The Paddy McKillen hearing in London’s High Court rumbles along with daily revelations about the lengths rich folks will go in pursuit of more riches. There is likely to be a focus on the hearing again on here once Derek Quinlan and NAMA executives get on the witness stand, but for now we get daily snippets which are germaine to NAMA – incidentally I see RTE appears to have pulled its reporter from the hearing which is now in its third week; I thought the London RTE bureau was staying open until September – ah well, I guess someone has to keep abreast of Pippa Middleton’s backside, or suchlike. Meanwhile the Irish Times and subsequently, the Independent both report an episode from yesterday’s hearing where one of the minions of one of the rich folks wrote in an email
“AB, I think it is in the public interest to know what Nama executives are paid. They are personally incentivised with the potential to earn millions in bonuses. It is time to increase the temperature of the water”
This email was written, it seems, in the context of the Barclay brothers trying to prompt NAMA into making a decision about Derek Quinlan’s loans – which has been transferred to NAMA – in favour of the Barclays so that they could strengthen their control of Coroin, the company that ultimately owns three of London’s greatest hotels, Claridge’s, the Berkeley and the Connaught. The Barclays, it appears, were becoming impatient with what was said in court to be NAMA’s delays in making a decision. When asked about the email yesterday, its author is reported to have said that he now didn’t know what the email was in reference to.
The email comes as a bit of a surprise on here. NAMA’s CEO, Brendan McDonagh, is widely understood to be entitled to a maximum of a 60% bonus on a €430,000 salary – though it should be said that (1) Brendan has for 2012 accepted a one-year 15% reduction in his salary to bring it down to €365,000 and (2) Brendan has waived his bonus in its entirety for both 2010 and 2011. But apart from Brendan McDonagh, what are NAMA’s bonus arrangements?
For 2010, we know that the NTMA, the parent organisation of which NAMA is a part, reported
“While performance related pay is an integral part of the NTMA model, the average bonus paid to staff at the Agency in 2010 was €7,681. Agency staff are also subject to the Public Service Pension Deduction. In total bonuses represented 6.6% of overall payroll costs at the Agency. Since the end of 2009, the Agency has secured 11% reductions in payroll costs [including bonuses] on a like for like basis” and that in 2010, the NTMA paid €1,981,760 in bonuses to 258 staff – an average of €7,681
But (1) we don’t know how much of the bonuses went to NAMA staff and (2) we don’t have figures yet for 2011 and (3) there is no information on individual bonuses but we understand from a Committee hearing that the highest wasn’t more than €100,000 at NAMA.
Interestingly there was gossip last week that NAMA staff were on a go-slow and leaving the NAMA HQ at Treasury Building at 5pm each day on the dot in protest at an alleged decision to withhold 2011 bonuses – it should be stressed this hasn’t been in any way verified, but doubtless we will learn in the weeks ahead what bonuses have been paid by the NTMA/NAMA for 2011, but I don’t think they will be substantial.
But could an executive at NAMA “earn millions in bonuses”? Well, if NAMA winds up in 2020, that’s another nine years between 2012-2020 so 9 years*€258,000 would be over €2m and that’s potentially what Brendan McDonagh could earn. What about the others though? In particular, are NAMA’s portfolio managers incentivised with bonuses? I certainly hope they are, these are the people you want thinking 24 hours a day how to make more money for NAMA! But what are they paid, and are their bonuses potentially worth millions of euro? And if NAMA’s clients think they can “increase the temperature” by putting this information – and how do they know, does NAMA’s HR department have leaks? – in the public domain, then shouldn’t NAMA act pre-emptively to remove this potentially extortionate risk? NAMA rarely comments on staff matters, so I guess another route will need be found to get at this information.
UPDATE: 3rd April, 2012. It seems that in 2010, no-one in NAMA was awarded a bonus in excess of €50,000 – “Deputy Doherty asked how many bonuses in excess of €50,000 were paid in NAMA. The reality is that the only individual in NAMA who was awarded a bonus of in excess of €50,000 was the chief executive but it is important to say he waived that bonus.”
NAMA Wine Lake 
That would have to be some form of profit sharing,or else it’s a oxymoron!
Well,good luck to the boys and girls,tough hand to play.Now,that 3,1 Billion in cash is off the balance sheet,interesting times,ramp up dispo’s?
No Bonus in 2011. Well, what a shame! What kind of country is this anyway?
Solution. Shut it down.
@Joseph, if anyone who has run a commercial – that is, sales/profit focussed business – wants to offer a rationale for NAMA having salary packages that exclude bonuses, I would like to hear it.
NAMA made a loss of €1.1bn in 2010, so bonuses generally for that year were not appropriate, particularly as NAMA failed to appreciate that Irish property prices were still tanking and maintained a loan valuation date of 30th November 2009. But you punish employees at the commercial coalface at your peril.
What makes NAMA different is its quasi State agency status, and this State is broke, so there has to be more emphasis on cutting your clothes according to your cloth but removing the potential to earn bonuses or commission in what is supposed to be a commercial environment to maximise returns to the taxpayer? The perspective on here is that is too extreme and ignorant of basic human behaviour.
@NWL
I do not have statistics, but I would venture that 90% of all employees in the State do not get a bonus. Like it or not that is reality.
The bonus culture is rampant in the financial services area but nowhere else. And in the absense of bonus payments in the general economy, it is simply rent seeking and gouging for those in the finacial sector/NAMA to look for bonus payments.
