At Bank of Ireland (BoI), it emerged that a settlement of approximately EURO2.5m ($3.1m) had been agreed between the bank and its former CEO, Michael Soden. Soden resigned in May 2004 after it was revealed that he had used his office computer to visit the website of a Las Vegas-based escort agency.
The AIB handover was not unexpected – when Sheehy was tapped as the new CEO in March, it was widely predicted that Buckley would quit sometime in the following six months. Buckley, who is 60, has been at the helm of AIB since 2001. Although his departure is not thought to have been acrimonious, he was not officially due to retire until February 2006.
In a statement, the bank noted that the appointment of Sheehy, who has a lifetime of experience with AIB, made for a quicker handover of the reins than would have taken place had an outside candidate been selected.
The statement said that because Sheehy “has over thirty years’ experience in a variety of roles for AIB…a lengthy transition is not necessary.” It also noted that “at the request of Mr Sheehy, Mr Buckley will continue as AIB’s representative on the board of M&T Bank until April 2006.”
M&T is based in Buffalo, New York. AIB has had an interest in the company since it merged with the Irish bank’s U.S. subsidiary, Allfirst, in 2003.
The tenure of the Cork-born Buckley is seen by most analysts as having had mixed results. The bank was hit by several scandals during his time at the helm, although all of them dated from periods prior to his appointment as boss.
By far the most serious problem the bank encountered was the so-called Rusnak scandal. In early 2002, it emerged that a currency trader at Allfirst, John Rusnak, had accumulated losses of $691m through fraudulent trading. AIB was rocked by the revelations, but Buckley received some credit for steadying the ship in the aftermath of the scandal. Buckley dispatched the man who has become his successor to calm the situation. Sheehy later oversaw the merger between Allfirst and M&T.
The bank landed in further hot water last year, however, when systematic overcharging of customers in its foreign exchange business came to light. The bank claimed that an administrative error was to blame for the affair, which continued over almost a decade. AIB has subsequently compensated customers for their losses, though the overall cost of the scandal to the bank has been estimated at anywhere between EURO25m ($30.1m) and EURO50m ($60.2m).
Despite such uncomfortable episodes, AIB is in robust health overall. Its share price has risen by about one-third in the past twelve months. At time of going to press, its shares were being traded at $41.90 on the New York stock exchange. Last year, the bank recorded its highest-ever pre-tax profit – EURO1.4bn ($1.7bn).
Eugene Sheehy first joined the bank at 17. He had been the favorite to be appointed CEO, in part because of AIB’s long tradition of selecting internal candidates for prestigious positions. Sheehy is also highly regarded within the sector at large.
Almost all analysts seem to be in agreement that he will have to focus on two key decisions upon taking over the top job – whether the bank should remain in the U.S. through its stake in M&T, and whether it should also maintain its operations in Poland, where it holds a majority shareholding in Bank Zachodini.
The Irish banking industry has also attracted overseas corporations – Royal Bank of Scotland and Danske Bank have both entered the market in recent times – and this poses obvious challenges for AIB.
Over at BoI, meanwhile, employees are unlikely to be impressed by news of their former boss’s compensation package. The Sunday Independent reported that management at the bank had agreed to give Soden a cash payment of EURO2m ($2.5m), along with an additional EURO500,000 ($617,000) contribution to his pension fund. BoI is currently seeking 2,100 staff redundancies, much to the fury of the banking unions.
Soden’s tenure at the bank is mostly remembered for two failures – he initially suggested a merger between BoI and AIB, but the idea that went nowhere. He also tried without success to take over British bank Abbey National.