“Government has to deliver better value in order to reduce the deficit, avoid job-destroying tax increases and protect frontline services. As part of this reform Fine Gael will… introduce a salary cap of €200,000 for everyone”
Fine Gael’s “5 Point Plan to Get Ireland Working”
There was something a little surreal in reading the Department briefing notes handed to the incoming Minister of Finance, Michael Noonan and which were published by the Department of Finance last Thursday evening. The first note came from the Department of Finance’s Secretary General, Kevin Cardiff, a highly experienced civil servant who has been present at many of the nation’s crisis-points in the last three years including that ill-fated meeting at Government Buildings on the night of 28th September, 2008 which gave rise to the guarantee and you may remember seeing him alongside then-Taoiseach Brian Cowen and former Minister Lenihan at the announcement of the IMF/EU bailout last November, 2010. Michael Noonan too has been around for a long time and at 68 years of age next month faces one of the greatest challenges in his career as he tries to restore the nation’s finances. Michael is Kevin’s boss and is likely to be for the next five years. Michael earns €169,275 a year and Kevin, who works for him, is reported to earn €228,446 – 35% more. Surreal.
The same briefing continues to be surreal by stressing that one of the four overarching objectives of policy should be to deliver “improvements in competitiveness and reforms to improve competition and reduce costs” and “further reductions in expenditures will be required and achieving these will require firm control of pay”. Surreal.
Page 190 of the main briefing document deals with the issue of public sector pay above €250,000 – not €200,000 as in Fine Gael’s “5 Point Plan to Get Ireland Working” and sets out some public servants whose pay is in excess of €250,000. The briefing goes on to say “a ceiling on salaries would have the greatest effect in the commercial State-sponsored bodies”. Former Minister for Finance Lenihan said in his Budget 2011 speech on 7th December, 2010 “while there are issues about the contractual position of incumbent post holders, I think the position of the Minister for Finance as a shareholder or statutory stakeholder in these companies can be used to enforce the objective of the maximum salary within a reasonable timeframe.”
Now in fairness to Taoiseach Kenny, one of the first reforms he effected as Taoiseach was the reduction of his salary by 7% from €214,000 to €200,000. And he reduced the Tanaiste’s, ministers’ and ministers’ of state accordingly. But what about existing contracts which provide for salaries in excess of €200,000? “private contracts” might be the defence, but is that the case any more?
Last Monday night on RTE’s Frontline programme, Minister for Justice, Equality and Defence, Alan Shatter referred us to Article 43 of the Irish Constitution in the context of unilaterally changing private commercial lease agreements. That Article includes the following
“43.2.2 The State, accordingly, may as occasion requires delimit by law the exercise of the said rights with a view to reconciling their exercise with the exigencies of the common good.”
And indeed there are other instances of the “common good” occurring in our Constitution – Article 6, which is an overarching Article, for example says
“All powers of government, legislative, executive and judicial, derive, under God, from the people, whose right it is to designate the rulers of the State and, in final appeal, to decide all questions of national policy, according to the requirements of the common good.”
So if the justice minister says that the State can interfere with commercial lease agreements in the “common good” then presumably the State can interfere with private employment contracts and change terms including remuneration. That being the case, then what obstacle lies in the way of delivering the Fine Gael “5 Point Plan to Get Ireland Working” pledge to cap public sector salaries at €200,000?
NAMA Wine Lake 
A question: How does reducing the rent of Multi national tenants at a cost to the taxpayer (through their ownership of NAMA) or any citizen (through their investment in pension funds) benefit the “common good”?
@WSTT, one answer: ensuring all factors of production are priced at levels which reflect our economic straits, will promote competitiveness & productivity which results in more employment, economic activity, wealth and taxes. And the converse will arguably give you the opposite result, that is, having a factor of production at a distorted price level reflective of a different, more prosperous economic period hinders competitiveness & productivity.
those salaries are just shocking. Certainly a case of delusions of grandeur. We are a small island relying on farming, tourism and some high tech stuff …
Time to get on bicycles and roll up the sleeves of those sleevin suits and get real like the rest of us.
we need a big clear out and an ethos of “the greater good”
and how much money does a person need to live anyway ? food, heat, clothes etc… mebe some charvez shirts ?
These things self adjust. Who will pay when the value of all NAMA’s investment properties, the remainder investment properties in the PIs and all the property in the non-NAMA banks, the Pension Funds, Insurance Funds and PI Investment Managed Funds lose half their value?
It also begs a couple of interesting questions relating to (a) compensation claims from investors against the State and (b) what chance have NAMA got of collecting on the PGs that they are relying on, seeing that the State will have interfered with the underlying asset value?
BTW, Non production of new commercial space will see rents rise in the future and we will be back to where we started. At current levels it is impossible to build office space at a profit.
@wstt
You answer your own question: “At current levels it is impossible to build office space at a profit.”
The ludicrous salaries paid out by the state go hand in hand with the high cost of construction in Ireland. Unfortunately for Ireland, the EU is no longer going to subsidize this fiasco where you do each others laundry for exorbitant salaries.
