Bank of Ireland continues to make payments to senior executives that are frowned on by the Department of Finance, writes COLM KEENAPublic Affairs Correspondent
THE PENSION arrangement for Bank of Ireland chief executive Richie Boucher, approved by Minister for Finance Brian Lenihan last year, was contrary to views expressed by his department’s Covered Institution Remuneration Oversight Committee.
That body, comprising Vivienne Jupp, John Purcell and Eddie Sullivan, reported to Mr Lenihan in February of last year. The committee was established to oversee the remuneration plans of senior executives in the “covered institutions”, which includes Bank of Ireland (BoI) and AIB.
In the section on pensions, the report states: “Pension arrangements for senior executives in each institution should, in our view, be at least broadly similar to those applicable to the generality of the staff of the institution.”
At the time the report was completed Boucher had just been appointed to his new post, but his pay package had yet to be agreed. As disclosed yesterday in documents to Labour TD Roisin Shortall, the bank later indicated its intention to Lenihan to allow Boucher retire at age 55 “in line with previous practice in relation to the chief executive officer position”. The Minister agreed.
The normal retirement age for staff in the Bank of Ireland is 65, so the arrangement agreed for Boucher did not sit well with the view expressed by the committee.
The €1.5 million top-up that had to be added to the bank’s pension fund as a consequence of the Boucher arrangement was disclosed in the bank’s report for the nine months to December 2009, published last week.
On page 120, the report shows the salary and other payments made to the senior executives over the period. Boucher’s salary is €623,000. Nothing is listed under the heading “pension cash allowance”. However, for the other senior executives, Des Crowley, Denis Donovan and John O’Donovan, amounts of €72,000, €245,000 and €152,000, respectively, are listed.
In its report, the committee said it was aware of the practice whereby “cash allowances” were paid in relation to measures in the Finance Act 2006. The Act introduced a cap on the size of pension funds, after which tax relief would not be available.
“Pension schemes should reflect public policy and tax law, and it is unacceptable that arrangements should be put in place which would be inconsistent with the intent of the relevant legislation,” the committee said.
When the report was published last year, Lenihan said he was going to seek a cap of €500,000 on the salaries of the chief executives of Bank of Ireland and AIB. The report recommended maximum salaries of €690,000.
When the then governor of the Bank of Ireland wrote to Lenihan about Boucher’s pay arrangements, he suggested pay of €500,000 and a “pension cash allowance” of €123,000. The Minister did not want the new chief executive getting any allowance that had been criticised in the committee report, and the amount ended up being rolled into a salary of €623,000.
Ironically, this appears to have been an improvement in Boucher’s terms, as the salary amount is pensionable, while the cash allowance is not.
Lenihan later told Shortall that Revenue was reviewing these cash allowance payments generally in the banking sector. The outcome of that review is not known.
Last night, Shortall said the Minister had questions to answer. “He approved a very generous pension arrangement that seems to be contrary to the report of the committee that the Minister set up in relation to executive pay.”