AIB's nauseating pay rise is a slap in taxpayer's face
BRIAN Lenihan's authority has been called into question many times by the Opposition, but it is perhaps a surprise that an institution that was saved from ruin by the Minister for Finance last year -- and still depends on him for its very existence -- should be the one to challenge Mr Lenihan this week.
Allied Irish Bank's decision to grant employees a 3pc pay increase threatens to destroy the last fraying threads of national solidarity because it is so patently immoral as well as being unwise and greedy.
It should be stopped and it can be stopped and it must be stopped if capitalism is to retain a scintilla of credibility.
Not content with playing a leading role in destroying the country's finances, these out-of-touch executives appear bent on destroying the country itself.
Let's be clear about this. Many people on the left, especially the trades unions, have talked self-serving rubbish since this crisis began, but people are right to be outraged by this pay increase which is being paid for by every single person in this country.
If a private company makes a profit, it is that company's business what it pays. But if a loss-making company is being subsidised to the tune of billions at a time of deflation, it has no right to increase pay.
Every cent squandered on paying out salary increases means the bank requires larger tax injections to build up the financial reserves it requires. Every cent spent on shoring up those reserves means tax hikes for companies battling to stay in business and spending cuts for schools and hospitals.
Employers all over the country have had to swallow hard and sack colleagues who have worked with them for decades. One of the reasons they have to do this is that over at the AIB, management was too feeble to face down property developers who wanted loans and remains too feeble to face down demands from employees for a 3pc pay increase at a time when deflation is running at 6.5pc.
Mr Lenihan must be scratching his head in bewilderment.
He has certainly done little or nothing to deserve this raspberry from the bank, but he is being less than honest when he says there is nothing he can do to prevent pay increases in a private company.
In truth, there are several possible responses ranging from the nuclear option of excluding AIB from the National Asset Management Agency to a simple statement to the effect that he will vote against any management appointments until the pay hike is rescinded.
The minister already holds 25pc of the bank -- which gives him a de facto veto on most decisions, as most shareholders don't vote. He will certainly hold a far larger stake, if not a controlling stake, by the time the bank's next annual general meeting rolls round and the simple knowledge that the minister is prepared to vote down board appointments would bring the bank to heel quickly.
Make no mistake, AIB's decision to grant the pay hike was a calculated risk by bank executives used to getting their way over large and small issues. It is the action of a bank used to holding the country to ransom. But the bank has overplayed its hand. Mr Lenihan can, and should, demand that the board resign and the decision be reversed as it has been in many other companies.
For good measure, and to prevent this nonsense happening again, he should decree that employees in any organisation which is subsidised by the State bear the same deprivations and hardship as their counterparts in the civil service.
The staff in AIB should be getting pay cuts these days in line with cuts in the public sector, not pay hikes. In a time of crisis, nobody who depends on the kindness of the taxpayer in any shape or form should be permitted to award themselves pay increases.
THIS includes quangos, health boards and financial institutions which could not survive for a day without state aid. Mr Lenihan must make it clear that anybody who depends on the Exchequer for their daily bread will not be propped up if they award themselves any sort of increase while deflation rages and the productive private sector is in freefall.
While AIB's decision to award a pay rise is nauseating it should not come as a surprise to anybody who has maintained an interest in that bank's antics over the last quarter century.
AIB has done everything from overcharging customers to helping depositors avoid paying the taxes the bank now needs to survive, but one of its most consistent foibles has always been to punch the State in the stomach shortly after the naive taxpayer has bailed it out.
Twenty-four years ago the taxpayer was forced to pay hundreds of millions of pounds to help AIB when a poorly supervised subsidiary, the Insurance Corporation of Ireland, collapsed and it faced bankruptcy. The bank was duly saved and proceeded to thank the Government of the time by paying a hefty dividend to shareholders within months.
This time around, the European Commission's rules thankfully ban banks from paying dividends while in receipt of state aid but unfortunately the rules do not prevent banks from awarding their employees unjustified pay rises subsidised by the State. It probably never occurred to Brussels that any financial institution could be quite so brazen, avaricious or indifferent to public opinion.
AIB seems doomed to repeat its actions again sometime in the future unless stopped now because that is the nature of the bank. Like the legendary scorpion who asked a frog for help crossing a river but then stung the poor frog halfway across because he was a scorpion and couldn't act any other way, AIB just can't help itself.
- Tom Molloy
Irish Independent
