Donohoe to hire Korn Ferry to assess return of banker bonuses
Performance-related pay is still banned across rescued Irish banking sector
Minister for Finance Paschal Donohoe, who decided last April to hire outside consultants to report back to him by the end of the year on compensation in the banking sector.
Minister for Finance Paschal Donohoe is poised to give Korn Ferry, one of the world’s largest headhunting firms, the job of assessing remuneration across bailed-out lenders, which is expected to eventually result in the return of bankers’ bonuses.
An announcement on the appointment is expected to be made in the coming days. A spokesman for the Department of Finance and a spokeswoman for Korn Ferry each declined to comment.
A decade to the week since Irish taxpayers were forced to guarantee the banking sector, which led to €64 billion of capital injections for the sector, salaries for top executives at State-controlled AIB and Permanent TSB remain capped at €500,000. Performance-related pay continues to be banned across rescued Irish lenders.
Mr Donohoe decided last April to hire outside consultants to report back to him by the end of the year on compensation in the industry, saying it was appropriate to do so as some overseas firms seek to move activities to Ireland from London as they plan for Brexit – increasing competition for staff.
The Minister voted in the same month against a resolution at AIB’s annual general meeting, which sought to reintroduce bonuses at the lender for up to 100 top executives from 2019. Mr Donohoe abstained from a Bank of Ireland remuneration resolution around the same time, which gave the bank the imprimatur to engage with major shareholders on “the adoption of an appropriate incentive scheme” in the future.
The recent resignations of two top finance executives at 71 per cent State-owned AIB – chief financial officer Mark Bourke and group director of finance and investor relations Myles O’Grady – were seen as adding to the debate on bankers’ remuneration, according to analysts from stockbroking firms Davy and Investec.
The group’s chief executive, Bernard Byrne, said in July that a “mid-teens” percentage of AIB’s almost 200 most senior managers had left the bank since its initial public offering (IPO) in June last year, amid compensation caps and as more London-based firms expand in Dublin as a result of Brexit.
Currently, any bonus plans involving a bailed-out Irish bank would be subject to an effective tax rate of 89 per cent, as a result of a measure injected into the 2011 Finance Act. Industry sources say that the removal of this clause would be very difficult to push through politically, especially with minority Government in place.