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Sean Dorgan: 'We took austerity on the chin because of our Catholic guilt'


Sean Dorgan. Photo: John Mulligan

Sean Dorgan. Photo: John Mulligan

Sean Dorgan. Photo: John Mulligan

It's Thursday afternoon and in the basement bar of a Dublin hotel it's as if a timewarp has spun the clocks back to 2005. One of the tables is brimming with boisterous lads from the UK on what looks like the beginning of a booze-sodden stag weekend. At another, a bunch of office workers is already getting stuck into peach-tinged cocktails.

There's little sign of the Catholic guilt that former IDA boss Sean Dorgan speculates is part of the reason that, by and large, relatively little fuss was made in Ireland about the austerity measures taken to correct the nation's banjaxed finances.

"I think there's a bit of the Catholic guilt complex, in that Lord, we partied too much. People understood it. Educated people, sensible people – they got it."

Got it right between the eyes, many of them would say. Tax burdens soared, services were cut and the nation spiralled into a bailout.

But things have moved on. So too has Dorgan, a Cork native who resigned as IDA boss in 2007 and as Ulster Bank chairman last year. He's just been appointed chairman of the Irish Management Institute.

The son of a dairy farmer, he went to school in Killarney and "fell into" being a civil servant after eschewing a potential career as a primary school teacher and instead studying commerce at UCD.

"It's a typical Irish story," he says, except it's not at all. "Farmers' sons tend to do well in Ireland." Few manage to climb the slippery civil service totem pole as Dorgan did though, starting off at Eircom's ancestor, Post & Telegraphs, in 1972.

"It wasn't the most exciting place because phones weren't being delivered," he recalls (indeed, back in those days, you had to know someone who knew someone if you wanted any hope of getting one installed before you were pushing up daisies).

But Dorgan, who in 1991 played a key role in shaping the so-called Culleton Review of Ireland's industrial policy was tapped in 1998 to become the head of the IDA, in a move that surprised some. He formally took on the role in 1999.

His first foreign trip in that role was to Apple's HQ in Cupertino, California. He met Steve Jobs' then lieutenant, Tim Cook, who now runs the company. Apple was thinking of moving jobs from its Cork operation, but the IDA persuaded it to stay and expand.

Apple was at the centre of a political storm last year both in the US and this side of the Atlantic when it was claimed the company had secured a sweetheart deal in the 1980s that enabled it to pay less than 2pc tax on huge profits. The alleged deal was denied by the government and Apple.

"There are companies in Ireland that wouldn't be here but for the fact that we offer an attractive tax rate, but that in itself is never enough," concedes Dorgan, nursing a coffee amid the rising din from the nearby revellers. "It's the marketing catch that makes them interested to start with. But it's entirely down then to performance in all sorts of ways."

Dorgan, who is on the board of Northern Ireland aircraft maker Short Brothers (owned by Canada's Bombardier), was once chairman of Tesco Ireland and is also a non-executive director at FBD Insurance, has seen it all over the past 15 years. He had one brief stint in the private sector during an otherwise civil service working life, when he was CEO of the Institute of Chartered Accountants in Ireland between 1995 and 1998.

He ascended to the top of the IDA at a time when the economy was just ratcheting up – and for all the right reasons. The property frenzy hadn't taken root and economic growth – and the country's finances – weren't built on quicksand.

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He cites some of the IDA's biggest successes during his tenure as attracting major investment from Intel, as well as seeing Google set up here and drug company Wyeth (which was bought by Pfizer in 2009) spending well over €1bn to build an expansive biotech campus in Dublin.

They were the gold stars on the report card.

"The toughest ones were the ones we didn't get," says Dorgan. "There were a few disappointments along the way (he won't say what they were). A lot of people put a hell of a lot of effort into them and they just didn't happen," he says. "You can never begrudge the work when you get the results and you don't even begrudge it when you don't because, truthfully, if you never put it in you had no chance of getting them. We had enough success to be able to celebrate a lot."

But while there were highs, between 2000 and 2007 (when Dorgan resigned from the IDA) the net change in full-time employment at IDA-supported companies was actually just 11,383. That's despite 102,036 new IDA-supported jobs having been created in that period. In fact, by the end of 2007, there were 139,071 people working in IDA-supported companies, down from 142,302 in 2000.

But the numbers don't tell the full story, the IDA would argue, as it chased better-paid employment, shifting away from jobs such as the manufacture of phones and computers, to luring more pharma firms and more highly skilled tech roles.

As the new chairman of the Irish Management Institute, Dorgan says the organisation is trying to ensure that managers here are capable of meeting the challenges presented by a new generation of companies – both foreign and domestic.

"Managers don't direct, they enable. A really good manager won't give you the answer to every question. They'll help others to work through to find the right answer. That's what management training has to be about too – the capability to solve problems for yourself," says Dorgan.

And solving problems is something that must have been very much on Dorgan's mind when he was appointed non-executive chairman of Ulster Bank in 2008 – on September 4. That was just 11 days before Lehman Brothers filed for bankruptcy in the US and only 25 days before the then government unveiled its much maligned bank guarantee scheme that critics argue was a major cause of Ireland's subsequent financial meltdown.

Ulster Bank wasn't covered by the guarantee, but Dorgan thinks the government was right to introduce it.

"I'm probably a bit against the grain here: Yes , it was right to do the bank guarantee."

If he said it louder, the bar might have gone dead quiet.

"Our subsequent problems were not caused by the guarantee. They were caused by all the previous decisions and the way the economy had become unbalanced. I think government made the right decisions."

But Dorgan also had a bird's eye view of what was happening as the property market unravelled. Did he feel any sympathy as he read the impairment reports and saw people losing their homes?

"You have to have sympathy on a personal basis with people who went out on a limb and exposed themselves," he says. "I know individuals who are in the position where it's a really difficult personal trauma, they feel broken and they're suffering on a continuing basis."

"But on the other side, you can't just forgive everything. That would just crush us economically. Taxpayers cannot afford to just give banks more money," he says. "There's a difference, clearly, between those who invested in buy-to-lets as an investment, and those who were exposed on the family home. I think the political response, the regulatory response and the bank response has also seen that difference."

Non-executive bank directors in Ireland came in for a lot of stick as the crisis unfolded, with accusations that they hadn't questioned executives enough and hadn't asked the tough questions at a board level.

"I think it's a fair criticism. There wasn't enough challenging, contrarian thinking. You need some contrarians on board. You need people to ask the awkward question, to see a different point of view," Dorgan says.

"Don't take everything for granted. That's essential."

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