Existing top brass likely to keep big pay packets
THE charmed life led by semi-state chief executives and staff is set to continue, at least in the short term, despite yesterday's Budget measures.
Workers at the semi-states avoided the controversial public-sector pension levy in February 2009 and the executives at these firms have avoided any compulsory pay cuts to date, despite some of them earning pay (and benefits) amounting to three times the Taoiseach's annual salary.
While the Finance Minister is now hoping to impose an absolute ceiling of €250,000 on public-sector salaries at the ESB, Bord Gais, the Dublin Airport Authority, and the various port companies, there is little legally the minister can do to interfere with existing contracts.
He cannot alter contracts retrospectively, but what he can do is get the chairmen of different semi-state companies to raise the issue of pay at board level.
If he manages to make the €250,000 cap stick, it will be more painful for some CEOs than others. For example the two highest-paid chief executives working at state companies and organisations are Padraig McManus of the ESB (€750,000 a year) and John Corrigan of the NTMA (€490,000 a year). Both men would have to make huge adjustments, whereas the chief executive of Bord Gais John Mullins would face less belt tightening.
But contracts are contracts, it seems. Mr McManus has a contract that does not expire until July 2012. This won't be the only contract that the minister will struggle to alter -- three-quarters of semi-state bosses have similar fixed-term contracts.
Of course, the minister, as shareholder can set guidelines, but these guidelines cannot override an existing contract agreed with a chief executive, which is legally binding and normally has no review clause.
While the minister has a range of powers in relation to semi-states, in many cases he does not appoint the chief executive. Almost 50pc of state-owned CEOs are appointed by the board alone.
The minister is able to call on semi-state chief executives to take a voluntary pay cut. Mr McManus took a 10pc pay cut in April 2009, but this was just on the salary component. The ESB, at that stage, was paying over €200,000 in bonuses and long-term incentive payments.
The minister's statement yesterday talks purely about "salary" and it is not clear whether semi-state chief executives could only earn a salary of €250,000, but could supplement this with other bonuses and benefits.
There is also the question of other more junior semi-state executives. The rough rule of thumb in big companies is the chief financial officer (or chief operation officer) can expect to pick up a salary of about 65pc to 70pc of the chief executive's salary and total package.
That would leave several individuals in the semi-state arena currently earning above the €250,000 ceiling proposed. These executives often have a fixed-term contract too, so it may be difficult to adjust their pay downward also.
As for the rank and file workers in the semi-states, there is nothing specific relating to their salaries in the Budget announcement.