Michael McGrath (Cork South Central, Fianna Fail)
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I thank the Ceann Comhairle for allowing me to raise the matter of the level of remuneration of chief executive officers in the commercial semi-State sector. It is a matter that has been well ventilated in the media at a time when so many have lost their jobs or are coping with significantly reduced incomes as we attempt to work our way through the current economic recession. I have no doubt that those who occupy chief executive officer positions in commercial semi-State bodies are people of integrity and ability, who work hard and fulfil their functions competently. The concerns I express do not relate to any specific personalities; I am not acquainted with any of the individuals involved. Moreover, I accept that these responsible positions should be well remunerated.

The question to consider is what constitutes an appropriate level of remuneration. The reality is that some of the packages currently enjoyed by the holders of these positions are grossly excessive. It is high time for the Government to intervene given the failure of the boards of these companies, which are generally responsible for setting the remuneration of their chief executive officers, to act responsibly in this regard. The remuneration assigned by the board generally requires the consent of the relevant line Minister who would normally give that consent with the approval of the Minister for Finance.

In recent weeks I tabled several parliamentary questions which sought to discover the details of the remuneration packages being paid in recent years at the various commercial semi-State bodies. Not all the information I received was up-to-date but it was indicative of what has been happening. For example, in 2007 the chief executive officer of An Post had an overall remuneration package of €523,000, reduced in 2008 to €493,000. Also in 2007 the chief executive officer of ESB had an overall package of €654,000, reduced in 2008 to €535,000. In 2008 the chief executive officer of Coillte received a remuneration package of €489,000, including a bonus payment of €74,000, reduced in 2009 to a total package of €414,000. These levels of remuneration are not acceptable. According to media reports - I did not receive this information by way of parliamentary reply - the chief executive officer of the Dublin Airport Authority enjoyed an overall remuneration package of €698,000 in 2007. This is the company which admitted some months ago that it had insufficient cash to run the business according to the existing model and was obliged to undertake a major redundancy and cost-cutting programme.

How did the boards of these commercial semi-State companies approve such ridiculously excessive levels of remuneration for their chief executive officers? There is a distinct lack of consistency across the sector, with some chief executive officers paid in the region of €150,000 to €200,000 while others enjoy packages up to and in excess of €500,000. According to media reports, the chief executive officer of the IDA had a salary of some €200,000 in 2007. The function of that office is to secure inward investment which will lead directly to the creation of jobs. I cannot understand how the person responsible for running the three State airports, although that is also an important job, could be paid up to €700,000 while his or her counterpart in the IDA, who has a key position in terms of our efforts to secure economic renewal, is paid only €200,000.

How then do we place a value on the respective roles of chief executive officers in the commercial semi-State sector? It has been argued in some quarters that benchmarking their remuneration against that of private sector counterparts suggests their pay is not excessive. I dispute that analysis because it takes no account of the radically changed environment in the private sector in the last two years. Moreover, commercial semi-State companies operate within the broader public sector family even though they have a commercial mandate. As such, many of their senior executives enjoy security of employment and the other entitlements of public sector employment but have not, despite their generous pension arrangements, been subjected to the pension levy. These companies are not floated and are not therefore subject to stock market disciplines. The Government is the only shareholder and in many cases a dividend is not required to be paid. In addition, many of them also function as monopolies within their sector.

The Government should consider the possibility of introducing a cap on remuneration in the semi-State sector. The high salaries being paid to chief executive officers and other senior managers are feeding into an environment of high energy, transport and compliance costs and so on, making our economy less competitive. I acknowledge that many of these people have taken a 10% pay reduction in response to the call by the Minister for Finance. Notwithstanding that, I urge the Government to establish a review body to update the 2007 Hay Group report in order to set more realistic remuneration levels for chief executive officers in the commercial semi-State sector in order to reflect the changed economic situation. Remuneration should be based strictly on performance.

John Moloney (Laois-Offaly, Fianna Fail)
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I am taking this matter on behalf of my colleague, the Minister for Finance, Deputy Brian Lenihan. I thank Deputy Michael McGrath for his contribution to this debate. There is considerable variation in the size and capacity of State commercial companies. They include large companies such as ESB, CIE, the Dublin Airport Authority and Bord na Móna which play a critical role in national productivity. State commercial companies have been central to the development and modernisation of our economy. They also provide many of our essential infrastructural needs.

In the past, recommendations regarding the remuneration of chief executive officers of commercial State bodies came within the remit of the Review Body on Higher Remuneration in the Public Sector. Following recommendations by the review body in 1996, the Government adopted new arrangements for the system of determining the remuneration of these chief executive officers. Under this system, management consultants review the pay of these posts from time to time based on comparison with posts in the private sector.

Pay ranges recommended through this system were approved by the Government in 1999 and 2007. Currently, the remuneration of chief executive officers of commercial State bodies is set within the range of 80% to 100% of the median of private sector rates. In addition, chief executive officers are eligible to take part in performance-related pay schemes which, since 2008, provide for a possible annual performance bonus of up to 35% of salary, 10% of which must be based on achieving rigorous measurable targets at the end of three to four-year periods.

The Financial Emergency Measures in the Public Interest (No. 2) Act 2009 provides for reductions in the pay of public servants including staff of non-commercial State-sponsored bodies. The Act does not, however, cover commercial State-sponsored bodies. As the Minister explained during the debate on this legislation, pay cuts in commercial State-sponsored bodies such as Bord Gáis and the ESB would have no impact on the public service pay bill because the pay of the employees of those bodies is funded through their own commercial efforts. Historically, these bodies have not been covered by the public service element of pay rounds and have taken an independent approach to controlling their pay bills. RTE, for example, achieved voluntary pay reductions in recent months by agreement of its staff. Similarly, there have been a number of voluntary redundancy schemes in the ESB. While these companies must be allowed to act commercially and in accordance with the normal industrial relations process, the Government believes they should be subject to pay restraint in the interests of fulfilling the long-term national goal of ensuring competitive pricing for energy and other goods. The Minister for Finance has indicated that he is concerned about top-level pay across the economy. He has said he will bring proposals to the Government to review the arrangements governing the pay of chief executives of commercial State-sponsored bodies. Accordingly, the issue under debate is being addressed. The nature and extent of the proposed review is under consideration by the Minister for Finance. I can confirm that the Minister will bring proposals to the Government shortly.