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No Bonus Bonfire at AIB or ESB

Posted on: December 12th, 2010

DID you miss the wonderful news in the Budget? You did? Well, the pay of semi-state bosses is to be capped at €250,000.

Welcome to the brave new world of sharing the burden. In this time of poverty, even Ireland’s oligarchs must limit themselves to five grand a week.

And if you believe that, you will believe anything.

Bravo for Brian Cowen and the Budget spinners. The rhetoric was splendid. News of the attack on semi-state salaries made good soundbites. The word went out: our overpaid, State-fed fat cats are finally in the frame.

Good headlines are often followed by depressing small print.

The news was truly epoch- breaking, as long as you did not ask how the dramatic capping would affect the current semi-state incumbents.

In particular, you should not ask how the cutbacks would intrude into the sheltered life of such talented servants of the State as ESB boss Padraig McManus.

Padraig is of special interest because he bagged a package of €752,000 last year. His masters in the Department of Finance judged him worth €15,000 a week.

Wow, is life going to be tough for poor Padraig when his pay is slashed to €5,000 a week?

Well… not exactly.

Staggeringly, the cut does not apply to Padraig. He is an incumbent. Incumbents don’t count.

Last week, after the Budget, Padraig was not coming out to play. While Padraig was squatting on €15,000 a week, middle Ireland was gasping for breath, knocked senseless by negative equity, lower child benefit, higher university registration charges and crippling income taxes. When Padraig was asked by the Irish Independent, whether he would take a voluntary cut, he was making no comment.

Nor were a host of other travellers on the semi-state gravy train. Only one of 13 questioned, Dick Fearn of Irish Rail, volunteered to drop down to €250,000.

The decision was not too difficult for Dick. He was the lowest paid of all those on the list, with remuneration of €256,000. Dick was only offering a sacrifice of €6,000 (2.3 per cent). Big deal.

Padraig’s pay is a wonder to behold. It even exceeds the €500,000 cap imposed on Ireland’s bloated bankers.

His €752,000 package is made up of some pretty fancy items. His salary was €432,000. It was supplemented by €16,260 in fees for being good enough to serve as an ESB director as well.

A curious fee. It is unthinkable that CEO Padraig would not be an ESB director; but he still pockets a separate board fee, exactly the same amount as a non-executive ESB director. What a sweetener — for a job he should be doing automatically. ESB board meetings would be pointless without Padraig.

Is that all? Not quite. Padraig trousered an “annual bonus” of €105,410 and a “long-term incentive” payment of €103,906.

He even grabbed further goodies in the shape of €71,000 in pension contributions and €23,000 in “taxable benefits”. His pay story echoes the good old days of AIB’s Eugene Sheehy and Bank of Ireland’s Brian Goggin

There is no sign that any of these items were hit in the Budget, challenging the spin that semi-state chiefs had been clobbered.

Quite the opposite. Last year, despite the onset of national penury, the ESB board, the Department of Finance — presumably approved by Energy Minister Eamon Ryan — gave Padraig a brand-new three-year contract, carrying him all the way up to 2012.

In keeping with such generosity, the Budget bottled the semi-state pay problem. Far from slashing Padraig’s pay, the Finance Minister threw in the towel, claiming: “There are issues about the contractual position of incumbent postholders. I think the Minister for Finance, as a shareholder, can be used to enforce the objective of the maximum salary within a reasonable timeframe.”

(Decoded. “Padraig and the rest of the quango boyos have us over a barrel . I will try and do something about it, but it will take time.”)

Padraig must be quaking in his boots.

He is not on his own. Others, such as Donal Connell, chief executive of the troubled An Post, had to settle for a banker’s package of a meagre €500,000 last year. He was another who pocketed board fees, this time of €18,000.

The An Post plutocrat could not bring himself to answer the same question from the Irish Independent about a voluntary sacrifice to bring his pay down to €250,000.

Ditto Declan Collier of the Dublin Airport Authority, the man who wasted €600m on Ireland’s most exotic white elephant, Terminal 2. Declan’s talents were recognised last year with a €568,000 package. Part of it was made up of a performance bonus — in a year when his state monopoly haemorrhaged millions!

No doubt the same “contractual” issues will protect his hefty bonus. Very appropriately, bonus-lover Declan doubles as a public-interest director of none other than AIB, this week’s world champion of unjust bonuses.

Unjust bonuses have had a good Budget.

It suddenly emerged that another to escape from the Budget pay cuts was the head of the NTMA, John Corrigan. John is entitled to a €390,000 bonus, bringing his complete package up to €880,000.

Indeed, bonuses could be the big loophole. On Pat Kenny’s annual post-Budget question and answer session with the public on Wednesday, Lenihan promised that “bonuses and other forms of disguised remuneration can be examined”.

(Decoded: “The old school is safe; salaries to newcomers will be capped; bonuses are still the business.”)

No sooner had Lenihan announced that bonuses would be “examined” than another hole was blasted in the pretence that pay in the state sector was being reformed. Within 24 hours, it emerged that State-owned AIB was lashing out €40m in bonuses to 2,400 employees, averaging €17,000 each. Some were receiving six-figure sums.

AIB is bust. The payments will be made just in time for Christmas. AIB boss Derek Hodgkinson is pathetically pleading that this payment was a legacy from the bad old days, imposed on the bank by a court order.

How very convenient. The law can sometimes ride to the rescue of the rascal. In this case, it is hardly the guardian of justice.

It may be technically right that, like Padraig and Donal and Declan, the lucky AIB bonus beneficiaries had watertight contracts. But the original agreements never envisaged that AIB’s privileged employees would demand these bonuses from a bankrupt bank funded by a bankrupt State. Nor would the bankers have been given such largesse if it had been remotely predictable that the €40m would leap straight out of the pockets of the taxpayer into the paws of the bankers.

Ireland’s oligarchs, still squatting in the banks and the semi-states, are not sharing the burden.

AIB is seeking a new chief executive. Padraig McManus might just be enticed away from the ESB next year. Who better to fit into the never-ending bonus culture so beloved of the banks and the semi-states? The €500,000 AIB salary might be a bit beneath him — but he would love the bonus culture.