Thursday 22 February 2018

Doherty was man Lenihan never wanted at the helm

George Garvey

WHEN Eugene Sheehy belatedly announced his intention to "retire" as AIB chief executive in April 2009, then-Finance Minister Brian Lenihan was determined that the job would go to an outsider.

Given that AIB had already revealed loan losses of more than €6bn and had required an emergency injection of €3.5bn of fresh capital from the State, this was an entirely reasonable demand.

Instead, in what was an astonishing display of hubris, the AIB board insisted that the job go to Colm Doherty, then head of AIB's capital markets division. It says something about Mr Doherty's toughness that the AIB board was prepared to defy the Finance Minister on his behalf.

Even more remarkably, Mr Doherty apparently won when, after a seven-month stand-off, Mr Lenihan capitulated and consented to his appointment. Only a redesignation of Mr Doherty's title from "chief executive" to "managing director" spared Mr Lenihan's blushes.

While Mr Doherty's appointment was a tribute to his toughness and tenacity, it was to prove a Pyrrhic victory.

Unfortunately, as so often happens in cases like these, hubris was quickly followed by nemesis. Not surprisingly, the AIB board's insistence on appointing Mr Doherty meant that his relationship with Mr Lenihan got off to a rocky start. An infuriated Finance Minister refused to have any direct dealings with Mr Doherty.

If AIB had been a healthy institution the absence of anything resembling a working relationship between its boss and the Finance Minister would be of purely academic interest. But AIB was far from healthy.

In the weeks and months following Mr Doherty's appointment it quickly became clear that AIB had still not faced up to the full extent of its problems.

On September 30, 2010, the second anniversary of its unconditional guarantee of bank deposits, the government announced that the National Treasury Management Agency would be injecting a further €3.7bn into AIB, taking the state shareholding to over 92pc.

Having successfully defied the Finance Minister first time round, there was to be no second chance for Mr Doherty with Mr Lenihan insisting that part of the price of any bailout was the departure of Mr Doherty and AIB chairman Dan O'Connor.

After less than a year on the job Mr Doherty cleared his desk for the last time.

While it was inevitable that Mr Doherty would end up carrying the can for AIB's escalating losses, he can with some justification claim that it wasn't entirely his fault.

From 1999 to 2009 he had been head of AIB's capital markets division. Despite all that has happened elsewhere in the bank, the capital markets division has remained consistently profitable.


AIB's 2010 results, which were published last week, revealed that the capital markets division recorded pre-tax profits of €71m. While that was considerably down on the €468m pre-tax profits recorded in 2009, it was still AIB's only profitable division last year.

Although Mr Doherty may not have had any day-to-day involvement in the disastrous decisions which have resulted in the bank having to write off more than €20bn of bad loans over the past two-and-a-half years, as a main board director of AIB since 2003 he cannot be absolved of all blame and responsibility for the debacle.

In the end it was Mr Doherty's legendary toughness, something which made him a figure who was respected rather than loved within AIB, that did for him.

By persevering in the teeth of fierce ministerial opposition with his claim to the top job, he ensured that, when the wheels did come off the AIB wagon, he would end up being blamed for the sins of his predecessors.

Irish Independent

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