Cantillon

Inside the world of business

AIB claims raise more questions

NOW THAT AIB is facing a growing raft of bonus claims from capital markets staff, it raises the question of whether or not they have a case and are likely to be paid.

Based on the Foy case, which started this ball rolling, they at least have a claim. Since then, Minister for Finance, Brian Lenihan, has warned AIB that the State will cut its lifeline to the bank if it pays bonuses.

The Credit Institutions (Stabilisation) Bill also has a provision making State support for banks conditional on them not paying bonuses. The President, Mary McAleese, may refer the Bill to the Supreme Court, but it’s likely to become law in some form by the time the courts get around to dealing with the latest batch of AIB claims.

So we know the new batch of bonus claims are being made in different circumstances: the Minister’s edict on the one hand and new legislation on the other.

But lawyers are not sure that either will have any impact on the cases being made by AIB staff. They point out that if somebody has a claim, they have a claim, and that the law at least gives them the right to have that heard.

It may not apply in every case but their claims appear to be based on contracts – legally binding agreements with the bank – so they hold at least one ace.

After that, it’s all down to whether the bank decides to put forward a defence to the claims. In the circumstances, it may not have much choice. If it does, then it is a question of that case’s merits.

Under normal circumstances, it would be hard for a company to argue that, after making a point of agreeing a series of contracts with its staff, it should now be let off the hook.

However, these are not normal circumstances. The bank’s biggest shareholder, the State, is the only thing that stands between it and effective insolvency, and that shareholder does not want the bonuses paid.

If these cases get to the point where they will be thrashed out in court, it will be hard for judges to ignore that fact, but it’s going to be harder for them to ignore the law, which is what they are supposed to be administering in the first place.

Perhaps the real questions we should be asking is what the bank and the Government were doing about this issue for the last two years?

And what other questions have they kicked down the road for another day and another mess?

It may be time for NESC to analyse itself 

ON THURSDAY, a very heavy and very carefully-prepared report landed on our desk, courtesy of the National Economic and Social Council (NESC). There is a particular joy (okay, maybe not always) to reports authored by the council, which has had the unenviable function of advising the Taoiseach of the day on economic and social issues for almost 30 years.

This week’s study, the second to be published by NESC this year, ran to more than 250 pages, each of which considered how best Ireland could benefit from its EU membership.

It contained a number of worthwhile points, such as a conclusion that Ireland’s success must run hand in hand with the success of the EU. There was also a call for reform of the public services, again to help us get the most out of the EU.

Such points are undeniably valid, but would it not have been possible for the Taoiseach, or indeed his team of civil servants, to have reached them on their own?

Was it really necessary for NESC, which has a team of salaried analysts and economists at its disposal, to get involved at all?

The answer probably has its roots in the history of NESC itself, which is firmly rooted in social partnership. The council’s membership includes farming interests, business interests, trade union interests and social interests, as well as the secretaries general of a raft of Government departments. The range of the vested interests at stake, all of which presumably have a say, may go some way to explaining the woolly language in which NESC’s conclusions are often encased. It may also explain why NESC’s existence in its current form goes unquestioned.

As social partnership moves into a new era and cash becomes tighter than ever, perhaps the time has now come to reconsider the apparatus that surrounds it, using value for money as one criterion on which organisations such as NESC can be judged. To help things along, perhaps NESC itself could undertake to conduct the research, starting with an analysis of itself.

ONLINE

For regular commentary on business and economic issues visit our blog, Current Account, at irishtimes.com/blogs/business

Twitter users can receive links to the latest business news and blog posts by following us at twitter.com/IrishTimesBiz