It's time BoI directors put their money where their mouths are
Published 01/05/2016 | 02:30
Congratulations to Bank of Ireland governor Archie Kane. Congratulations to Bank of Ireland boss Richie Boucher. Congratulations to Bank of Ireland director Kent Atkinson. Congratulations to Bank of Ireland director Fiona Muldoon. Congratulations to Bank of Ireland directors...
Congratulations were heaped on Bank of Ireland directors at the AGM last Thursday. Mostly by themselves. They boasted of the strong capital base, increased profits, the repayments to the State and the prospects of a dividend. It has been a great year for Bank of Ireland. The future is even brighter. Or so they said on Thursday when they gave themselves a great welcome at the annual meeting of misery in the O'Reilly Hall in University College, Dublin.
Such self praise is not shared by the cold-blooded stock market. The cold judge of company performance has given Bank of Ireland the thumbs down over the last 12 months. The share price stood at 37 cents a year ago. Last Thursday it had tanked by 30pc to just 26 cents. Not to worry. Such a sluggish performance in the share price did not put a brake on the giddy mood of the directors.
And God bless them. Why should such a dismal story have fazed the bankers squatting up on the podium last week? These guys are financial geniuses. Indeed, so brilliant are they that they received the unswerving support of the biggest shareholders, the Irish Government. The State, with its 14pc stake, voted full confidence in the directors. Even though the Irish State was the big loser in Bank of Ireland shares in the last year, the minister for finance told the directors to rock on.
Ponder for a moment the real reason why these directors deserve universal plaudits. It is hardly because the share price has been tanking. No, it is because most of them have, with masterly insight, personally avoided Bank of Ireland stock like the plague. They dodged the bullet. The register reveals that the bank's bosses have shirked the shares. When it comes to stock picking, these guys are on the button.
Take the governor, the super-rich Archie Kane, the man who eulogised the bank's mediocre performance on his watch last Thursday. Governor Kane holds 11,074 shares. Their value is just €2,879. Bully for Archie.
Archie, the canny Scot, is sharp as a razor. No point in Archie spending too high a percentage of his €500,000 annual remuneration on Bank of Ireland stock. In a few weeks Archie will have been in the driving seat for four years. His total remuneration will amount to just short of €2m. He was dead right not to show too much confidence in his bank. Three grand out of €2m is quite enough to waste on a floundering enterprise. Good thinking, governor.
Archie's pal, the UK- based Kent Atkinson, is chairman of the bank's group audit committee. Kent has only earned a pittance compared to Archie, just €102,000 a year from Bank of Ireland fees since his appointment in 2012. That's around €400,000 in total. But he is even shrewder than Archie. Kent holds just 2,000 shares in Bank of Ireland. Their value: €520 - enough to buy him a pair of expensive shoes in the City of London. Like Archie, Kent is hardly a pauper. He has held board positions on such lucrative spots as Coca Cola, Cookson, Standard Life and Telent (formerly Marconi). So it is a fair bet that Kent might just be able to afford more than €520 worth of shares. Kent has taken the informed decision of an experienced banker and bought a token, positively insulting, holding. He is not going to contaminate his personal portfolio with a dud.
Ditto many, but not all, of the other directors. Chief executive Richie Boucher holds more shares but he has benefited from juicy options in the past, allowing him to take up shares at attractive prices. Boucher is favoured by the bank in other ways. He earned €961,000 last year.
It is one of the big mysteries of Ireland's banking swamp how Richie Boucher survived the banking crash and remains at the top of the Bank of Ireland, commanding such a massive salary. It is an even bigger mystery why Richie's survival is supported by the Irish Government. Last Thursday Michael Noonan and the department of finance mandarins again voted Richie through for another year at the helm. They cast the State's 14pc holding four square behind Boucher, Kane and Kent Atkinson. They voted not only to give them all another year on vast salaries, but to endorse their stewardship of the bank.
Noonan's endorsement of Boucher is even more bizarre in light of the Bank of Ireland top brass's defiance of the Government's wishes in the last year. Not only is Boucher's €961,000 package in breach of the Government's own salary cap, but he and the board have openly defied Noonan's wishes. The minister has consistently called in the banks to pressurise them into reducing standard variable rates to borrowers. He has told them that they are causing huge concern to the Government and hardship to the citizens. Some banks, most notably Allied Irish Bank and Permanent TSB, have bowed to pressure and reduced their variable rates, albeit by far too little. Not Bank of Ireland. In the world of Kane, Kent and Boucher the minister is an interfering politician. It is their job to deliver profit, even when it means making life miserable for Noonan's citizens. They have eye-balled Noonan and refused point blank to reduce variable rates. Noonan has blinked.
Not only has the minister blinked, but his response has been craven. Last week, instead of voting against the board that has enriched itself while citizens and small shareholders suffer, he endorsed their greed. Worse still, he gave them the green light to retain variable rate mortgage rates at punitive levels. Noonan cast your holding and mine in favour of re-electing all the directors and approving their overblown salaries. By implication, he applauded their open contempt for the prospects for shares in Bank of Ireland.
When governor Kane was asked at the AGM why he had not used some of his vast wealth to buy more shares and show confidence in Bank of Ireland he responded that he and others complied with the minimum holding requirements for directors. He weakly pleaded that any director's investment was a personal choice and refused to comment further. He is technically right of course, but their personal decisions to shun the shares speaks volumes. Losing money in the ailing vehicle is for small savers. Every year at the AGM they are fed the same soothers of hollow thanks to the staff, the familiar bull about the overworked Richie, and the mantra about how well-placed the bank is to take advantage of the recovery.
The Irish people's shareholdings in Bank of Ireland and AIB are the point where politics and banking meet. It is a murky mixture. There is plenty of public posturing where minister and banker clash for the cameras. But the reality is reflected in the annual endorsement that the Government gives to its banking friends. It is further revealed in the directors' pathetic personal shareholdings, the barometer of their confidence in the bank, and in the continued existence of overpaid "public interest" directors who serve no purpose .
Bankers and politicians are still joined at the hip. We are being bombarded with promises of Dail reform. Even more pressing is the need for an end to the less visible political antics outside the Dail chamber. Banking reform has not even started.