Eircom chief denies he is to get €4m bonus in 2012

EIRCOM CHIEF executive Paul Donovan told staff yesterday that he will not get a bonus of €4 million in 2012, as was reported by a Sunday newspaper last weekend.

But Mr Donovan made no comment on whether a two-year, voluntary pay cut of 10 per cent that he accepted in 2009 would be reversed in July, as was previously agreed with the company.

The media report had angered many staff in Eircom, who only last week agreed to accept the terms of a wide-ranging restructuring plan aimed at reducing labour costs by €92 million.

This involves pay cuts of 10 per cent and significant changes to work practices. It could also result in more than 1,000 redundancies.

Eircom is also seeking to restructure its €3.8 billion debt pile and warned recently that it could breach its financial covenants with lenders due to pressure on its earnings.

In an internal notice to staff yesterday, Mr Donovan said the article was “not correct”. “I will not receive a bonus of €4 million in 2012 and my incentives are not linked to the outcome of the [restructuring] ballot,” he added.

“In recognition of the situation the business found itself in 2009, I took a voluntary pay reduction of 10 per cent along with many other colleagues. My pay has been a subject of public record since October 2010 and my total annual remuneration is published in the company’s annual bond report for transparency.”

Eircom’s annual bondholders report states that Mr Donovan is paid a base salary of €720,000.

This is after the voluntary pay cut of 10 per cent.

He agreed to accept the pay cut until June 30th, 2011.

In addition, Mr Donovan agreed that no performance-related bonus would be paid for the first year of his employment, which closed on June 30th, 2010.

The report states that Mr Donovan receives employer pension contributions, travel benefits, healthcare benefits, a car allowance and housing allowance.

But it does not put a value on these other payments.

Mr Donovan’s contract also includes a long-term incentive plan that provides for “annual cash awards” of up to 175 per cent of basic salary based on certain goals being met.

This would be paid at the end of his three-year contract term, which expires on July 1st, 2012.

Based on his original salary of €800,000, the incentive plan could amount to €4.2 million over the three years.

If based on his reduced salary, it could amount to €3.78 million.

About 400 executives and senior managers took voluntary pay cuts in mid 2009, which are due to be reversed this year.

A spokesman declined to comment on whether Mr Donovan and other senior staff would continue to forego their pay.

“No decision on the restoration of pay has been taken by the company yet,” he said.

Eircom’s directors were paid an aggregate €5.5 million in the year to June 30th, 2010.