Kathy Sheridan: Unicorn returns to the table as bankers’ sense of entitlement strong as ever

In December 2016, as the Christmas spirit was being sniffed and swirled, the chief executive of TSB, Jeremy Masding, suggested the time was right for a “mature debate” in Ireland about pay for senior bank executives. Leave aside the implication that debate to that point had been “immature”, that the little people had never quite grasped the marvels and privations of the unicorn that is a senior bank executive.

That same month, AIB had just admitted to wrongly taking large sums of money from thousands of tracker account holders (a scandal that would balloon to involve five Irish banks and nearly 35,000 customers). Earlier that year, both AIB and Bank of Ireland had fared among the worst in the European Union in banking stress tests. And an Oireachtas inquiry into the banking crash, though nobbled by legal restrictions, had dredged up salient reminders of how bankers perceive their position in society.

From 2005 to 2007, the joint salaries of six bank chief executives totalled just under €5 million. But that, literally, wasn’t the half of it. When such miscellaneous dainties as fees, bonuses, profit and share options, benefits and pensions were slipped in, total remuneration more than doubled to more than €14 million. AIB’s chief executive, Eugene Sheehy, for example, had doubled his income in a couple of years.

External consultants

Years later, when asked to explain how he ended up with €2.4 million a year and how it could be justified, Sheehy explained: “There were a number of components to it and they were scientifically constructed. We had three external consultants who looked at it.”

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Bank of Ireland’s chief executive, Brian Goggin, was asked the same question. “It wasn’t for me to determine,” he said. Nothing to do with me, guv. It was all about science, the sacred independence of a process that required no fewer than three external consultants and unicorns.

That’s what happens when people are allowed to operate, unchecked, in a little bubble of mutually affirming back massage, in enterprises that have grown too big to fail. Sheehy conceded at the inquiry that the amounts paid to the bankers were “too high”. “I mean, when I came from the States I was paid a lot less over there, but they had a totally different philosophy about long-term compensation.” A keen insight, given that blindingly avaricious short-termism was the major factor that led this country all the way to fiscal hell, a decade of pain and a national debt overhang for generations.

The fact that AIB had to be taken over by the State in December 2010 and that it still owes us more than €10 billion hasn’t stunted its arrogance. Last month, the board breezily announced a plan to introduce a share bonus scheme worth up to 100 per cent of annual salary for a swathe of executives. Doubtless to ensure a mature debate with their 71 per cent shareholder – that is, all of us little people, represented by Minister for Finance Paschal Donohoe – they proposed to link the vesting of the shares to the “State’s opportunity to recover the value of its investment in the group in full”. Read that again. They expect our official approval to double their salaries in exchange for working to return our own money to us.

‘First step’

They describe the scheme as the “first step in its journey to more normalised remuneration practices”. The first step would bring the chief executive’s salary – currently capped at €500,000 plus pension payment of €100,000 – up to a million plus.

Here’s the jaw-slacking part. It was only last October, as the full horror of the tracker scandal crashed in, that an angry Donohoe warned he had lots of punitive options open to him: “For example, in relation to what happens to bankers’ pay, what happens to bankers’ bonuses.” Since the threat involved removing an incentive rather than delivering an actual punch, it was hardly going to be banking Armageddon. But they were most definitely on notice.

That they simply put this proposal out there, not even minimally bothered about a public or political backlash, suggests the old “Because I’m worth it” spirit has survived the banking winter. The Minister’s unamused response will have given them pause. There will be a regrouping, of course – this campaign has been ongoing for at least four years – but its choreography will be interesting and necessary to behold.

As for the rest of us, the lesson has been made abundantly clear, again.

Never forget.