FREE KIC - NO. 80 AUGUST 12
AIB AGM AND NEW DIRECTORS AT BOI
When I worked for AIB there was a profit sharing scheme that allowed employees to become shareholders. I participated in the scheme and over the years built up a reasonable size holding but luckily I sold most of my shares after the rogue trader John Rusnak incurred major trading losses. I held on to some shares primarily because even after Rusnak I still had a significant capital gain and I thought I might be able to keep my tax bill down. (Like so many people I should not have let tax influence my decision and I also have to be honest and admit that I did not see the extent of the decline in property prices and the implications for the banks). I am now in a situation where it would cost me more to sell my shares than I would get for them so I continue to hold on to them.
A different shareholder asked Mr. Hodgkinson about his benefits in kind (BIK) and the way he replied clearly indicated that the €4,500 per month spent on an apartment for him (along with payment of the BIK tax) on top of his €500k salary was totally reasonable.
I do not expect the executive chairman during his temporary period working full time for the bank to have to slum it while staying in Dublin but I got the impression that the other shareholders felt that he could easily afford to pay for his accommodation from his salary. In my opinion while answering this question there was no sense of humility. The leaders of the banks have made such a mess of things that I thought they might be a bit more humble but I came away thinking that Mr. Hodgkinson still believes that he has such a rare and scarce talent that his compensation could easily be higher.
While I came away depressed from the AIB AGM, I was pleasantly surprised to hear that Prem Watsa has joined the board of Bank of Ireland (BOI). I have been reading about Prem for a few years because he is sometimes called the Warren Buffett of Canada (and everyone knows what I think about Warren Buffett!). Prem has invested in BOI through Fairfax Financial and he wrote about BOI in his most recent newsletter to shareholders:
Bank of Ireland is very strongly capitalized, led by an excellent banker, Ritchie Boucher, and its shares were available at a significant discount to book value. We look forward to being long term shareholders of Bank of Ireland and hope to make more investments in that country as it continues under strong leadership diligently remedying its economic problems. Ireland by the way is a leading location of choice for foreign direct investment because of its talent, tax regime and technology capabilities together with its unique pro-business environment. Our nSpire Re subsidiary has been in Dublin since 1990 and was a great help in making our decision to invest in Bank of Ireland.While I have my doubts about our "strong leadership" I do hope that our "unique pro-business environment" ultimately turns things around and as for BOI I hope this is an indication that the current leaders will be able to create a banking culture that people can be proud of. Maybe there is some hope after all.........................................................................