Banker's scheme legendary in industry
Published 23/12/2010 | 10:15
It has been a subject of endless fascination for years in banking circles. It has made some bankers angry, others simply jealous, but Michael Fingleton's €27.6m pension scheme has never stopped arousing curiosity.
In some respects, this is unjustified. Fingleton was effectively chief executive of Irish Nationwide since the early 1970s and such a long period of service was always likely to guarantee him a very large pension pot.
It is also worth pointing out there was nothing illegal about any of the arrangements that were put in place for Fingleton. In fact, there were no regulatory rules or government restrictions on a pension pot of this scale. Also the board and its subcommittees signed off on all the arrangements granted to him over many years.
When Irish Nationwide was profitable before the crash, only a small minority complained about the level of Fingleton's pay and most were never prepared to support any motions of no confidence put down on him by his small band of enemies.
Despite this, there is no doubt that Fingleton managed to extract very generous concessions from the society over several years. These were generous in comparison to many others at the top of the Irish banking industry.
A forensic analysis of Fingleton's pay and pension entitlements points out a lot of negatives for Irish Nationwide from the arrangements and a lot of positives from Fingleton's own perspective.
In a section of a report done on these arrangements by a sub-committee of the main Irish Nationwide board, the "salient features'' of Fingleton's pension arrangements were picked out.
The main features the that authors spent time on were the "enhancements'' to Fingleton's pension given in 1997 and 2005.
One allowed bonus payments to be included when calculating the value of the pension and secondly the entitlement of his wife was also significantly improved upon compared to industry norms.
The entitlements reflected Fingleton's position as "a CEO of long service, his significant salary level, and in particular were considerably enhanced by modifications authorised by the trustee''.
The authors of the report made it clear that all arrangements were fully tax-compliant. While there is little doubt that including bonus payments and upping the entitlement of his spouse increased the burden of the scheme on the society, Fingleton ironically helped the society in other ways.
Firstly he administered the pension himself, saving the society about €2m, and the decision by the trustees to allow Fingleton take away the pension pot in 2007 actually helped the society avoid having to fund any liabilities later on when the markets would turn.
The unusual aspect of Fingleton's pension scheme is the heavy emphasis in it on bank shares, with HBOS and Northern Rock among the investments. These performed reasonably well before the sub-prime crisis, but literally collapsed after 2008.
What is not known -- although there has been plenty of speculation -- is what happened to the make-up of Fingleton's pension after it was drawn down from Irish Nationwide. If the composition was not changed, Fingleton is sitting on huge and painful losses. But if he wisely converted some of it into cash, the value of the scheme would be relatively intact.