AIB, once the most vocal bank on the “unfairness” of crisis-era executive pay limits, may have kept its head down on the issue in recent years after former chairman Richard Pym, who rarely missed a chance to bemoan the caps, stepped down almost four years ago.
However, his successor, Jim Pettigrew, is back on the case. Pettigrew told Minister for Finance Michael McGrath in a recent letter that the ongoing €500,000 pay cap at AIB is viewed as “untenable” by private investors in the bank, who see it as a “material talent retention risk” that puts the company at a “significant disadvantage” to competitors.
“We believe that without it being addressed, it will ultimately impact on the value of the State’s shareholding in the bank,” he said in the letter, released by the Department of Finance under the Freedom of Information Act.
As things stand, the State has recovered €13.6 billion of AIB’s €20.8 billion rescue bill from over a decade ago – including proceeds form share sales, dividends, redemption of bailout bonds, interest and guarantee fees.
Its remaining 40.8 per cent stake is currently worth €4.23 billion, leaving taxpayers almost €3 billion underwater on the money committed to keeping the bank afloat following the 2008 property crash.
It’s hard to see McGrath being swayed by the Pettigrew’s valuation argument – especially after the Minister failed to lift the cap after the State’s stake fell below the key 50 per cent threshold last summer.
Department officials, after all, had privately argued in early drafts of a banking review report in late 2022 that the restriction could be removed when the bank was no longer majority State-owned.
It would be politically difficult to remove the cap when the bailout hasn’t been fully recovered – especially with a general election, which must be held by March 2025, on the horizon.
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