Nationwide boss comes with a high price tag

Business Opinion: Can Michael Walsh, the chairman of the Irish Nationwide building society, really believe that Michael Fingleton is worth more than €835,000 a year? asks John McManus

Apparently so, for he said as much last week at the society's annual general meeting after Mr Fingleton was finally gracious enough to tell the members of the society how much they are paying him to run it for them.

Presumably, then, Mr Walsh believes that Mr Fingleton is worth more than 40 junior gardaí, who earn €20,662 a year, or that one Michael Fingleton makes a contribution that has a value in in excess of 24 public health nurses, who start on salaries of €34,377.

Mr Walsh must also be of the view that his managing director is worth the equivalent of more than 37 teachers earning the basic salary of €22,208.

If we look a little closer to home it is also logical to assume that Mr Walsh is of the opinion that Mr Fingleton is worth the equivalent of 23 other employees of the Irish Nationwide, who took home an average of €35,000 last year.

Such assertions are clearly ridiculous and no sane individual would attempt to try to stand over them for a minute. Which is why when chief executives of larger corporations try to justify their massive salaries they always make comparisons with their peers, rather than with the real world.

Even on this sort of abstract basis, Mr Fingleton's salary is utterly without justification.

Assume for the sake of argument - and it is a big assumption - that Michael Buckley is worth the €940,000 that he was paid to run AIB last year. In return for this package - and options over some 85,000 shares - Mr Buckley ran a bank that employs almost 30,000 people around the world, had an income of €3.9 billion and made a profit of over €1 billion.

Mr Fingleton got around €100,000 less for running a company that operates almost entirely in the Republic and employs 398 people. It had an income of €136 million and made profits of €70 million.

To put this in perspective. Mr Fingleton's salary was getting on for the equivalent of one per cent of Irish Nationwide's profits last year. Mr Buckley's package equated to less than 0.01 per cent of AIB's profits.

Just in case you have not got the point, here is another comparison. Mr Fingleton's remuneration accounted for just under 6 per cent of Irish Nationwide's total payroll. Mr Buckley's was less than 0.01 per cent of AIB's.

Mr Buckley no doubt is doing his best to try to persuade Mr Walsh to take over the chair at AIB where the current chairman, Mr Lochlann Quinn would not appear to use the same yardstick as Mr Walsh when deciding what his executives are worth.

Unless, of course, there is something so profoundly and uniquely difficult about running a small and rather secretive business that basically sells one product - mortgages - in a booming market.

Maybe Mr Buckley, for all his experience in the Department of Finance, stockbroking, corporate finance, capital markets, Poland and elsewhere just couldn't cut it in the bear pit that is the Irish residential mortgage market.

Maybe we are doing Mr Fingleton and Mr Walsh a disservice by comparing the Irish Nationwide managing director's pay to that of the chief executive of an international bank.

Perhaps we should look instead at what other executives running Irish building societies and facing similar Herculean challenges are earning.

There really is only one other member of this elite band, the EBS building society. (The ICS does not really count because it is in effect a subsidiary of Bank of Ireland. ) Mr Ted McGovern, the chief executive of the EBS, earned a basic salary of €303,000 last year but took home something in the region of €512,000 including bonuses.

On the face of it there would appear to be some sort of twisted logic at work here. If it is reasonable for Mr McGovern to earn €512,000 running a building society with an income of €112 million that made a profit of €35 million, then arguably Mr Fingleton deserves to be paid significantly more for making profits of €70 million on a income of €136 million.

The reality is of course that neither man should be paid anything like this sort of money for running a small Irish building society.

You can make this assertion on the basis of a comparison with Mr Buckley's salary alone. It is not even necessary to bring in the issue of what the average Garda or nurse earns, never mind what is actually moral.

One suspects that one man at least knows this and that is Mr Fingleton. Why else would he have been so bashful about disclosing his salary? Mr Walsh does not appear to share this view.

One would have to wonder what sort of money Mr Walsh earns in his day job as Dermot Desmond's right hand man, that he would not baulk at signing off on Mr Fingleton's package.