ALLIED IRISH Banks (AIB) has yet to reach agreement with the Government on the annual salary to be paid to Dan O’Connor who was named executive chairman of the bank yesterday in the long-awaited management reshuffle.
The bank confirmed Mr O’Connor’s appointment to his enhanced role and the promotion of senior AIB executive Colm Doherty to the new role of group managing director of the bank.
Mr Doherty has agreed to the reduced salary of €500,000 after the Government rejected the bank’s proposal to breach the State pay cap for top bank executives and approve the retention of his existing salary of €633,000.
An AIB spokeswoman said Mr O’Connor’s pay would be agreed with the Department of Finance and declined to comment further before the salary was approved.
A spokesman for the department said that no discussions were ongoing with the bank on the issue. The bank has yet to submit details of Mr O’Connor’s proposed salary to the department.
His predecessor, Dermot Gleeson, received annual remuneration of €390,000 after taking a pay cut from €520,000 following the bank guarantee. The Government-appointed committee on bankers’ pay had recommended that the chairman of AIB receive annual fees of €276,000 a year. Mr O’Connor has assumed much greater responsibilities as executive chairman which may lead to a higher pay package.
The protracted process to find a new management team at AIB led to the appointment of insiders to the two most senior roles within the bank in a compromise deal between AIB and the Government.
AIB director Seán O’Driscoll, who played a central role in the appointments, said that the indication from the Government was “a very strong preference for an external candidate” to be installed as the new chief executive. However, Mr O’Driscoll told RTÉ radio that the Government’s €500,000 pay cap and “the constant media attention and scrutiny” made it difficult for AIB to find an external replacement.
He declined to discuss details of discussions with the Minister for Finance or Government officials on the bank’s proposal to pay Mr Doherty a salary above the cap.
“The directors of AIB are not in the business of eyeballing a Government or, as somebody said, giving one finger to the taxpayer and one finger to the Government,” he said.
The bank said that Mr Doherty had agreed to a salary that was “considerably lower” than his existing pay and the salary paid to chief executives in the past, “reflecting his personal commitment to the bank and its future”.
Former tánaiste Dick Spring, a Government appointee director at AIB, said that “an exhaustive, comprehensive and independently assessed search” was carried out and Mr Doherty emerged as the best candidate from the process.
AIB confirmed that it intends to appoint two outsiders to the key roles of finance director and chief risk officer, while Dr Michael Somers, who is retiring as head of the National Treasury Management Agency, will take up the post of deputy chairman of the bank.
It is understood that prior to the appointments, the Irish Association of Investment Managers (IAIM), which represents institutional investors in the banks, including AIB, raised concerns about good corporate governance within the bank relating to the role assumed by Mr O’Connor.
The bank said that his appointment as executive chairman would be “on a temporary basis” to oversee the raising of further capital, the movement of loans to the National Asset Management Agency and the bank’s restructuring plan.
Fine Gael deputy leader Richard Bruton said important questions remained about the appointments before the Government agreed to the decision.
He said AIB should be asked to spell out which international firm of head-hunters, specialising in financial services, was hired for the search, how many CVs were submitted to the board subcommittee and how many candidates were interviewed.