Culture of entitlement must be replaced

PEANUTS, monkeys. Pay peanuts, you will get somebody with a monkey’s brain. If you want the job done properly, you gotta fork out the serious bucks. So it goes for those with big brains.

One of the more odious aspects of the decade long ruinous reign of Fianna Fáil and the PDs is the sense of entitlement which was engendered in some sections of society. In areas like the semi-state sector, salaries for the head honchos went through the roof.

Those in receipt quickly bought into the “because I’m worth it” ethic. They were not alone. Huge swathes of the upper reaches of the socio-economic ladder benefited disproportionately to the rest of society in the spend and grab fest that passed for governance. Then, when it all came crashing down and the smoke began to clear, the sense of entitlement stuck around. They still believe they’re worth it.

Since the recession kicked in, the Government has given in to public pressure to apply salary caps in areas like banking and the semi states. This has not gone down well in some quarters.

Yesterday, in a newspaper interview, businessman Lawrence Crowley threw in his tuppence worth. He thinks the €500,000 cap for bank chief executives and €250,000 for semi-state chiefs is “nonsense”. Crowley served time as chairman of Bank of Ireland, and he is a director of semi-state, Bord Gáis.

Referring to the impoverished semi-state chiefs, Crowley said it may be possible to retain existing bosses at that level, “but who is going to succeed them?” We’ll answer that one in a minute.

Unlike many of his former colleagues in banking, Crowley retains credibility as he had departed when the madness took hold after 2005. Another figure from Bank of Ireland, Mike Soden, is in a similar boat. He resigned as chief executive in 2004, and has offered himself as an oracle on banking since the crisis took hold. On radio last month he described moves to cap salaries as something which would lead to “egalitarian mediocrity.”

In other words, the big brains need to be rewarded with very big bucks.

One of those who enjoys big bucks as a semi-state boss is Bord Gáis chief executive John Mullins. He has taken salary cuts since he was appointed to the post in 2007, just as the economy went into a nosedive. In recent months he has said he will move to the private sector when his contract is up next year.

“The company is going to have to recruit a new chief executive in the next 12 months and will need a package to offer,” he said. “With the salary cap it will be difficult to get somebody to run a company worth €4.5 billion.”

Well, let’s take a look at that. Mullins is regarded as a high effective operator. His own CV includes stints with the ESB, and Irish industrial companies Greenstar and National Toll Roads. His work since assuming the top job in Bord Gáis has been widely commended. But is he really suggesting that somebody with a similar background to his would be loathe to take up a roll as top man in a semi-state, which dominates the competition, for a package worth well over €300,000?

Bord Gáis provides an excellent example of how crazy things got for those at the top through the years of misrule. Court documents filed last year showed that in 2000 the chief executive of the company, Gerry Smyth, was paid €184,000. By the time he left seven years later he was on €432,000. The High Court case in question involved Smyth suing the company for extra pension benefits, to which he said he was entitled, amounting to around €2m. The case was settled.

Mullins took over in 2007 at a salary of €294,000, but this didn’t include extras, including bonus, which could amount to another €150,000. Over the following two years, as the economy went into freefall, Mullins did take cuts to his basic salary, but continued to be paid bonuses. By 2009, his basic pay was down to €270,000. But, according to a report on semi-states compiled by economist Colm McCarthy, Mullins’ extras that year increased from €73,000 to €124,000, leaving him with an effective pay rise of €33,000.

Mullins did nothing dishonest. He works hard. His remuneration is decided on by members of the board, who quite obviously believe he is worth it. But does it all stack up?

Bord Gáis is a state-owned utility company operating in a country in receivership. Over 115,000 of its customers are having trouble paying the gas bill, three times the number in such difficulty a year ago. And the citizens are being told by its chief executive and a board member that a package in excess of €300,000 isn’t enough to get the right talent on board?

One of the serious earners in the semi-state sector is the ESB’s Padraig McManus. In 2009, despite a cut in his basic, his remuneration went from €654,000 to €752,000, an increase of €98,000 as the country was going down the tubes. Did the state have to woo McManus from some foreign multinational to lend his expertise to the ESB? No, he spent all his career at the company. He has offered the opinion that it will be difficult to replace him with the salary cap when he retires later this year. Latest speculation suggests that his replacement will come from within, as he did himself. And look at the fine job he did. There is no reason to believe that his successor won’t be as capable, even if the overall package will be south of €400,000.

The most recent spat in the semi-state sector involved the chief executive of Horse Racing Ireland being forced by a minister to return a bonus he received. Brian Kavanagh ascended to his current position through the domestic industry. He was paid in July for bonuses accruing since 2008 and 2009, to the value of €21,089 and €16,461. These formed part of packages in those years worth respectively around €255,000 and €247,000. By comparison, Enda Kenny is paid around €200,000, Angela Merkel, €228,000. The most powerful woman in the world, who currently stands at the helm of the global economy, earns less than the man charged with overseeing Ireland’s horse racing industry.

As with the others, Kavanagh’s position had the backing of his board. The “because I’m worth it” notion is not confined to individuals enjoying the gravy. All of their fellows who operate on the same rung of the socio-economic ladder agree. They all believe they’re worth it. These days, there is frequent commentary on the level of the dole. It is customary in business circles to decry what is described as the second highest minimum wage in Europe. Competitiveness, which involved exerting downward pressure on the wages of ordinary workers, is all the rage.

Yet precious little has changed at the top. The sense of entitlement, engendered by a system of voodoo economics, persists. Peanuts and monkeys, monkeys and peanuts. Like many things, if you say it often enough you end up believing your own horse manure.