Sheehy departs after signal from major AIB backers

ALLIED IRISH Banks (AIB) received indications from some of its largest institutional shareholders that they would abstain from the vote to re-elect chief executive Eugene Sheehy at the bank’s annual meeting later this month.

Mr Sheehy, AIB chairman Dermot Gleeson and the bank’s finance director John O’Donnell – the three most senior directors at the bank – announced yesterday that they would be stepping down.

It is understood that two institutional shareholders had indicated they would abstain from the vote at the extraordinary general meeting in a signal that they had lost confidence in Mr Sheehy.

Other institutional shareholders showed ambivalence about Mr Sheehy’s re-election,saying they had not made up their minds how they would vote yet.

This was interpreted as indicating that Mr Sheehy’s position as chief executive had become untenable.

Mr Sheehy was due to have stepped down with the rest of the board of the bank ahead of the annual meeting on May 13th to seek re-election at the meeting under the terms of the Government’s €3.5 billion recapitalisation agreement with the bank.

However, it was unlikely that Mr Sheehy would been re-elected without the support of the bank’s largest institutional shareholders.

The Government had also not declared whether it would support the re-appointment of Mr Sheehy or other members of the board – using its 25 per cent voting rights in the bank which it has taken under the recapitalisation deal.

Mr Sheehy informed the AIB board at a meeting on Thursday that he intended to retire, though it is thought he had made his decision to step down last week.

The bank said he would continue to work as chief executive until a successor was appointed.

Mr Gleeson will stand down in July after six years in the position. Mr O’Donnell will retire in August.

“A process will be put in place immediately to identify and appoint his successor in the coming months,” the bank said.

Mr Sheehy, the only long-standing chief executive remaining at a guaranteed Irish institution, had come under pressure following the announcement on April 20th that the bank would need an additional €1.5 billion in funding.

This was despite reassurances from AIB in March that the bank was adequately capitalised with the Government’s investment of €3.5 billion. At that time the bank said that it had sufficient capital to absorb loan losses of up to €8.4 billion over a three-year period.

It’s understood that Mr Gleeson and Mr O’Donnell also informed the bank’s board on Thursday that they would be stepping down.

The board met again yesterday morning when Minister for Finance Brian Lenihan was notified of the decision. Mr Gleeson and a non-executive director of the bank met the minister yesterday.

AIB said the process to appoint successors for Mr Sheehy and Mr O’Donnell would consider external and internal candidates.

AIB said that Dan O’Connor, who joined the board of the bank in 2007, will become chairman. David Pritchard, who also joined the board in 2007, has been appointed to the newly created post of deputy chairman, a role he will take up on May 14th.

The bank said that Mr O’Connor and Mr Pritchard would both seek re-election to the board at the upcoming annual meeting.