The minister says he is powerless, but he has options to put manners on greedy bankers.
Two weeks ago, Finance Minister Michael Noonan came in for significant criticism for saying he was powerless to tackle the excessive pay and pension levels at the top of Ireland's bailed-out banks.
"There are some historic salaries above the ceilings, but they are a matter of contract and I wasn't legally empowered to reduce them and they are very few at this stage," he was quoted in our front-page story, which was picked up internationally.
Both at home and abroad, Noonan was blasted for his insipidness, while 10 days ago, in front of the Oireachtas Finance Committee, he admitted that a request back in April from him to the board of the IBRC for them to take a 15 per cent pay reduction was roundly rejected.
Rejected! This is despite over €34bn of taxpayers' money being sunk into it, and that as Finance Minister he is not only the major shareholder but the only shareholder in the bank, and the fact that he has two so-called public interest directors on the board.
Such revelations have fuelled public anger ahead of his second Budget, in which he needs to cut spending and raise taxes by €3.5bn, and against the backdrop of record debt levels, record low economic activity, and record high unemployment.
Day after day, since our 'Powerless' story, there has been almost daily revelations about excessive pay and pension arrangements at the top of the bailed-out banks, which showed in total there are 76 individuals being paid in excess of €300,000 across the bailed-out banks, and 1,700 being paid in excess of €100,000.
But how powerless is Noonan really?
It is simply not credible that the minister – who is the sole owner of two banks who are only in existence because of taxpayers' money – would have no options in determining anything he wanted at such institutions.
"Well, nothing is impossible," barrister and legal commentator Paul Anthony McDermott said this weekend. "It is largely a matter of political will – if he wanted to do something, he probably could."
In truth, there are several legally acceptable options open to Noonan if he is genuine in his expressions of outrage about the levels of pay at the top of the State-owned institutions.
It must be remembered, in fairness to him, that the best opportunity to affect the pay and pensions levels of bankers was at the time of money being handed over back in 2009, 2010 and 2011.
There appears to be no evidence, either in legislation or in political direction, that such controls were ever put in place by Noonan's predecessor Brian Lenihan.
"This was without question a glorious missed opportunity, as these people were representing bankrupted institutions. They only survived by way of taxpayers' funds. That was the time, and it was missed," one senior member of the judiciary said.
OPTION 1 – Tear up bankers' contracts
The legal consensus is that retrospective claw-backs of monies already awarded to current and former bankers is fraught with difficulty and unlikely to yield any significant savings.
"One has to ask is this being done as a means of punishment or in a real desire to improve the financial lot of the country," McDermott said.
However, there is very little stopping the minister, by way of legal impediment, in reducing current or future salaries and therefore the pensions of current senior bankers, particularly in IBRC and AIB.
It could be argued that as virtual public servants, whose pay is under statute and liable to change under ministerial direction, that he can impact on their rates of pay.
Also, Noonan has said he cannot alter people's contracts.
But speaking privately, two senior judges have said that, given that apart from taxpayers' money these are bankrupted institutions, the value of any contract held with them is questionable and so open to be amended downward.
"Most contracts can be changed. The only other factor then is whether bankers walk out of the place because of the reduction in pay, but that is not a legal question," said McDermott.
OPTION 2 – Force the bankers to challenge the reductions
Given that, according to the senior judges, there would be legitimate grounds to claw some pay and pensions back, it has been argued that the Government should put it up to the bankers to take a legal challenge to prevent that.
There would, however, need to be a judgement call made about whether the fight would be worth it based on how much could ultimately be gained back.
OPTION 3 – Introduce emergency legislation
A constitutional change, it seems, would not be necessary to reduce bankers' pay. In the case of the judges, whose pay was reduced by referendum last year, there is specific mention in the Constitution over their independence and pay, and thus the reduction required the amendment to bring them into line with other public servants.
Fianna Fail's Michael McGrath suggested that the Government could use existing legislation, the Financial Emergency Measures in the Public Interest (Fempi) Act 2009, which has already been used to reduce public servants' pay and pensions, to reduce bankers' enormous awards. The two judges said this weekend that such a move would be legally possible.
"There is a realistic chance to introduce a Fempi-like legislation for bankers, as they are simply holding contracts with insolvent or bankrupt institutions, save for taxpayers' money," said one of them.
OPTION 4 – Sack the boards of the bank unless they do what he wanted
In truth, Noonan has many strong cards to play if only he was willing to play them. While he may not be able to directly force a bank board to take a pay cut, he has the power as the sole shareholder to sack the board, or at least substantially alter the make-up of the board.
"It is not impossible. There may be some limitations as to what you can do with executive directors, but certainly non-executive directors could be moved out if he wanted to," said one judge.
Noonan could even use this "credible threat" of removing them to try to enforce change.
OPTION 5 – Get better legal advice
It seems that the minister has been given advice that has not considered taking the fight to the bankers.
He has been primarily relying on the advice of the Attorney General, Maire Whelan, according to a government spokesman.
It is worth the chance of failure to see what a more aggressive legal strategy would bring up.
The truth of the matter is that if Noonan and the Government is serious about reducing the pay and pensions paid to senior bankers, they actually can do something about it if they want to. The only question is, do they?