Publicly-owned companies which do not rely on the State for funding should have greater freedom in setting pay rates for their top executives, former minister for health Stephen Donnelly told a government-appointed review of remuneration last year.
Mr Donnelly said while some form of policy was necessary regarding chief executive remuneration in the commercial State sector, “a strong case can be made for those bodies which do not have recourse to the State for funding to be dealt with in a different manner to reflect this”.
In a letter to the Senior Post Remuneration Committee (SPRC) the then minister said: “Perhaps such bodies could be permitted to offer an increased level of basic pay to their CEOs. Or the rules pertaining to the current headroom in pay required between the CEO and the next highest executive (usually held to be 10 per cent) could be altered.”
SPRC chairwoman Maeve Carton had written to ministers, including Mr Donnelly, inviting them to make submissions regarding remuneration in commercial State companies that came under their auspices.
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Mr Donnelly said that as minister for health, VHI was the only commercial State company in his area.
He said while it did not require State funding and operated in a competitive and commercial marketplace, VHI remained “a valuable asset in State ownership”.
“Therefore I, and by extension the State, have a duty to ensure that it is not hindered in any meaningful way from carrying out its permitted activities in the highly competitive market in which it operates.
“The recruitment and retention of very highly qualified and skilled individuals, including at CEO level, is undoubtedly one of its main priorities and the provision of appropriate remuneration should reflect this.”
He noted that VHI was the largest non-life insurance company in the State, with gross earned premiums in 2023 of €1.684 billion and over 1.2 million customers.
It required a “specific calibre of CEO”, he said, who can successfully manage a company of its size and complexity.
“The applicable remuneration should reflect this,” he wrote.
“The new VHI (group) CEO role has changed to a large extent in recent years. In addition to being regulated by the Central Bank, it is now organised in a group structure with a number of growing subsidiary companies. It is an increasingly complex organisation that has expanded into the provision of health services as well as providing private health insurance.”
VHI accounts for 2023 showed the annual basic salary for its chief executive officer was €287,000.
In 2022, the insurer told a Government-appointed independent review panel that restrictions on pay and pensions were adversely impacting its ability to compete and grow.
“VHI is experiencing significant risk in recruiting and retaining colleagues based on State remuneration restrictions when benchmarked against industry equivalents. It has experienced difficulties in attracting and retaining senior staff. Remuneration restrictions mean that we are competing for the same talent that others are competing for without the same restrictions. It is vital for the long term sustainability of VHI and to allow us execute our business strategy that we are able to attract and retain the people we need to run and develop the business.”
Last month following the report of the SPRC, the Government signalled it would update rules to allow a “market rate” to be paid to chief executives in commercial State companies.
