Back to bonuses? Donohoe seeks advice on bankers’ pay

Top executives’ pay and incentive plans remain a highly politically sensitive issue

Minister for Finance Paschal Donohoe is seeking to hire consultants to advise the Government on bankers’ pay. Photograph: Nick Bradshaw

Minister for Finance Paschal Donohoe is seeking to hire consultants to advise the Government on bankers’ pay. Photograph: Nick Bradshaw

 

Minister for Finance Paschal Donohoe is set to widen his search for consultants to advise on remuneration across bailed-out banks, in a move that is expected to pave the way for a return of bonuses a decade after the financial crash.

The Department of Finance said four weeks ago that it would carry out a “mini competition” among firms that were appointed to one of three panels it set up in 2014 for financial advisers in relation to the State’s bank investments.

The 10-member panel in question includes firms from human resources consulting group Aon Hewitt to Wall Street investment bank Goldman Sachs.

Mr Donohoe said at the time that he expected the external consultancy firm to be appointed “shortly”, with the expectation that the review would be completed towards the end of 2018.

However, a spokesman for the department said on Thursday that contract would now go out to full tender, not limited to the panel, “in the coming weeks”. He declined to comment on why the search was being widened.

While the Government has set out terms of reference for remuneration as it has an impact on 23,000 bank workers across AIB, Bank of Ireland and Permanent TSB, top executives’ pay and incentive plans remain the most politically sensitive issue. Salaries for top executives at State-controlled AIB and PTSB have been capped at €500,000 since the onset of the crisis, while bonus plans have been banned across the industry.

Stock incentive

The Minister’s decision to bring in outside consultants came in April as he moved to use the State’s 71 per cent interest in AIB to vote against a proposal at the bank’s annual general meeting aimed at reintroducing a stock incentive plan for senior executives.

Mr Donohoe said at the time that any changes in relation to compensation for the banking sector would have to be led by the Government, after the industry received “extraordinary support from the Irish taxpayer”.

AIB warned in its initial public offering (IPO) documents last year about “elevated risks” associated with its executive remuneration policy, especially as local banks face growing competition for talent from firms expanding in Dublin as a result of Brexit.

Bank of Ireland chief executive Francesca McDonagh told The Irish Times in an interview last month that compensation restrictions across bailed-out banks had curbed her ability to make senior hires.