Sigrún Davíðsdóttir's Icelog

There is moral indignation in Ireland right now over royal pension being paid to former managers at Allied Irish Bank. The Oireachtas finance committee is criticising the present AIB management for not requesting that former executives return their pension. Ia former AIB chief executive Eugene Sheehy is paid a pension of €529,000 per annum, while former managing director Colm Doherty will receive an annual pension of €300,000 on reaching his 65th birthday. Minister for finance Michael Noonan says there is nothing he can do but is appealing to the bank managers’ moral sense to relinquish the payments.

This is starting at the wrong end. The managers shouldn’t be dealt with on a moral ground but on a legal ground. In any company that fails it’s of vital importance that those who take over  as managers investigate decisions made over the last months in order to prove their soundness and the effect it has had on the standing of the creditors. AIB received a bailout of €3.5bn in Februar 2009, which together with bailouts for five other banks contributed to Ireland itself needing a bailout in November 2011.

What should be done is to investigate the decisions taken by the AIB management (and the other banks). Is there no ground there for suing these managers?

The three main Icelandic banks failed in October 2008, ie they were not recapitalised. The winding-up boards of all the three failed banks are suing managers and some board members for damages and losses caused. The amounts run to millions of euros. If these cases are won these managers won’t have much left. – In addition, the Office of the Special Prosecutor is pressing criminal charges against some of the managers but that’s an other saga.

Apart from charges against Anglo Irish manager Seán FitzPatrick and two colleagues (concerning loans to ten businessmen in summer 2008 to buy AI shares no one else wanted to buy), not much is happening on the legal front. I fully understand that Irish ministers feel they can’t relieve bankers of their pensions – but ministers could use their power to push the boards of banks, now partly or mostly state-owned, to explore thoroughly if all was sound and safe in these banks before they failed. Indeed, that should have been done long time ago. Is the AI loan to the “golden circle” really the only questionable deed before the six Irish banks failed?

*I have earlier written on the “golden circle” (ia here) – I find it astonishing that if this “trick” was known it would be the only questionable action taken by the six failed Irish banks. The Mahon report  tells stories of some dubious dealings here and there in the 1980s and the 1990s.

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