What are public interest directors doing if banks have free reign?
Recent decisions by bailed-out banks to hike mortgage interest rates, slap charges on deposit accounts, and an unwillingness to lend to businesses has sparked anger.
Some have pointed to our public interest directors on the bank boards — well-respected figures appointed by the State to serve the interests of the State — as a way of easing pressure on consumers.
But who are these ministerially appointed ‘gatekeepers’, and what do they do? More importantly, what should or can they do to ease the burden on borrowers and customers?
When the banks were guaranteed in late 2008, it was agreed with then finance minister Brian Lenihan to appoint two non-executive directors to promote the public interest on their boards.
Despite public outcry over bonuses paid to departing bank chiefs in recent years and a series of mortgage interest rate hikes hitting families, there is very little (if any) pressure that can be brought to bear on those special appointees.
Those nominated directors are essentially subject to the requirements of company law in the discharge of their duties, as any company director is in a bank.
Finance Minister Michael Noonan says his department held “generic briefing sessions” about their roles in late 2008, when they were being appointed.
But he has previously admitted to the Dáil that “there was no job description or scope of work set out for them”.
For this reason, the public interest directors of the covered banks do not have a formal reporting relationship to the minister or to the Department of Finance.
An updating of legislation in 2010 saw an attempt to address concerns about any perceived conflicts between the directors’ public and company roles. This provided that the overriding duty of directors — not just public interest directors but the whole board — of the covered institutions relates to the public interest.
But has Mr Noonan ever called in the nominated directors for a briefing or reprimand, as demanded by opposition parties and consumer groups?
He told the Dáil in May last year: “No, because it would be inappropriate for me to do so... I work with these covered institutions through the chairpersons of the boards and that is my point of contact.
“If I want to see the board or individual directors, I will meet the board in its totality. I will not pick out individual directors and call them in for some kind of reprimand when I do not have a legal leg on which to stand to make any suggestion to them whatsoever.”
This is the same position today, his department said.
But Government TDs believe some accountability is needed, especially with constituents angered at the billions of euro in state funds pumped into banks.
Ciaran Lynch, the chairman of the Oireachtas Finance Committee, said his members would this week quiz the heads of covered banks about the public interest directors.
“People are disappointed they [banks] have not addressed the mortgage crisis. They need to wake up. Maybe it is time to redefine the terms and duties of the PIDs [public interest directors],” said the Labour TD for Cork South Central.
Party colleague Aodhán Ó Ríordáin believes there’s a fine balance in addressing the actions of banks.
“We don’t want anybody to lose their home but we need banks for business. Sometimes they make decisions to survive,” said the Dublin TD.
Bank of Ireland, AIB and Permanent TSB say public interest directors have the same standing and responsibilities as other directors.
Nominated bank directors, though, seem all too aware that the public is watching them. Permanent TSB’s Ray MacSharry told the Irish Examiner: “I am nominated by them [the department and the minister] as a public interest director but have been elected by the shareholders over the last three years. Like in all public companies, you become an independent non-executive director, bearing in mind that you’ve been nominated in the first instance by the minister in the public interest according to the legislation.”
Age: 60.
Appointed: Jan 2009.
Paid: €132,000 in fees.
Attended 24 board meetings last year.
Mr Spring is a member of AIB’s nomination and& corporate governance committee and of the board’s risk committee.
He is also a non-executive director of Fexco Holdings and Repak. He is chairman of International Development Ireland.
Age: 68.
Appointed: Jan 2010.
Paid: €248,000 in fees.
Attended 22 board meetings last year.
Mr Somers is deputy chairman of the AIB board and chairman of its risk committee.
He is former CEO of the NTMA, a non-executive director of Willis Group Holdings, Hewlett-Packard International Bank, Fexco Holdings, the Institute of Directors and the European Investment Bank.
He is a government nominee on AIB’s board. He acknowledges this is the same as a public interest director.
Age: 67
Appointed: Jan 2009.
Paid: €240,000 in fees.
Attended 51 board and committee meetings last year.
Mr Considine is on BoI’s group audit committee, is a trustee of the bank staff pensions fund, and is on the group’s court risk committee.
He is a former secretary general of the Department of Finance and a former member of the advisory committee of the NTMA.
Mr Considine was formerly a board member of the Central Bank and the Financial Services Authority of Ireland.
Age: 69.
Appointed: Jan 2009.
Paid: €217,000.
Attended 31 board meetings last year.
Mr Walsh is a member of the group’s nomination and governance committee and the group’s remuneration committee.
A former agriculture minister, he chaired the EU Council of Agriculture Ministers. He retired from the Cabinet in 2004.
He is chairman of Cork Racecourse Limited, Horse Sport Ireland, and the Irish Hunger Task Force.
Age: 74.
Appointed: Dec 2008.
Paid: €183,000 in fees.
Attended 27 board meetings last year.
Mr MacSharry is on the group’s remuneration committee and group’s nomination and governance committee.
Former EU commissioner, finance and agriculture minister, he was governor of the European Investment Bank and served as a non-executive director of Jefferson Smurfit Group and Ryanair.
Former chair of London City Airport, Green Property, Eircom.
Age: 58.
Appointed: Dec 2008.
Paid: €207,000 in fees.
Attended 26 board meetings last year.
Former secretary general for trade department, she also served in the Revenue Commissioners and other departments.
She has served on a number of state boards and was a member of the National Economic and Social Council.
* AIB public interest director Declan Collier resigned in June this year after sitting on the board since Jan 2009. He earned €140,000 in director fees.
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