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To most people, the prospect of a €500k salary is the stuff of dreams. To an experienced chief executive of a large bank, it’s something of a derisory offer.
AIB’s search for somebody to take over the helm has been going on for almost a year. David Hodgkinson has filling the void in the meantime as executive chairman and chief executive, but to describe the role as interim would be stretching it.
The reason the search has been so unfruitful, suggests AIB, is that the €500k salary on offer is not a big enough carrot to sway the international talent needed to take the bank forward to take up the role. David Duffy and Brendan McDonagh, two former bankers currently working as consultants outside of Ireland, are believed to be the prime targets for AIB, but they’re unlikely to take the role for that kind of money.
AIB has to adhere to the €500k salary cap imposed by the government in 2009, but has now applied to the Department of Finance for approval to exceed this limit. So far, it’s received a cool response.
Back in the bad old days of 2007-08, the CEOs of Ireland’s banks were much better remunerated. Bank of Ireland’s Brian Goggin was paid €2.9m in 2008, and €3.9m 2007 (even finance director John O’Donovan received nearly €1.5m), AIB’s Eugene Sheehy was paid €2.1m, while Anglo’s David Drumm took home €3.2m.
Understandably, in the wake of shelling out a cool €64bn in tax-payers’ money to bail out the banks, the Irish government is reluctant to believe the line that you have to pay big to secure the right talent.
Let’s not forget, though, that both Lloyds Banking Group and Royal Bank of Scotland have had to tap the state’s coffers, but the UK government has reluctantly agreed to let the firms pay the going rate for their key staff.
Stephen Hester, RBS’s chief executive, has a base salary of 1.2m (€1.4m) and the government gave the thumbs up to his 7.7m overall package this year despite resistance from shareholders. Antonio Horta-Osório, Lloyd’s boss, has a potential pay packet of 8.3m and the new head of its retail banking arm, Alison Brittain was offered a golden hello of 2.3m to join this week.
What’s more, over 300 senior ‘code staff’ at RBS (as defined under the UK regulator’s remuneration shake-up) earned an average of 1.2m each last year.
These are eye-watering sums for jobs at much larger institutions than Ireland’s domestic banks, but it shows what it’s possible to earn even at firms battered by the financial crisis.
An impressive 67% of our readers (who we assume to be Irish financial services professionals) believe that the €500k limit should be lifted, according to a recent poll we conducted on the subject. What’s more, local headhunters we speak to bemoan the salary cap as unduly restrictive when trying to attract senior bankers from abroad, even for head of function positions.
The problem with the pre-crisis excess was that short-term performance was rewarded, ultimately, at the expense of long-term stability. AIB needs someone to come in and help turn the bank around so it can justifiably be called a ‘pillar’ of the Irish banking system. Any remuneration needs to be based on long-term criterion, but sadly needs to be bigger than €500k.
the most likely candidate will be Mcdonagh, former HSBC like his mate who wrote the letter looking for the higher pay deal.
Boys club working for each other, chewing over the remains of the bones of the AIB carcas. The Hodgkinson needs over 10,000 euro a month just to live in Dublin, his 500k is not enough. Wouldnt want to go for dinner with him and get stuffed with the bill……
AIB is a glorified safe deposit box service provider.
A civil servant on 200k a year could run it.