Bank of Ireland’s plan to top up the salaries of its top executives with bank shares worth up to 50 per cent of their salaries in the coming years went down like a lead balloon with Sinn Féin, the State’s main Opposition party.
The leading international proxy advisory firms that advise major shareholders on annual general meeting (agm) resolutions are altogether more sanguine – even if one of them, Glass Lewis, noted that the plan was an “unusual remuneration restructure”.
“We believe the introduction of an equity component to remuneration, and the vesting schedule of awards (which will vest over three years from the time of grant) should also serve to further align the interests of executives with the company’s shareholders,” said Glass Lewis, which recommended that investors vote for the proposal at the bank’s agm next Tuesday.
Institutional Shareholder Services (ISS), another leading proxy advisory firm, said it had “no significant concerns” with the proposal and the bank “has provided sufficiently compelling rationale” for the move – as the remuneration of the top executives is more closely tied to medium-term share price performance.
Bank of Ireland said in its annual report, published in March, that the planned so-called fixed share awards were “not subject to any performance conditions”, leaving them outside the scope of an effective continuing ban on performance-related bonuses above €20,000 across Irish bailed-out banks.
The Government moved in December to lift a crisis-era €500,000 limit on executive fixed pay at Bank of Ireland, months after it sold its remaining shares in the bank. Still, its chief executive, Myles O’Grady, was hired in November on a salary of €960,000, as successive governments had allowed the bank to pay its chief executive above the going rate at rivals, after it avoided falling under State control during the financial crisis.
ISS noted that the total targeted pay of the chief executive would remain “below the lower quartile” of UK mid-tier banks and below the median of peers across the top 15 Iseq companies.
Still, the speed with which Bank of Ireland came out with the shares plan has made it difficult to dissuade sceptics from believing that all the lobbying for a relaxation of pay restrictions in recent years was more about top executives than the rank and file.