Low public salaries in high places

When the chief executive of IDA Ireland, Mr Kieran McGowan, announced his planned retirement last week, among the reports of tributes and plaudits was a quiet reminder that the salary for the job is a mere £81,000.

This is, in fact, the new rate for the job, having been increased as part of a Government decision last March to raise salaries for senior public sector employees. The package includes a maximum bonus of 15 per cent, or £12,150, of performance-related pay, to bring maximum possible earnings to £93,150 annually.

The problem of low pay is obviously not confined to the low-paid. That the chief executive of the state agency responsible for delivering sales of this country as an investment location, for the begetting of thousands of jobs, should be paid so little is ridiculous. The same low salary is paid to the chief executive of the very successful domestic job promotion agency, Forbairt, now being merged with An Bord Trachtala.

Comparisons with the salaries of chief executives of what are officially called commercial State bodies are odious. In some of these, "special arrangements" apply, meaning that personal contracts over and above the normal Gleeson guidelines have been put in place, which are, by all accounts, considerably more remunerative. But there is no rational basis for the situation where the ESB is limited to the guidelines and Telecom Eireann is not; that Bord na Mona deserves special treatment but Aer Rianta does not; that there is something special about the CEO position in ICC Bank as compared to the same role at ACC Bank.

Hopefully, some element of rationality will be introduced to the pay of CEOs of commercial State bodies by the report of Hay management consultants later this year. The Government says that the consultants are to "evaluate or `size' the chief executive positions of all the commercial bodies and rank them according to job scores" and then "suggest minimum, lower quartile and median rates for the various job-score levels". But the distinction between commercial State bodies and non-commercial State bodies will remain. And we will still ask, does the head of Dublin Bus really deliver more value-added to Ireland than the Head of the IDA?

It is very strange that the maximum potential annual earnings (which is how the Department of Finance presented the data) of the CEO of every commercial State body, other than the Irish Horseracing Authority, Bord na gCon, and the National Stud, exceed the maximum possible for the chief executives of the IDA and Forbairt.

Think about it the heads of Coillte, RTE, Irish Rail, CIE, Irish Bus and Dublin Bus, the Irish National Petroleum Corporation, Aer Rianta, ACC Bank, Bord Gais Eireann and the Irish Aviation Authority all have more earning power than the midwives of thousands of jobs annually in the IDA and Forbairt. Very odd.

Of course, the oddities owe a good deal to the fact that commercial State bodies as we knew them have become outdated, and their position between the private sector and the public service leave them open to odious comparisons in both directions. They would better be one thing or the other private businesses or State agencies.

In the public sector mindset, one shouldn't have the head of the IDA earning more than the minister to whom he or she reports. Relativity must rule for valid cultural and political reasons. Comparing with the private sector is altogether more difficult. We are all supposed to be believers now in merit leading in direct proportion to reward, but we all know that in the private sector some people just seem to get lucky, too. Mr Sutherland's prospective boost to his personal wealth will not be claimed to be performance-related pay. It is capitalist fortune which seems to smile on anyone making an initial public offering with a good business in a bull market. It is also hard to argue that managers who earn windfalls in demutualisations have been rewarded directly in proportion to meritorious work. Most people in the private sector, most CEOs even, never reap windfalls.

Even without the windfalls, the salaries of the heads of the IDA and Forbairt are very low in comparison to those of private sector CEOs. We as citizens have a large interest in these two State employees doing their jobs well. Can we continue to rely on public-spiritedness to get the best people? Unless some imaginative changes are introduced, we will have to. This may still be alright, for one wouldn't want to underestimate the degree of public-spirit about, nor the satisfaction that can be derived from working for something other than money. Time will tell, quite soon, if we can really bank on it.

Oliver O'Connor is an investment funds specialist