Member warned of deteriorating governance

Bolger Memo:The former vice-chairman of the EBS, Ron Bolger, has warned that he would make an approach to the financial regulator if issues he was concerned about were not addressed.

Mr Bolger sent a two-page memorandum to his fellow EBS directors in April 2006 headed "corporate governance and other concerns" in which he said that corporate governance had "seriously deteriorated" over the previous 18 months.

"Individually and collectively, as a board of directors we all bear responsibility.

"As senior independent director, I feel a particular burden of responsibility. Despite my efforts to provide professional guidance and advice, and to support the best interests of the society, I now find myself being personally discredited when I speak out."

Mr Bolger is the principal of consultancy firm Ely Capital. He is chairman of Irish Food Processors, the Galway Clinic and C&D Foods, and is a director of Aircap Holdings NV. He is a former managing partner of KPMG and a former chairman of Telecom Éireann. In his memorandum Mr Bolger said that there had been a serious breakdown in "communications and trust" between the chair, Brian Joyce, and three of the independent directors, Cathal Magee, Ethna Tinney and Mr Bolger himself. He said that there had been "breaches of the sanctity of the confidentiality of discussions between chairman and directors, in particular between the chairman and myself as senior independent director".

In the memorandum Mr Bolger cited a range of issues which he said had led to the difficulties at board level, including the "handling of the €5 million cash injection into the manager and senior managers' pension schemes", and aspects of the subsequent reporting to the board on this matter.

He said that the escalating cost of the senior managers' pension fund had been of "great concern" to the remuneration committee. As part of "considerable salary increases" received by senior executives, he said, an increase in pension contributions to 10 per cent from 5 per cent had been sought by the remuneration committee, and agreed.

However, within a week this had been "put on ice following a memo from the CEO".

Mr Bolger also cited what he said was the increase in the size of the bonus received by the chief executive, Ted McGovern, after the remuneration committee had agreed a lower figure.

Mr Bolger said that he had "personally told the chairman that he should review his own performance in the context of the corporate governance issues raised".

He said that unless appropriate immediate action was taken by the board, then the onus fell on him, as senior independent director, to "hand these issues on to someone else who will force change upon us, the financial regulator". Mr Bolger resigned from the EBS board in December 2006.