Remember about 10-12 years ago when the unions quite rightly looked for ‘gainsharing’. They did not get it then.
The unions also missed a golden opportunity to assist all workers, particularly low paid, by not insisting on ‘gain-sharing’ as part of a strategy to enable companies to survive.
And yes, I would shut NAMA/NTMA it down rather than pay bonus payments.
How about this for a bonus.
People who do a good job get to keep the job. That is a bonus in the current environment.
PS I am a leftie. Bonus payments for the very well paid are not top of my agenda. I hope they are not top of the union or labour agenda either, though there is reason to beieve they are a bigger priority than jobs for unemployed or decent pay for low paid workers.
@Joseph, I understand what you say, but bonuses, commissions and other incentives are not confined to financial services, ask any salesman, business manager, account manager.
I would challenge any member of this blog’s audience that has run a commercial profit/sales focussed business with employees, to justify salary arrangements for employees at the commercial coalface NOT having incentivisation.
What complicates matters is NAMA is quasi semi state and has employed people in 2010 and 2011 after the crash and you would expect at relatively competitive salaries. So NAMA more than say its competitors at Ulster Bank, Certus/Bank of Scotland and ACC, needs to be sensitive to its remuneration arrangements.
But at the same time, if NAMA has proper bonus arrangements which maximise profit and what is returned to the taxpayer, then good luck to NAMA and its employees.
@NWL Setting up a business rather than running one so I probably don’t count, buuuut in Dan Pink’s book “Drive” he demonstrates many times how performance related bonuses hinders performance on any task which involves a reasonable level of thinking, the point is summarised very succinctly here http://www.youtube.com/watch?v=_mG-hhWL_ug&t=32m50s
Shut it down and do what?? Transfer the loans back to the Banks! Sack the staff! Cancel all the legal process in train & recommence under the names of the individual Banks as plaintiffs! Lets do that, as we probably have’nt lost enough money up to now!!
Fintan O’Toole was writing about numbers and incentives too yesterday:
http://www.irishtimes.com/newspaper/opinion/2012/0403/1224314296157.html
Frank needs to get a life,this is just a weird obsession like a spurned x girlfriend.Frank it’s a waste of time effort and resources.
Daly: “Well anywhere I go on that Matt is going to drag me in to that case. Let me answer the substantive point. Are we happy that we are going after all of the assets and tackling the lifestyles of the debtors? And I am satisfied that generally speaking, we are. We have already managed to get either charges or actual reversal of asset transfers to the tune of about €350million from some of our debtors. We certainly expect that that will total about half a billion when we’re finished.”
http://www.broadsheet.ie/2012/04/03/frank-daly-why-were-paying-millions-to-failed-developers/
If Chairman of the Board the ubiquitous Hugh Cooney,can convince the powers to be that Siteserv is a “good” deal,NAMA needs to radically rethink its strategy.
http://markets.ft.com/Research/Markets/Tearsheets/Directors-and-dealings?s=SSV:LSE
Linked it before but here’s a little pic of Hugh with your fearless leader prior to his huddle with the buyer later same day !
No wonder he has a shit eating grin on him I would too if I had pulled off the stroke that Siteserv is.Can a RE developer propose the same terms and conditions that Cooney got,or do you have to be on the advisory board of the NTMA to get away with a hesit like this.Resign Cooney you are an absolute disgrace.
http://www.enterprise-ireland.com/en/News/PressReleases/2012-Press-Releases/Enterprise-Ireland-Client-Nualight-Announces-$100-million-Lighting-Alliance-During-Taoiseach’s-St-Patrick’s-Day-Washington-Visit.html
To begin with, NAMA is a bad manager of its assets and shouldn’t be holding onto them. It is happening because it has no confidence in its own ability to price and sell its assets. It should set some kind of time limits: perhaps six months for a single-family residence and nine months for apartment blocks, and a year for some kinds of commercial property. If it hasn’t sold a piece of property within the time limits, then it should start dropping the price. Give the sales person flexibility down to 80 percent. If three months after that it still hasn’t sold it, drop the floor to 70 percent. Just keep dropping the price until the property is sold.
The Agency doesn’t get it. I think that is an indication of just how much damage the “dead hand” of historically based, backward-looking accounting has done; of how much influence it still has on the way most of the world, particularly the politicians, the media and thus the public perceives things, rather than thinking in terms of markets and current market prices. The property assets in NAMA need to be sold.
In truth, besides being a poor manager of assets, the agency is a poor seller of assets. It is difficult for it to acquire really high-quality expertise at civil service salaries and in a culture that promotes the absence of commissions, bonuses, etc. NAMA’s staff have their limitations, and the salary structure – the absence of commissions and other incentives that would be natural in a private-sector setting – clearly inflict limitations.
Selling property is inevitably going to be a problem in this kind of environment. It is easy for NAMA to be criticised regardless of the strategy pursued. No civil servant working in the Agency will take the responsibility to carry out a transaction – and the culture does not allow for it. Either the Agency will be criticised for selling too cheap and somebody else will be making huge profits, or it will be criticised for holding it too long as the market falls away and the question will be “Why didn’t you sell sooner?” It is a problem. It leads to an unfortunate but realistic conclusion: the management and sales of property and property related loans in a political fish bowl is not easy. Bonuses? In that climate and with that thinking?