Wednesday, 28 April 2010
Financial Institutions Support Scheme.
Question 42: To ask the Minister for Finance the action he has taken on the report of the remuneration committee on the covered financial institutions and individual institutions whose actions have not sufficiently taken into account the objectives of the Credit Institutions (Financial Support) Act 2008. [17123/10]
Under the Credit Institutions (Financial Support) Scheme 2008, the remuneration packages of directors and executives, including total salary, bonuses, pension payments and any other benefits, were subject to review by the covered institutions remuneration oversight committee, CIROC, arising from the provisions of the Credit Institutions (Financial Support) Act 2008.
Paragraph 47 of the scheme required each covered institution to prepare a plan to structure the remuneration packages of directors and executives. For this purpose, remuneration includes total salary, bonuses, pension payments and any other benefits received from a covered institution and its group entities, or otherwise, received by a director or executive arising from the performance of his or her functions as a director or executive. These plans covered executive bonuses including share options, if any.
CIROC reported on 27 February 2009, recommending reductions in prevailing base salary, bonus and pension levels for chief executives, chairs and ordinary board members that it considered to be, in many cases, markedly excessive.
The Government considered the CIROC recommendations in light of the further downturn in the wider economy, the current position as regards the financial position of the covered institutions and the fact that larger economies such as the United States of America and Germany have set lower caps on the salaries of government-aided financial institutions than those suggested by CIROC.
In that regard, the Government considered the CIROC recommendations regarding bonuses, pensions, long-term incentive plans and board sub-committees are appropriate but that remuneration terms should generally be lower than those recommended by CIROC.
I wrote to the chairpersons of each of the covered institutions on foot of the publication of the CIROC report seeking immediate action from the boards to revise remuneration plans so that revised remuneration packages of everyone in their organisations reflected the concerns of Government in such a way as to respect the salary cap of €500,000 or amounts recommended by CIROC, whichever is the lesser.
CIROC acknowledged it will be appropriate to introduce new bonus arrangements at a future date taking account of any long-term incentive initiatives. However, this should arise only where an institution is no longer part of a Government guarantee scheme.
CIROC also considered pension arrangements for top management should be reviewed with the payment of cash allowances to compensate for the effects of the pensions cap imposed by the Finance Act 2006. CIROC felt it unacceptable that arrangements be put in place which would be inconsistent with the intent of the relevant legislation. CIROC signalled consideration should be given to the appropriate balance between personal employee contributions and the employer contributions in respect of the pensions of senior executives.
The Minister wrote to all covered institutions requesting revised remuneration plans. Has any institution not sent a revised plan?
The €1 million bonus payment to Irish Nationwide's former chief executive officer, Mr. Michael Fingleton, was not covered by the CIROC's recommendations. Considering, however, that the Minister has put €100 million of taxpayers' money into the building society through special investment shares, has he written to its board requesting it pursues the retrieval of this bonus through legal channels?
Revised plans were received from Bank of Ireland, AIB, Anglo Irish Bank, Irish Nationwide and EBS and were approved. I do not have the information relating to Irish Life to hand.
Before I became the holder of the shares referred to, I inquired of Mr. Fingleton's position. The legal advice given to the Irish Nationwide Building Society indicated that the 2008 €1 million bonus payment to the former chief executive officer was a contractual one and its payment did not contravene the bank guarantee scheme.
CIROC recommended no bonuses would be paid in 2008 which means this payment is not in compliance with the scheme. Has the Minister written to the board of Irish Nationwide requesting a refund of the bonus through legal means? The taxpayer is entitled to know this.
Yes, I have. The board received legal advice that it was not permitted to request a refund. That was obtained prior to my assumption of a shareholding in the building society via the special share device.
If the Deputy, however, wishes me to reopen the matter with the board, I am prepared to do so.