And while you at it, nwl, you might wish to look at not only the level of pay but at the qualifications behind them. I am sure you will not find too many quantum chemisty PhDs (see your nemesis Germany).
An example: US supreme court justice salary, 155,000 euros; Irish suprem court justice salary, 258,000 euros.
There is an old Dublin colloquialism which I find more an more use for these day; namely, “wasters”.
The head of the NTMA is paying himself almost a million euros from publc funds, even as he mismanages them. The head of the DAA being paid over half a million to build a massive white elephant second Terminal that no-one needed. And what the hell is the NDFA?! I have never even heard of this agency up to this very moment!!
A transition year student could so most of these jobs. I’m not exaggerating. My deep suspicion is that the majority of the people do almost no work at all, and simply sit in meetings. I dare anyone to prove otherwise with anything more than the usual rhetoric about “rewarding best talent” and “meritocracy” and all the other excuses that have allowed the widescale rapine of public and private funds.
These men (excepting the President they’re all men), are the modern equivalent of the old aristocracy, who were rewarded handsomely for doing essentially no labour. What exactly does a CEO _do_ all day? Not enough to earn these salaries, that much is certain. The president of the US earns less than these clowns, and he makes actual decisions.
I’ve asked many about the entire structure of corporate governance and I still don’t understand why state and semi-state companies need corporate style boards or management at all. As far as I can see, the purpose of management is plunder the organisations they manage.
I am in complete agreement with the Minister for Justice. The Irish constitution was not written by rich protestant landowners. The Irish State has the power to revoke these salaries, and it should do so.
@OMF, I think what you’ve written is very unfair but reflects popular opinion (by “popular” I don’t mean “populist” or any other insulting term – I just mean it seems to be held by a lot of people). John Corrigan can hardly be said to pay himself – I would guess that his salary is determined by others and is supposed to be competitive. I have been disappointed by the returns of the NPRF, but the claim is that it has outperformed other private sector Irish pension funds, so in that sense you might say that they could have done better – and in 2009/10 when world stock markets rebounded, the returns from the NPRF seemed anaemic – but I don’t it’s fair to call that “mismanagement”. You might say that the September 2010 bond auction was suicide but again I think “mismanagement” would be too strong.
But what I do find insulting from the NTMA is that it doesn’t reveal salaries because it employs people “mid-career” in a “highly competitive environment” and disclosing salaries would cause dysfunction. What complete and utter tosh!
As for the others, you are ahead of me if you know what their jobs actually entail, but speaking about NAMA which is probably the agency most familiar to me from that list. Brendan McDonagh has overseen the detailed valuation of €27bn of property loans and absorbed same with EU approval, has recruited 100+ people and an army of contractors, dealt with a hostile public and special interest groups not to mention political interests and overseen the sale of €2.7bn-odd of assets. There have been delays but no scandal, at least of which I am aware. I would guess that if he was managing a €30bn property fund privately he might expect remuneration that might run into the millions per annum. But should he be paid €430,000 plus 60% max bonus each year when the State is close to being on its knees. Personally I used to think a €200,000 salary might have been more appropriate with a substantial bonus based on challenging targets (profit, reducing debt, protecting employment).
But take a look at US Treasury Secretary Timothy Geithner paid €137,000. Does he also not have the financial weight of the nation on his shoulders? And that’s the point – the “pay them a competitive salary or they’ll go elsewhere” meets a State that is financially impoverished. And I tend to think that salaries should be reduced in these circumstances.
And to conclude, I think it is very unfair to claim that a gap year student might do the NAMA CEO job as well as the present incumbent. I don’t know about many of the other CEOs but my starting assumption would be that they are hard-working, academically qualified, experienced with appropriate management, personality & networking skills to deliver a decent result in their jobs.
In former times maybe the current reward was appropriate but at this point the “common good” seeks a sacrifice from them also.
I think the unstated fallacy here is that because someone is managing a large portfolio of assets, it follows that they should be paid a large amount of money. This attitude has crept in from the banks and is what has a public servant in the NTMA being paid more every year than most people will make in ten. There are surgeons with responsibility over life and death who are not compensated to this extent.
Corrigan and others before him perform a relatively routine public function. They are not driven by profit, they are not under pressure from competition, they do not answer to shareholders, nor do their decisions ever generate much in the way of revenue. There’s absolutely no reason whatsoever to pay them any more than about €80,000 a year, and I’m sure in times past that was the equivalent level of compensation in the DoF. Unfortunately, bonus culture has wrecked whatever prudence existed through the public service. The madness of the banks has management, public and private, all but misappropriating company and public funds.
That may be all very well starting assumption, but you must be willing to examine evidence critically and review opinions. Semi -state bodies _have_ been mismanaged, chronically in some cases, for over a decade now. The banks are the most glaring offenders here, but organisation like DAA, and the HSE are well known disaster areas. The problem is indeed in management. A crony culture has seen unqualified, unsuitable and destructive individuals appointed at ever level across the state.
