Friday 24 March 2017

Newsletter: Mike Soden, Central Bank Commission Member

Following his appointment to the Central Bank Commission this week, the rehabilitation of the former BoI chief is complete

Six-and-a-half years after he was ignominiously forced to quit as chief executive of Bank of Ireland Michael Soden's rehabilitation is complete. He was appointed to the Central Bank Commission this week and has recently published his first book. Big Mike is back with a bang.

The American writer F Scott Fitzgerald once famously observed that there were no second acts in American lives. Michael Soden is living proof that we do things differently in this country.

Few Irish businesspeople have risen so high -- and fallen so far -- as Soden. One day he was chief executive of Bank of Ireland, at the time probably the most prestigious job in the whole of Irish business, the next day he was out on his ear after being forced to resign following the revelation that he had accessed adult websites on his Bank of Ireland PC. By doing so he had contravened Bank of Ireland's internet usage policy for its staff.

Resignation

However, even at the time of his resignation there many who felt that the punishment was wildly disproportionate to the "crime". A stiff talking to from the chairman and a hefty donation to a suitable charity should have been a more-than-sufficient penalty for what was, at worst, a minor transgression.

Unfortunately, Soden fell victim to internal Bank of Ireland politics. The announcement in June 2001 that he had been selected to succeed Maurice Keane as chief executive came as a total surprise to most Bank of Ireland watchers, who had been expecting the appointment of an internal candidate.

Upon succeeding Keane in March 2002 Soden did nothing to help his cause by immediately targeting Bank of Ireland's 2,300-strong fleet of company cars. "We are not a car rental company," he pithily commented at the time.

The company car controversy was merely the first occasion on which he challenged the entrenched order of doing things at Bank of Ireland. Soden continued as he had started. He first proposed a merger of AIB and Bank of Ireland, and then unsuccessfully attempted to take over UK mortgage bank Abbey National.

Soden remains unapologetic about his in-your-face management style at Bank of Ireland. "I was brought in to change the culture at Bank of Ireland.

"The culture was one of entitlement. That you were entitled to certain rewards for simply turning up," he told journalist Eamon Dunphy in a 2009 radio interview. However, what ultimately did for Soden was his decision to outsource Bank of Ireland's IT department, a decision that caused great acrimony among workers.

Soden didn't help his cause by publicly pontificating on the need for Bank of Ireland staff to observe the highest possible standards when surfing the web on company time.

This meant that when details of his own web browsing were leaked to the media shortly afterwards, Soden was placed in an impossible position and was forced to resign as chief executive in May 2004.

Nothing became Soden's time at Bank of Ireland more than the manner of his leaving it. Instead of bemoaning the fact that he had been railroaded, he took immediate responsibility for his mistake and quickly resigned rather than further damage the bank's reputation. The contrast between Soden's rapid departure and the reluctance to quit of those bank bosses who have presided over massive loan losses and destruction of shareholder value was striking.

Most Irish bank bosses spend their entire working lives with the same institution. These banking 'lifers' typically joined Bank A, B or C as bank officials straight out of school in their late teens.

University

After a few years in branch banking they were talent spotted and sent to university at their employer's expense. After university they were fast-tracked through the organisation to become chief executive in their early fifties.

While many of these banking lifers were enormously talented executives -- former Bank of Ireland chief executive and current chairman Pat Molloy immediately springs to mind -- this system of growing your own talent was not without its disadvantages.

Having spent all of their lives with the one organisation, for most of which they were being groomed for the very top, these banking lifers wouldn't be human if they didn't develop a certain sense of entitlement.

Even worse, confined to the goldfish-bowl of internal organisational politics for 30 years or more, they almost inevitably succumb to internal group-think, looking at the world from the bank out rather than vice versa.

As the Irish banking crisis worsened from 2007 onwards all of the incumbent bank bosses displayed these negative qualities in abundance. As the consequences of Ireland's credit-fuelled property bubble became blindingly apparent to non-bankers, these gentlemen, and they were all men, ignored the implications for the solvency of their institutions and the broader economy.

By comparison, Soden's career before he joined Bank of Ireland couldn't have been more different than those of the bank's lifers.

A native of Dublin, he was educated at Blackrock College and then went on to study for a commerce degree at UCD. After graduating in 1968, Soden went to work as a credit analyst in Canada with oil company Shell. He returned to Ireland five years later and, after spending two years with the state-owned development bank ICC, he was recruited by Citibank.

This launched him on his career as an international banker. He spent a decade in various roles, both in Ireland and overseas, with Citi before joining investment bank Security Pacific Hoare Govett in 1985, first as deputy managing director, before becoming chief executive in 1989.

In 1990, following a health scare, he retired from banking for four years before being head-hunted by National Australia Bank (NAB), which then owned National Irish Bank, in 1994. He spent seven years at NAB, eventually rising to become the bank's effective second-in-command as the head of its core retail and global business arm.

With its inbred corporate culture, this CV made Soden stand out as a very exotic creature when he joined Bank of Ireland nine years ago.

Following his enforced departure from Bank of Ireland, Soden initially adopted a relatively low profile. However, contrary to the expectations of many, he didn't go back on the international banking merry-go-round, opting to remain in Ireland instead.

In November 2008, just two months after the Government was forced to unconditionally guarantee the deposits and bonds of the Irish-owned banks, Soden broke cover and called for the Irish bank bosses to do the "honourable thing" and resign. Unfortunately, his former colleagues ignored his advice, instead clinging like limpets to their well-paid jobs.

Since then Soden has done little to spare the blushes of the banks and their bosses. Last month his book, 'Open Dissent', a no-holds barred look at Ireland's banking crisis, was published.

Over the past two years Soden has been gradually transformed from grumpy old banker to incipient national treasure. His experience and expertise have allowed him to articulate the anger and frustration felt by the general public at the banking crisis.

This week his new status was officially recognised when he was appointed to the new Central Bank Commission, which replaces the previous Central Bank board. Michael Soden's remarkable comeback is now complete. Given all that has happened since, maybe those who expedited his demise six-and-a-half year were unwittingly doing him a favour.

Irish Independent

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