Money matters: why AIB should pay its executives whatever it wants

In Ireland today politics is everywhere and it is nowhere, even in relation to what really matters: money.

Allied Irish Banks (AIB) hit the headlines again today with its transparent attempt to avoid a government mandated maximum pay rate for bank chief executives. Senior executive Colm Doherty has been proposed as the new managing director and the AIB board wanted to continue to pay him the €633,000 salary he was paid last year in a more junior role. (In fact, Doherty earned over €800,000 when his pension and benefits are included).

The outcry began immediately and finance minister Brian Lenihan immediately rejected the request on the basis that it was in excess of a salary guideline cap of €500,000 that AIB had agreed to in return for state aid. Speaking after a cabinet meeting, Lenihan said that the government was “not willing to break with the established guideline in this case [...] That was my position, that’s the position of the government and that’s where the matter stands,” Lenihan told RTÉ.

It seems like an open and shut case. AIB is clearly attempting to circumvent an agreement with the government and is doing so in bad faith by claiming Doherty will be the bank’s managing director and not chief executive, as if there was any difference in the roles. Unfortunately, there is more to the issue than meets the eye. The salary is galling, given AIB’s performance. But it is also AIB’s problem and if the government had simply let the bank collapse there would be no question about its executive payments whatsoever.

The ‘overpaid’ have become a new focus of Irish politics precisely because of the emptiness of the issue.

Veteran journalist Vincent Browne recently weighed-in on the issue of pay, not to argue against widespread cuts, attacks on social welfare benefits and the generally agreed plan of austerity for all, but to lambast RTÉ for overpaying television presenters. (1) If Pat Kenny’s salary, however generous, is what passes for politics in Ireland today then it is in a very sad state. According to Browne, the salaries of Kenny and his colleagues exemplifies a “culture of financial squander.” (2) Browne argues that RTÉ is merely a “supposed public service” and that there is “no culture at all nowadays in RTE where an awareness of such biases and of the station’s ideology might be critically examined.” This is undoubtely true. What is also true is that the competition, in the form of TV3 and Newstalk, is infinitely worse. RTÉ‘s primary problem is a small audience. Most bizarre of all, however, is that Browne’s argument is not a response to a clear public debate about the future of Irish broadcasting – which at least would have some political meaning, however limited – but to an unhinged rant by an audience member who interrupted Kenny’s programme.

The worst aspect of the ‘overpaid’ narrative is that it promotes a bizarre vision of ‘fat cat’ workers. While the undeserving rich are the initial target, the end result is an attack on living standards across the board. The politics of anti-affluence have much to say on moral issues – ‘the economy in recession because of greed’, for example – but they do not have an economic programme. Commentators and government figures alike have rounded on unions for merely attempting to stop pay cuts, never mind raise wages, fostering the idea that ‘greedy’ public employees are ripping-off workers in the private sector. ‘Share the pain’, is the mantra. Strangely, ‘share the gains’ had rather less coin during the boom.

Complaining about ‘overpaid’ executives and television presenters hides the reality of the all-party agreement on austerity: any caps or cuts endured by the rich are enforced on the lower paid with even more vigour. Last month’s outrage at AIB’s attempt to raise the salaries of ordinary staff is only the beginning. (3) The attacks on AIB and RTÉ‘s top-dog loafers come at a time when the government is attempting to cut public sector pay across the board as well as, once again, raise the income tax burden on everyone – including the lowest earners. Indeed, Brian Lenihan has already mooted the idea of taxing Ireland’s lowest-paid workers, a clear case of inflicting pain on those least able to take it. (4)

Worse still, though, is the fact that attempts to put a limit on earnings inhibit the aspiration to better oneself in general, thus providing intellectual cover for a deeply conservative programme of endless pay restraint. Even union leaders have been attacked for their pay rates, as if union staff were paid out of the public purse and not by members’ contributions, and promoting the strange notion that working people cannot be represented by anyone who earns more than them – a self-fulfilling prophecy that would see political discourse become the private domain of the rich.

Jason Walsh is the editor of forth

(1) Kenny heckler should have targeted Cathal Goan, Vincent Browne, Politico, November 16, 2009
(2) It is worth noting that Browne appears to be in favour of ‘top-slicing’ the licence fee. This would result in TV3, the channel than employs him, receiving a share of public funding. Earlier this year TV3 mooted the possibility that Browne’s show would be cut if funding could not be arranged.
(3) Bashing the bank workers, Jason Walsh, forth, October 21, 2009
(4) Lower-paid may be brought into tax net, Ireland Online, November 17, 2009