A CONFIDENTIAL report on the pay and pension of former Irish Nationwide chief executive Michael Fingleton found that no consideration was given on whether a controversial €1 million bonus paid in late 2008 was appropriate following the Government bank guarantee.
The bonus was agreed by Irish Nationwide’s board to retain Mr Fingleton for a year but the report found that he requested it before the year had ended “without further recourse to the board”.
The report – written by two Irish Nationwide directors on foot of a request from the Department of Finance – reveals that the bonus formed part of a deal reached in April 2008 to retain Mr Fingleton for a year after he stepped down as managing director that January.
The report also shows that the value of the assets in Mr Fingleton’s pension fund at January 2007 – when he moved it out of the building society – plummeted from €27.6 million at that date to less than €4 million in April 2009.
Some €22.8 million was lost off the value of equities in his pension fund, including €11.7 million on shares in AIB and some €6.6 million on Bank of Ireland shares.
It is not known whether Mr Fingleton sold out of these investments before they fell in value.
After Mr Fingleton agreed to stay on for a year – after reaching his 70th birthday in January 2008 – he received a 10 per cent increase on his salary and payments of €400,000 and €50,000 to compensate for loss of director’s fees. The board wanted him to stay on to lead loan recoveries and to give it time to find his successor. His pay, bonuses, fees and benefits totalled €2.417 million for 2008, up €104,000 over 2007.
Mr Fingleton sought the €1 million retention bonus to be paid in November 2008 – weeks after the Government introduced the bank guarantee – before he had completed the full additional year.
“By this time the Government guarantee scheme had been put in place,” the report says. “There was no consideration given at the time of payment as to its appropriateness in the light of the guarantee scheme.”
The report – which was released to the Public Accounts Committee last month and published yesterday on its website – says there is no evidence that in the significantly new circumstances of the guarantee scheme, “any review of the €1 million bonus payment took place at the time”. It says that while Mr Fingleton had said in April 2009 he would repay the €1 million bonus, he had not done so. The report says Mr Fingleton also received a €1.4 million bonus in 2007, €1 million bonus in 2006 and a €500,000 bonus in 2005.
“In the six years to 31st December 2008 Mr Fingleton’s total package increased from €1.2 million for the year ended 31st December 2003 to €2.4 million,” the report says.
Mr Fingleton enjoyed salary increases of 9.5 per cent a year from 1992 to 2008, and he was entitled to an annual pension of €890,000 based on his final yearly salary of €1.34 million. The report described Mr Fingleton’s €27 million pension fund as “generous”.
“They reflected his position as a CEO of long service, his significant salary level and in particular were considerably enhanced by the modifications authorised by the Trustee (Irish Nationwide).”
The report says that in 1997 Mr Fingleton’s pension was significantly enhanced by the trustee, acting through the board to include annual bonuses averaged over the preceding three years.
This became a large part of the scheme totalling €12.4 million.
“In 2005 the trustee further enhanced Mr Fingleton’s pension entitlements by increasing the spouses’s benefit to 100 per cent from two-thirds of his pension entitlement,” the report said. “This added approximately €2.2 million to the pension scheme liability at the wind-up date.”
