Bankers’ pay – Outrageous refusal to reform pay

WHAT planet are bankers on? Having brought the country to its knees, they are still engaging in a rotten culture where executives think they can pay themselves like kings.

In its review of pay packages and practices in a number of Irish banks, the Central Bank found that only one bank was taking an obvious lead on reforming pay policies. Not alone is this outrageous, it is an indictment of the banks, especially of the passive role played by directors in plush boardrooms, and a damning reflection of the failure of Government to bring banks into line. It is time to crack the whip and ensure that not a red cent of the €35 billion now pouring into bank coffers from the EU/IMF bailout package goes to line the pockets of greedy bankers.

So inadequate is the ongoing governance and oversight of remuneration practices in the banks that the Central Bank, the institution responsible for overseeing Ireland’s financial affairs, is urging non-executives to step up their scrutiny of company pay arrangements. If that means they should become whistleblowers and expose executives who are being overpaid they must be afforded far greater protection than courageous whistleblowers have received heretofore from vengeful organisations or passive Government ministers.

Sadly, recent history shows those brave people were frozen out while the malpractices on which a spotlight had been shone continued as if there was no tomorrow. If we expect good people to speak out, it is vital they be protected rather than harassed and hounded.

Despite finding that the banks have started to reform their remuneration practices and policies, the rate of progress is so slow as to be “discouraging”, according to the Central Bank. If the bank is not employing the right financial incentives, it is not managing its risks — “it’s as simple as that”, the report concludes.

It found little evidence to suggest the banks had “self-consciously” made a link between what it terms as their “risk appetite and their incentive structures”. In other words, the culture of greed that wrecked the Irish economy continues to prevail.

At least it is a welcome sign of the times that the Central Bank is finally singing from the same hymn sheet as the plain people of Ireland on the vexed question of bankers’ pay. Effectively presiding over an obscene culture of excessive bonuses and astronomical levels of pay, perks and golden handshakes in the recent past, the Central Bank was guilty of giving its blessing to such excesses by turning a blind eye with so-called ‘light-touch regulation’.

The days of golden parachutes when executives had their snouts deep in the trough are long since gone. It is time all the banks, and not just one, woke up to that reality. Otherwise, what remains of our banks, indeed the financial security of the state, and the wellbeing of aggrieved taxpayers, will be exposed again to reckless risk-taking involving rogue bankers driven by naked greed.

The Central Bank should put the boot in!