Dáil Éireann Debate, Wednesday - 28 April 2010
42 Deputy Kieran O’Donnell asked the Minister for Finance the action he has taken on the report of the remuneration committee on the covered financial institutions and individual institutions whose actions have not sufficiently taken into account the objectives of the Credit Institutions (Financial Support) Act 2008. [17123/10]
View answerUnder the Credit Institutions (Financial Support) Scheme 2008, the remuneration packages of directors and executives, including total salary, bonuses, pension payments and any other benefits, were subject to review by the covered institutions remuneration oversight committee, CIROC, arising from the provisions of the Credit Institutions (Financial Support) Act 2008.
Paragraph 47 of the scheme required each covered institution to prepare a plan to structure the remuneration packages of directors and executives. For this purpose, remuneration includes total salary, bonuses, pension payments and any other benefits received from a covered institution and its group entities, or otherwise, received by a director or executive arising from the performance of his or her functions as a director or executive. These plans covered executive bonuses including share options, if any.
CIROC reported on 27 February 2009, recommending reductions in prevailing base salary, bonus and pension levels for chief executives, chairs and ordinary board members that it considered to be, in many cases, markedly excessive.
The Government considered the CIROC recommendations in light of the further downturn in the wider economy, the current position as regards the financial position of the covered institutions and the fact that larger economies such as the United States of America and Germany have set lower caps on the salaries of government-aided financial institutions than those suggested by CIROC.
In that regard, the Government considered the CIROC recommendations regarding bonuses, pensions, long-term incentive plans and board sub-committees are appropriate but that remuneration terms should generally be lower than those recommended by CIROC.
I wrote to the chairpersons of each of the covered institutions on foot of the publication of the CIROC report seeking immediate action from the boards to revise remuneration plans so that revised remuneration packages of everyone in their organisations reflected the concerns of Government in such a way as to respect the salary cap of €500,000 or amounts recommended by CIROC, whichever is the lesser.
CIROC acknowledged it will be appropriate to introduce new bonus arrangements at a future date taking account of any long-term incentive initiatives. However, this should arise only where an institution is no longer part of a Government guarantee scheme.
CIROC also considered pension arrangements for top management should be reviewed with the payment of cash allowances to compensate for the effects of the pensions cap imposed by the Finance Act 2006. CIROC felt it unacceptable that arrangements be put in place which would be inconsistent with the intent of the relevant legislation. CIROC signalled consideration should be given to the appropriate balance between personal employee contributions and the employer contributions in respect of the pensions of senior executives.
Additional information not given on the floor of the House
Pension arrangements for senior executives in each institution should, in CIROC's view, be at least broadly similar to those applicable to the generality of the staff of the institution.
CIROC in its report recommended that the remuneration of other executives should also be adjusted to take account of the revised salaries for chief executives. The reduced salaries for executives should have regard for the need for adequate headroom between them and the chief executive.
It is a matter for the remuneration committees of the covered institutions to ensure these recommendations are being adhered to. However, it is possible that in some cases the remuneration committee is restricted because of contractual arrangements entered into with individual senior executives prior to the publication of the CIROC report. It is not in any bank's interests, as a matter of policy, to pay personnel with lesser responsibilities than the CEO higher amounts than that of the CEO unless they have no other option.
I have no legal power under the scheme to force new agreements in such cases for the duration of the existing contracts.
In general, the experience of the Department is that the recommendations of CIROC are being complied with or being attended to satisfactorily on an ongoing basis or both.
The respective covered institutions operate in a commercial fashion. Subject to contractual considerations, they are expected, in the present economic circumstances, to take account of the necessary downward adjustment in remuneration levels affecting all sectors of the economy.
The Minister wrote to all covered institutions requesting revised remuneration plans. Has any institution not sent a revised plan?
The €1 million bonus payment to Irish Nationwide's former chief executive officer, Mr. Michael Fingleton, was not covered by the CIROC's recommendations. Considering, however, that the Minister has put €100 million of taxpayers' money into the building society through special investment shares, has he written to its board requesting it pursues the retrieval of this bonus through legal channels?
All of the submissions were received from the covered institutions earlier this year.
What about the revised remuneration plans?
I understand revised plans have been approved.
Has the Minister seen these?
Please allow the Minister to reply without interruption.
Revised plans were received from Bank of Ireland, AIB, Anglo Irish Bank, Irish Nationwide and EBS and were approved. I do not have the information relating to Irish Life to hand.
Before I became the holder of the shares referred to, I inquired of Mr. Fingleton's position. The legal advice given to the Irish Nationwide Building Society indicated that the 2008 €1 million bonus payment to the former chief executive officer was a contractual one and its payment did not contravene the bank guarantee scheme.
CIROC recommended no bonuses would be paid in 2008 which means this payment is not in compliance with the scheme. Has the Minister written to the board of Irish Nationwide requesting a refund of the bonus through legal means? The taxpayer is entitled to know this.
Yes, I have. The board received legal advice that it was not permitted to request a refund. That was obtained prior to my assumption of a shareholding in the building society via the special share device.
If the Deputy, however, wishes me to reopen the matter with the board, I am prepared to do so.
Yes, the Minister should do so as a matter of urgency.
