Monday 24 November 2014

Top AIB bosses lobbied Noonan over 'incentives'

Finance Minister is not for turning as bank heavyweights look for bonus-type share deal

FIONNAN SHEAHAN and DONAL O'DONOVAN

Published 16/03/2014 | 02:30

Finance Minister Michael Noonan
Finance Minister Michael Noonan

TOP bosses from AIB lobbied Finance Minister Michael Noonan seeking bonus-type incentives for its senior executives – just two weeks after he publicly rebuked the bank for asking for the lucrative 'top-up' payments, the Sunday Independent has learned.

Rather than straightforward cash bonuses, AIB appears to be looking at being able to offer deferred share options to executives.

The revelation comes just a week after AIB CEO David Duffy claimed in an interview with the Sunday Independent that the bank did not request bonuses for senior staff.

A delegation of the bank's heavyweights – including chairman David Hodgkinson, deputy chairman Michael Somers, former Tanaiste Dick Spring and director Jim O'Hara – met with Mr Noonan in the Department of Finance last month.

Mr Noonan was flanked by Department of Finance secretary general John Moran and other senior officials at the meeting.

The meeting took place in the conference room adjoining Mr Noonan's office in the Department of Finance on Monday, February 10.

Among the dozen items on the agenda were mortgage arrears, business lending, new mortgage lending and the construction sector.

AIB's side gave their views on how the bank was getting through the mortgage arrears and also expressed concerns with the lack of equity in the construction sector.

But incentives for executives was also on the agenda of items raised by AIB.

"It was about the risk to the bank in terms of retention of staff. Their point is they need to be able to paint a brighter future in terms of remuneration. They just wanted to fully explain they weren't all about bonuses," a government source told the Sunday Independent.

But Mr Noonan again informed the bank's directors the Government was not changing its policy on pay.

"There is no point in talking about incentives until they get everything ship shape," a government source said.

The bank is believed to be looking at an incentive share option scheme, known in the industry as 'eat-what-you-kill'.

Executives would receive rewards of share options in the coming years, provided their initiatives generated profits. AIB has denied bringing up pay at the meeting.

"No attempt was made to put any form of pay arrangement back on the table. AIB regards this matter as closed," said a bank spokesperson.

However, Mr Noonan has confirmed banking pay was discussed at the meeting.

"No policy changes are planned in the area of banking remuneration. I personally reinforced this point when my officials and I met the chairman and a number of board members," he said in response to a Parliamentary Question.

Salaries for senior executives at bailed-out AIB have been capped at €500,000 and bonuses have been banned since late 2011, after the State poured €21bn worth of taxpayer money into the lender at the height of the financial crisis.

Only Mr Noonan has the power to remove this rule.

AIB had already raised "staff incentivisation measures" at a meeting with officials from the Department of Finance in January.

The bank raised the pay issue in the context of the "shared objective to return the bank to profitability and ultimately deliver a return for the taxpayer".

At that point, the Department of Finance ruled it out and the minister publicly stated there would be no return to bonuses.

"The answer is 'sorry, guys', much better performance required before we'll even consider bonuses," Mr Noonan said at the end of January when the talks were revealed.

"If any executive wants to leave AIB, I'll shake his hand and wish him fair passage as he leaves. While we're holding 99 per cent of AIB, there's no point in having those discussions with me."

Last week, Mr Duffy rejected criticism of the bank for trying to open discussions with the Department of Finance about loosening restrictions on executive pay.

That was misunderstood; no one is looking for changes right away, he told the Sunday Independent.

Sunday Independent

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