AIB lines up €1m pay package for new boss
New boss at bank will get raft of salary 'extras'
Published 03/10/2011 | 05:00
STATE-owned Allied Irish Banks is set to offer its next chief executive a pay package worth almost €1m, the Irish Independent has learned.
The bank has conceded defeat in its fight to be allowed pay its new boss a basic salary of more than the government-imposed cap of €500,000.
But it has now emerged that AIB will instead be able to offer extras such as share options and a bonus that could boost the chief executive's pay to €1m.
AIB chairman David Hodgkinson is expected to go back to Finance Minister Michael Noonan with the proposed new pay package and this is likely to be approved.
Sources have indicated AIB is leaning toward offering the job to consultant and former international banker David Duffy and hopes to announce him as new chief executive within the coming weeks.
Mr Duffy, who lives in Singapore, has worked for many years for Dutch bank ING and now runs Celtic Advisory International, a consultancy company he established earlier this year.
The other contender for the post is Brendan McDonagh, a former banker with HSBC.
Whoever gets the job will also be offered share options that could be worth many multiples of his salary if he manages to put the bust bank on a steadier footing. The new AIB boss is expected to be offered a contract that would keep him with the bank for up to five years. At the moment, AIB shares are worth just 4c each so if they rise substantially during that time the new bank boss will be able to cash his options in and make a profit.
Mr Noonan is thought to be in favour of granting the share options as it is in the Government's, and the taxpayer's, interest to see the AIB share price rise again.
And while Mr Noonan's department has slapped a ban on bank bonuses, the minister could allow AIB to offer the new boss a long-term bonus that would trigger a pay-off if he met his targets.
Anglo Irish Bank chief executive Mike Aynsley is already earning a pay package of close to €1m. Last year, he was paid a €500,000 salary, €133,000 worth of pension contributions and relocation expenses totalling €324,000, bringing his total pay to €957,000.
Paying such a generous deal to the next AIB chief will be hard to swallow for the bank's more than 20,000 employees.
More than 2,000 of them are expected to lose their jobs once the new boss takes over at the bank and there are fears even more jobs could be cut.
Irish Bank Officials' Association general secretary Larry Broderick said AIB was making a "dangerous presumption" that by offering more than €500,000 this would automatically mean it got a better chief executive.
"Previous senior managers in AIB and other Irish banks received multiples of the €500,000 figure in times past but that did not prevent them pursuing policies which brought their institutions to the verge of collapse," he warned. The bank union has so far failed to get agreement from AIB about redundancy terms for the 2,000 staff who will be let go.
It will be hoping the job cuts will be voluntary with most of them expected to be made at the bank's headquarters, and within those parts of AIB that provided services to its banking operations in Poland and in the US, which have since been sold.
Other parts of the bank may also be sold off as AIB tries to raise more money, and this could see its employees being offered jobs working with whoever buys them. Mr Broderick said AIB staff had been on "tenterhooks" about their future for 18 months.
"AIB staff are becoming increasingly frustrated and demoralised over their treatment at the hands of the bank. This is an appalling way to deal with employees on whom the bank (and indeed the taxpayer) will depend to restore AIB to financial health," he said.
"Our members compare the bank's failure to treat them with due care and respect with its continuing pre-occupation with offering excessive rewards to senior executives -- past, present and now future."