I am deeply sceptical of the current culture and makeup of modern management. My opinion is that most in senior management possess little more than “people” skills, good for getting them the job. I believe that people possessing real skills are few and far between in the upper layers of private and public management. Perhaps others might have experience from a different era, but looking around, all I see is case after case of incompetence and corruption. I’m actually quite surprised that the whole rotten structure of corporate governance hasn’t caved in long before now. Even the EU seems to have finally begun paying attention to the manifest problems in the continents boardrooms.
@OMF, I think you make good points. Though it seems to be an accepted fact of life that when you’re managing wealth for profit, your salary tends to reflect the value of that wealth. The NTMA claims to have consistently outperformed private sector Irish pension funds in recent years. It still seems too early to tell how NAMA is truly performing – it has accomplished a lot and completed many processes but there are concerns as well.
And speaking of concerns we should get the remainder of the Paddy McKillen Supreme Court ruling tomorrow at 10.45am. NAMA’s failure to properly make a decision on Paddy McKillen’s loans and the result that Paddy partly won his case is certainly a black mark against NAMA and its advisers.
Ah…. true no scandal has surfaced yet, but that is the nature of scandals. They bubble under the surface. You have to see the bubbles to know that they are there. And there are bubbles aplenty. The actuality will be outed in the courts. It will first be seen in the underselling of assets to friends of the receivers to the detriment of the taxpayer. As the motto on the Curragh racecourse clock tower says: “Time discloses all”.
….then there will be NAMA’s agreement to such sales. The issue of the fraudulent interest rates charged to borrowers by Anglo Irish Bank and NAMA’s continuation of the practice (i.e. charging interest on dubious interest calculations). The use of extortionate methods to lever assets from borrowers’ relatives to cover the principals’ losses. And we haven’t even begun to discuss brown envelopes and the fact that some NAMA advisors are also NAMA borrowers.
For instance it is a little known fact that Blackrock who have a nice little earner with NAMA are also on the other side advising borrowers on funding and restructuring their loans out of NAMA. Blackrock is not the only one – every major accountancy firm in the country is doing the same thing.
The disposal phase has not even got into gear yet. Wait until that happens!
The First this I notice is that the Head of the Government is the lowest paid public servant on this list: These salaries are outrageous and if Enda Kenny wants to keep support for this Government he should immediately slash these lottery salaries .There is no justification in paying out such salaries when the country is in the financial meltdown it is in and with the savage cuts in essential services this action is morally justified .Before going off the Europe we need to cut our cloth according to our means !
“So if the justice minister says that the State can interfere with commercial lease agreements in the “common good” then presumably the State can interfere with private employment contracts and change terms including remuneration. That being the case, then what obstacle lies in the way of delivering the Fine Gael “5 Point Plan to Get Ireland Working” pledge to cap public sector salaries at €200,000?”
the state has already reduced public sector pay through the pension levy – they have also reduced pay of people only tangentially part of the public sector. This seems a clear interference with the property rights of these people
However, the question is whether this would be a proportionate interference with these property rights (and perhaps right to earn a livelihood).
The people involved probably have a contract and the question is whether the state can rewrite these contracts in the interests of the common good. Clearly no private sector party has this ability.
It would need be to shown that the policy pursued a legitimate aim, was rationally connected to that aim, and that it interfered with the right as little as is possible to achieve the legitimate aim. There would be need to be proportionality between the aim pursued and the means employed.
The leading cases are Cox v Ireland and In re A26 and the Health Amendment Bill (No 2)
Having seen this list, I think it is time for all honest citizens in the State to down tools. If there are honest citizens!. Why in God’s name or even Irelands’ name would any sane person work to keep these people rich. None that I can think of.
The bondholders get the loot, Irelands’ insiders get the loot, poor people get the boot. What a republic.
And what is the NDFA anyway. Its address is the same as the NTMA. No wonder Johnnie Ronan feels entitled to his rent.
Why would the Europeans consider giving one red cent to Ireland while this robbery goes on.
PS.
Have the NTMA managed to get the keys of the Maybach yet.
all of the above with reference to bloated and lottery type remuneration are of course correct. We the “outsiders” are absolutely powerless to do anything to change the poisition except lobby our local and national Politicians. Pure waste of time.
The problem is “THE CLUB”. the Public/Civil Service is a club and no-one on the inside beneffeting from bulging salaries will ever rock the boat and do themselves out of DOSH.
When eventually WTP (we the people) get angry enough and exercised enough to do something about it, will anything happen. It is utterly indefensible to pay these guys such ridiculous salaries. we are completely out of step with our neighbours and most European countries.
A company can get out of paying a wage increase due under the national wage agreement (prv) because of “inability to pay”. Surely a country that is bankrupt, on life-support, looking down the barrel of default can similarly plead total inability to pay such crazy salaries. WTP should find our voices and redefine the “mission statement” for our little island, before it is tooooooo late. The clock is ticking……..
Really don’t understand why our leader does not cap the wages based on this article, why do we continue down this road. It’s so unfair, when recently I was refused an application for incremental pay which would bring me up to an annual salary of less than €30000? This is a sad reflection of the state of this nation. I’m deeply saddened.
Yours sincerely A proud Irish citizen