chief executive of the National Treasury Management Agency, will be appointed to the AIB Board as deputy chairman.
He will also chair the AIB risk committee.
Mr Lenihan wished Dr Somers well in his new position and praised his work in the public service as outstanding.
“The minister wishes to express his profound appreciation and that of the Government for the enormous contribution Dr Somers has made to the public service over almost five decades,” his Department said in a statement.
Mr Lenihan’s office also said the minister welcomed Mr Doherty’s salary being kept to the €500,000 limit.
“The primary objective of the Government is to have a working banking system that will provide credit to businesses and consumers throughout the economy,” Mr Lenihan said.
“To meet this objective we need effective management structures in each of our banks and I therefore welcome the Board and Executive appointments to Allied Irish Bank.
“Allied Irish Bank is one of our largest banks and it is in the best interests of employment in this economy that it has an effective management structure.”