Review of CEO pay in commercial State firms looks at rates in private sector

A review looking at top level pay in commercial State companies should consider remuneration for chief executives in comparable roles in the private and public sectors, its terms of reference state.

Earlier this year the Minister for Public Expenditure Paschal Donohoe announced the establishment of a new senior posts remuneration committee to be chaired by chartered accountant and former CRH director Maeve Carton. She is also a governor of The Irish Times Trust and a former chairwoman of the National Treasury Management Agency (NTMA).

The Government decided that the first priority of the new group should be to examine the pay arrangements of chief executives in commercial State organisations.

In a letter to Ms Carton in April, the secretary general of the Department of Public Expenditure, David Moloney, said the group should have regard to recruit and retain individuals with the necessary skills and experience. He said other factors to be taken into account included the conditions of service enjoyed by those in comparable roles in the public and private sectors.

He said the group also needed to consider “the need to reflect the relative levels of remuneration received elsewhere in the organisation”.

Mr Moloney said the group should have regard also to the prevailing economic conditions and the impact (of any recommendations) on collective pay agreements.

The Department of Public Expenditure redacted parts of the letter sent by Mr Moloney to Ms Carton so it is unclear as to whether there are additional elements to the terms of reference of the group.

Almost 30 commercial State organisations will fall within the remit of the new senior posts remuneration committee. Among the organisations where top level pay will be assessed are RTÉ, the ESB, the VHI, Uisce Éireann, CIÉ, and its three subsidiary transport companies, the DAA, the Shannon Airport Group and a number of ports across the country.

The new committee was established by the Government on foot of the recommendations of an earlier independent review panel on senior public service recruitment and pay determination processes which reported last year.

The papers of this independent group, published by the Department of Public Expenditure last March, showed that a host of commercial State companies wanted greater freedom and flexibility in setting pay rates for their most senior executives and believed that current arrangements are too restrictive.

The submissions – which mainly were drawn up in the summer of 2022 – show State firms wanted greater autonomy over pay, including offering incentive bonuses or performance-related pay.

The ESB told the independent panel in its submission that to attract and retain the best talent, the company must have “competitive and market-facing remuneration for everyone in the organisation including the chief executive”.

It suggested that the salary ranges in place before the crash in 2008 should be reinstated; that there should be an external review of the commercial State sector every three or five years which would place companies in a particular band and that, internally, the chairman and the board would have the flexibility to set a competitive remuneration package for the chief executive.

Bord na Móna said it wanted a return to a market-based pay model for chief executives in commercial State companies.

Airport operator DAA said an independent review should be established by the Department of Public Expenditure to carry out an annual benchmark of chief executive salary rates which would take account of revenue, employee numbers, diversity and complexity of the company as well as “geographic breadth” in determining annual revisions of pay rates.

It suggested that any such review should have to engage with the remuneration committees in commercial State companies.

Health insurer VHI said it was experiencing “significant risk” in recruiting and retaining staff based on State remuneration restrictions when benchmarked against industry equivalents.