Since barely a month has passed since one CEO told investors recently that he’d “rather die” than allow the government to become an investor in his bank ... will tonights announcement be a precursor to further resignations over the coming week (notwithstanding the Taoiseachs comments that further board/management changes were not a precondition to investing in the three banks).
Should the government have insisted on board/management resignations ?
- Thread starter Panacea
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Brendan Burgess
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The Minister has the right to appoint 4 board members in total to AIB and Bank of Ireland. That would be a very strong force on any board. If they decide that someone should be fired, then they can initiate the process.
They have effective control of Anglo and can remove whomever they wish.
People seem to forget that the executives are entitled to full protection of Irish employment law. The media or politicians can call for heads to roll as much as they like. But the fairest way to do any of this is to have a calm disciplinary process at which the subject can put forward his case.
The employers must go through a process and then prove that the dismissal is fair. They would have little chance of succeeding if they were forced into dismissing someone because it was a condition of some third party deal. The executive would win a huge settlement and the media and politicians would all be shouting again.
They have effective control of Anglo and can remove whomever they wish.
People seem to forget that the executives are entitled to full protection of Irish employment law. The media or politicians can call for heads to roll as much as they like. But the fairest way to do any of this is to have a calm disciplinary process at which the subject can put forward his case.
The employers must go through a process and then prove that the dismissal is fair. They would have little chance of succeeding if they were forced into dismissing someone because it was a condition of some third party deal. The executive would win a huge settlement and the media and politicians would all be shouting again.
In time I'm sure they will happen, but the braying for the blood of the board/management is reminiscent of a lynch-mob mentality. The public are looking for someone to blame rather than facing up to the reality that this whole country got swept along by greed. Sure, the board/management had their part to play in this but so do the regulators, the politicians and the public without whom this could have not come to play. As regards the board/management/staff/shareholders of these banks, have they not already had extraordinary 'punishment' as a result of the wipe-out of shareholder equity. It seems nothing less than a public flogging will satisfy some people.
It all depends on who they appoint to these positions. Given the track record of the current government, I would not hold out too much hope that we will see the government appoint experienced and independent people to the boards.
Just look at this recapitalisation! The government managed to negotiate a very poor deal for taxpayers even though the banks were beholden to the state because of the guarantee. It looks like business as usual for the Irish banking industry. I bet the bankers and shareholders could not believe their luck.
I don't know the legal issued involved, but if some of the head people in these banks are not replaced - without receiving the golden parachute many of them seem to avail of - the public will not have confidence in the banking system. If not legally responsible they are morally responsible and therefore should not be compensated or rewarded for the mess a lot of the banks are in. The public also deserves full disclosure of loans made to board members & top members of staff - we have paid for that privilege.
Unfortunately we have not. We have paid without receiving much privilege. Our team of top-class negotiators have suceeded in limiting the government rights to changes in control and capital structure.
True, they can appoint some directors, but see my last post for my take on that. I wonder if that chap from Fas is looking for work?
I note the comments about senior management and executive directors having the same employment protection as everyone else, but honour should have a role to play. At its bluntest, I cannot understand why the Finance Director of Anglo who, as far as I know, was FD throughout the entire eight years that Fitzpatrick was doing his annual (or was it half-yearly?) loan shuffle, has the gall to hang on. He should do the honourable thing and resign.
A lot of people I've been speaking to would love to know what Fitzpatrick was spending his 87 or is it 94 million on. It got me thinking that perhaps this type of pulling the wool over shareholders eyes must go on elsewhere in the the corporate world. Surely this is not the only company where directors have taken out huge loans and if Fitzpatrick figured that moving it once a year kept the auditors off his back and the shareholders from asking too many pesky questions then its not a far stretch to assume that other execs could be at the same thing.
Also it brings up the question of Golden handshakes and severance packages over the last number of years. Lets say you have a CEO or director who has resigned or been replaced and the company realises that the same CEO or Director has taken loans from the company, perhaps the CEO Director wouldn't be ever in a position to pay back , could it be possible that as part of a severance package the company decides to give options or shares as a golden handshake and then the loan is called in?
Hypothetical Example:
CEO steps down after 4 years at the helm , profits are down, board decide a shake up and the CEO gets his P45. CEO says ok but I've a company loan for €20million and now you are making me redundant, how will I pay it back, and worse how will shareholders react when they find out that you guys sanctioned a loan from company money and it mightn't get paid back?
Board says " Well Mr CEO, on top of your €2million cash compensation package we can offer you €20million in backdated share options or some other form of collateral (which you can use to pay back your loans).
I know this sounds fairly mad and wouldn't or couldn't happen in the real world? but so does a Financial Regulator knowing for most of the year about a $87 million loan that was being hidden from shareholders - now thats mad.
Shareholders should ask questions at AGMs directly to directors in relation to loans - " Did you at any stage of this year or previous years take a loan from this company?" If the answer is yes but it doesn't show on the books , then WTF, but if the answer is no and the financial regulator knew but sat on it then happy days because nothing untoward or illegal occured.
Legalised fraud is still fraud in my opinion
Also it brings up the question of Golden handshakes and severance packages over the last number of years. Lets say you have a CEO or director who has resigned or been replaced and the company realises that the same CEO or Director has taken loans from the company, perhaps the CEO Director wouldn't be ever in a position to pay back , could it be possible that as part of a severance package the company decides to give options or shares as a golden handshake and then the loan is called in?
Hypothetical Example:
CEO steps down after 4 years at the helm , profits are down, board decide a shake up and the CEO gets his P45. CEO says ok but I've a company loan for €20million and now you are making me redundant, how will I pay it back, and worse how will shareholders react when they find out that you guys sanctioned a loan from company money and it mightn't get paid back?
Board says " Well Mr CEO, on top of your €2million cash compensation package we can offer you €20million in backdated share options or some other form of collateral (which you can use to pay back your loans).
I know this sounds fairly mad and wouldn't or couldn't happen in the real world? but so does a Financial Regulator knowing for most of the year about a $87 million loan that was being hidden from shareholders - now thats mad.
Shareholders should ask questions at AGMs directly to directors in relation to loans - " Did you at any stage of this year or previous years take a loan from this company?" If the answer is yes but it doesn't show on the books , then WTF, but if the answer is no and the financial regulator knew but sat on it then happy days because nothing untoward or illegal occured.
Legalised fraud is still fraud in my opinion
I find ths notion that the ' whole country' was greedy is over-the-top. Most people I know work very hard, typically 60 hours/week - and yes, some may have ventured forth on the odd sking holiday, or even invested in an investment property - but this hardly constitutes greed, rather, a result of hard work and effort.
Those swept along by greed were to my mind, senior politcians/public servants/bankers/lawyers and hospital consultants, who basically decided that they were entitled to lead world renumeration tables for their respective professions, even though they typically delivered (and continue to deliver) mediocre outcomes.