Minister for Finance Brian Lenihan has said a Government imposed cap on the salaries of top bankers will not be breached with the appointment of AIB's new managing director.
Mr Lenihan was responding to reports in the
The Irish Timestoday that senior AIB executive Colm Doherty would be appointed to the role shortly and his salary is expected to remain at €633,000, the amount he was paid in 2008. This means he will not be forced to take a salary cut to meet the Government's cap of €500,000 for top bankers.
However, Mr Lenihan said the Government had not approved the salary. Speaking on RTÉ Radio this afternoon, the Minister said he had brought the proposal to Cabinet for discussion.
"The Government is not willing to break with the established guideline in this case," he said.
Mr Lenihan conceded that there may be some connection between the salary cap and the lack of suitable external candidates, but said the limit was necessary.
"In this case it seems unfair that a person has to reduce their salary to take an executive position in a bank, but the reason for that is of course that existing appointees were not affected by the salary cap. So it is already the position in the Bank of Ireland that for example, that the chief executive is paid less than some of the other executives, and that arises because of course when we brought in the salary controls, they applied to new appointments," he said.
"The new chief executive of Bank of Ireland (Richie Boucher) had to take a very substantial pay cut and he still remained somewhat above the guideline, but he took a very substantial pay cut of about a third of his salary."
Mr Doherty is AIB's preferred choice as chief executive and is set to be appointed to the new post of managing director in a compromise reached with the Government, which had favoured the appointment of an external candidate.
As part of the deal, the bank's chairman Dan O'Connor will assume management responsibilities as executive chairman, working alongside Mr Doherty.
According to today's reports, it was expected that both Mr Doherty and Mr O'Connor would remain on their existing salary and pay levels as the role of chief executive will remain vacant.
Labour finance spokeswoman Joan Burton criticised the possibility that AIB executives would remain on higher salaries, saying it represented "game, set and match for the old guard in Irish banking and total capitulation on the part of Minister for Finance".
"The taxpayers who have already contributed €3.5 billion towards the recapitalisation of AIB, and who are now told they face extra charges and cuts in services in the budget, are being asked to accept that it is fine for a banker to earn more than 20 times the average industrial wage," she said.
"The appointment to the position of executive chairman of Mr O'Connor, who has been a member of the board of AIB since 2007, would make a mockery of all of the promises we have had from the Taoiseach and Minister Lenihan that they were going to deliver real regime changes in the bank."
Fine Gael's enterprise spokesman Leo Varadkar said AIB was giving two fingers to taxpayers and the Government by ignoring the €500,000 salary cap.
"AIB's decision to appoint Mr Doherty as managing director, and for chairman Dan O'Connor to take on an executive role, is little more than a special purpose vehicle to get around the salary cap. It is also bad corporate governance to combine the executive and Chairman's roles. This scenario gave rise to problems at Anglo Irish, DCC and Fás," he said.
Mr Varadkar called on the Minister refuse the appointment and the proposed salary level.
As part of the reshuffle at senior management level, AIB will also signal that it plans to appoint two external candidates to senior executive roles – chief financial officer and chief risk officer.
In a further compromise reached with Government, the bank will agree to appoint Michael Somers, who is retiring as chief executive of the State's debt manager, the National Treasury Management Agency, to the post of deputy chairman. The appointment is being made at the insistence of the Government in an attempt to foster public confidence in the bank.
The Government holds a 25 per cent stake in the bank following the State's €3.5 billion capital investment last May.
AIB's board had wanted the Government to accept the appointment of Mr Doherty, who ran the bank's profitable capital markets division, as chief executive. However, following the controversy surrounding Bank of Ireland's appointment of an insider, Richie Boucher, as its chief executive last January, the Government encouraged the bank to seek an external appointee instead.
After a trawl of both internal and external candidates, the board of the bank felt that Mr Doherty was the best candidate for the job. The proposed salary of €500,000 for the role of chief executive was reported to have been a reason why some outside candidates turned the job down.
Shares in AIB were trading down 5 per cent on the Irish market this morning, at €1.71 by 1.30pm.