Bank bosses: bottom of the pile when it comes to pay rises

Irish bankers, once among the top-paid chief executives of public companies, have been languishing in recent years at the bottom of the pile.

Their luck isn’t set to change any time soon.

After guaranteeing the banking sector in 2008, the government of the day moved within months to cap the pay of most chief executives at €500,000 and scrapped bonuses entirely.

Bank of Ireland boss Richie Boucher has been able to get around this, with his basic salary set at €690,000 a year in line with recommendations of a government-commissioned report in early 2009 and as the group is alone among bailed-out banks in managing to escape State control during the crisis.

Adding in pension contributions, his total remuneration came to €961,000 last year. That was up 14 per cent on 2014 as that year he elected to waive €118,000 of his salary, but last year he only waived €17,000. The company highlights in its annual report that remuneration restrictions “may adversely impact” the group’s ability to attract and retain “high calibre” people.

Technically, the Government ban on bonuses can continue as long as lenders have bonds and deposits guaranteed by the State. As of the end of April, that figure was still €2.5 billion across the three surviving banks, albeit down 99 per cent from the peak in 2008.

An attempt by AIB's board to introduce a long-term incentive plan for key executives in early 2014 was met with short shrift by Minster for Finance Michael Noonan. "The answer is, 'Sorry guys, much better performance required before we'll even consider [bonuses]','' he said at the time.

Former AIB chief executive David Duffy told The Irish Times in an interview earlier this year that potential investors in an initial public offering (IPO) of bank shares would want to see top management locked into an incentive plan, to show that they have "skin in the game".

Analysts largely don’t see this happening as the Government prepares to sell a 25 per cent stake in the bank as early as the first half of next year.

"My expectation would have been that had the IPO been this year or early next year that, much like with Permanent TSB's flotation in 2015, there would be no near-term possibility performance incentives," said Stephen Lyons, an analyst with stockbrokerage Davy.

Executives at the bank have also publicly stated that they have no intention of renegotiating the bonus ban before an IPO.

Another analyst, who declined to be identified, said there had been an expectation last year that Bank of Ireland would seek a nod from the State in 2016 to lead the sector back into bonus plans, the current political landscape makes this much more difficult.

“We’ve a minority Government that will struggle to even get its first budget over the line,” he said, adding that a return of banker bonuses “is well and truly on the long finger”.

In addition, Bank of Ireland warned late last month that its plans to reinstate dividend payments next year for the first time since 2008 could be hit by the impact of Brexit on its business.

Many investors would like to see a return on their support for the bank through the downturn before executives start to reap bonus benefits.