Policy change in 2007 led to early bonuses, says AIB
PAYMENTS:AIB HAS said the policies governing bonuses in its capital markets division were changed in 2007, allowing the bank to make payments relating to 2008 earlier than it had done in previous years.
The bank was responding yesterday to the claim that it had rushed through the payment of the 2008 bonuses earlier than usual in 2009 in order to boost the remuneration of its employees before the recapitalisation of the bank by the Government.
The recapitalisation took place in February 2009 and would serve to prevent any further bonus payments.
Up until 2009, it was the normal practice for employees in the capital markets division to be informed of the size of their individual bonus awards “in early to mid-February”, AIB said yesterday, with the bonuses paid in March or April. Bonus awards in other parts of AIB were typically paid in April.
However, the bonus policies of the capital markets division “were subject to a three-year review cycle”, the bank said in a statement.
“Revised policies covering the period 2008 to 2010 were agreed in late 2007 and formerly approved by the AIB group board remuneration committee and the AIB group board in early 2008,” it stated.
“The revised procedures allowed for the communication of awards to take place in late January and allowed for bonuses to be paid one month earlier .”
The statement was issued after The Irish Timessubmitted a series of questions, seeking an explanation of the decision to pay the 2008 bonuses earlier in 2009 than had occurred in previous years.
The Government had initially announced that it would be putting public money into AIB in December 2008.
This initial recapitalisation amounted to €3.5 billion. It is now on track to becoming fully nationalised.
Taoiseach Brian Cowen and Minister for Finance Brian Lenihan both expressed confidence yesterday that the action taken to prevent the payment of the €35 million in bonuses to AIB staff is legally sound.
Mr Cowen told the Dáil that the decision to inform the bank that State funding would not be available to save the bank if the bonus payments went ahead had arisen after political discussions over the weekend. It is understood that Mr Cowen, Mr Lenihan and Attorney General Paul Gallagher spent the weekend working on a scheme to block the bonus payments in the bank.
Mr Cowen said the bonus issue had been deferred by the bank because there was some debate as to whether the payment could be avoided.
“However, the legal advice was to the effect that it had to be paid, and there were some 1,460 employees who had chalked up aggregate bonus awards to the tune of around €35.5 million.”
The Taoiseach accepted that the one employee who had already won a court decision would have to be paid a bonus but he said this did not automatically apply to 91 other employees who had instituted legal proceedings. He added that the issue of the 91 employees was not the same as that of the 1,460.
“This is difficult territory in legal terms, but we believe this is the means by which we can ensure that bonus payments are not paid, and to do so in a way that withstands legal scrutiny,” he said.
Earlier Mr Lenihan said that he found it “galling” that AIB was going to pay bonuses at a time when everybody in the country was having to make sacrifices.