Irish Banker Pay Review Said to Urge Looser Policy as Execs Quit
(Bloomberg) -- A report is set to recommend easing constraints on Irish bankers’ compensation, according to people familiar with the matter -- putting the onus on politicians to choose between angry voters and a revolving door in lenders’ executive suites.
The government-commissioned report is set to propose amending government rules which limit bonuses and cap salaries at 500,000 euros ($565,000) per year, according to the people, who asked not to be named as the information is private. The review will be completed in coming months, according to one person, and the conclusions could still change as it’s still in draft form.
In Ireland, bonuses of more than 20,000 euros currently face a tax of 89 percent, and banks have sought to test the pay constraints. Finance Minister Paschal Donohoe hired Korn/Ferry International to examine banking pay policy after blocking a proposal earlier this year by AIB Group Plc that would have created a deferred bonus plan.
The report is still being drafted and will be reviewed by officials before being submitted to the finance minister, a spokesman said in response to a request for comment.
With pay still a lightning rod for taxpayers forced to bail out the banks, there’s no guarantee Donohoe will act on Korn/Ferry’s likely recommendations, with many senior executives seeing no prospect of a change anytime soon. Still, the case for a revision may have been buttressed by the planned departures of the top two managers at AIB -- Chief Executive Officer Bernard Byrne and Chief Financial Officer Mark Bourke. Byrne is joining Davy, a securities firm that’s not subject to the caps.
Ireland holds about 71 percent of AIB, 75 percent of Permanent TSB Group Holdings Plc and 14 percent of Bank of Ireland Group Plc.
AIB is mulling a second effort to push the bonus plan through next year, according to a person familiar with the matter. The bank declined to comment. Pay restrictions make it “very difficult to operate,” AIB Chairman Richard Pym said in October.
There are some exceptions to the rules. Bank of Ireland CEO Francesca McDonagh earns a basic salary of about 950,000 euros, as her predecessor’s contract pre-dated the introduction of the cap.
In the end, any government-endorsed changes to rules on bonuses are likely to focus on lower-ranking staff rather than executives, said one of the people.
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