Departure of AIB chief executive David Duffy may require rethink on the salary cap
Overseeing sale of State’s bank share will be key role for successor
When the Government last week appointed the investment bank Goldman Sachs to examine how to recover the €20.8 billion invested by taxpayers in State-owned AIB following the banking crisis, clearly it never envisaged the departure of the bank’s chief executive a week later. David Duffy’s sudden resignation – three years after his appointment – has surprised financial markets and is a setback for the Government. Last week Finance Minister Michael Noonan indicated his officials were in discussion with AIB on how to reconfigure the bank’s capital structure. And few then doubted Mr Duffy would remain to complete the work he had started so successfully. AIB under his direction has achieved major cost savings, has returned to profitability, and recently passed the European Central Bank’s stress tests.
The next phase of the recovery strategy – selling some or all of the State’s shares to recoup the €20.8 billion – is, as Mr Duffy noted, a job for his successor to undertake. But losing a successful chief executive at a critical time and finding an adequate replacement may not be easily or quickly achieved. The likely delay – given the salary cap in place for State-owned banks – creates unwelcome uncertainty. Before Mr Duffy’s appointment in 2011, the post had remained unfilled for a year. And recent years, given the pay restraints, have seen a high turnover of top bank employees, notably from the Central Bank. In 2009, the government introduced a €500,000 salary cap against the background of taxpayers’ €64 billion investment in the banks; a limit that made sense then but which may now have to be reconsidered in spite of a widely-held view that it should not be done – given the collapse of Irish banks and scale of rescue required with State funds.
AIB has returned to profitability. It is now better placed to return in time some or all of the taxpayers’ money invested to rescue the bank.
To do so successfully will also required a skilled and experienced chief executive, who may prove hard to attract if the salary cap is not adjusted.