Last Friday evening, the directors of AIB were asked to dial into a conference call for word of an important announcement that the bank was going to make to the stock market first thing on Monday morning.
Jaws dropped when chairman Richard Pym informed them that chief executive David Duffy was quitting to take a similar role with Clydesdale Bank in the UK. It was totally unexpected.
Only last June, Duffy had signed a permanent contract with AIB, having originally signed up in December 2011 on a fixed-term contract for three years.
In the statement announcing his departure, Duffy said “now is the right time for a new CEO to lead the bank through the next phase of its recovery and growth and a multi-year process of returning capital to the Irish State”.
Why in the space of seven months had Duffy gone from committing to a permanent contract to deciding to quit?
Why move from one of the top two banks in Ireland that is back in profit and on the road to privatisation in favour of a role with Clydesdale, a loss-making UK bank with significant reputational problems that its parent company National Australia Bank wants to offload?
Having invested some €20.8 billion in AIB between 2009 and 2011 to save the bank from collapse while also protecting the flow of credit in the economy, these are important questions for Irish taxpayers.
Clydesdale announced on January 6th that its chief executive, David Thorburn, was leaving the company. It's possible that they moved swiftly to headhunt Duffy with an offer that he simply couldn't refuse.
He’s sure to earn more than the €489,000 remuneration he received from AIB – Thorburn got £955,000 last year. And with Clydesdale on the blocks there’s the opportunity for him to get a bit of “skin in the game” from any transactions that transpire.
But Duffy has never appeared motivated by money and often talked about taking on the job out of a personal motivation to help the State at a time of crisis. And AIB was in quite a state when he took over.
There is a view that Duffy simply became weary of the political oversight involved with the role and that it became clear to him that any IPO process for AIB this year or next would be controlled by the department rather than the bank. The Minister last week appointed Goldman Sachs to advise it on potential restructuring actions.
Duffy’s departure is a blow to AIB and the State, which owns 99.8 per cent of the ordinary shares. He was well respected within the bank and was a polished performer with shareholders, customers, potential investors and other stakeholders. His years spent with Goldman Sachs and ING bank would surely have been of benefit to AIB in terms of an IPO or sale to private investors.
The search for a replacement will now begin. Minister for Finance Michael Noonan will meet Pym today to discuss the board's plans to recruit a successor. This process will be managed by AIB's nominations committee, whose members include Pym, former Intel boss Jim O'Hara and UK-based non-executive director Simon Ball.
There are three potential internal candidates. Bernard Byrne, who joined from ESB in 2010, is head of personal, business and corporate banking and would be considered the front runner among internal applicants.
Chief financial officer
joined last May, having led Irish-listed financial services group IFG, where he earned substantially more than he now does at AIB.
Fergus Murphy is director of products but is not a member of the board. Murphy was chief executive of EBS Building Society between January 2008 and December 2011, during which time it was nationalised and folded into AIB.
A number of inquiries about the role are believed to have already been received by the Department of Finance. Sources close to the department say the Government will not be removing the €500,000 cap on remuneration (excluding pension contributions) that has applied to the chief executive role at AIB since 2009.
Loosening the purse strings to hire a heavy hitter wouldn’t play well with voters in what is effectively an election year.
There is one outstanding home grown candidate who happens to be at a loose end right now. Patrick Kennedy recently stepped down from bookmaker Paddy Power after eight hugely successful years in charge. Four and a half years as a non-executive director of Bank of Ireland means he also knows a thing or two about banking.
His former employer has him at 16/1 to succeed Duffy, alongside Bank of Ireland boss Richie Boucher. Don't bet your life savings on it happening.
Pym might want to pick up the phone to him all the same.