THE BOARD of Allied Irish Banks (AIB) is set to review the process of choosing a successor to outgoing chief executive Eugene Sheehy, following renewed signals from the Government that it will not endorse an internal candidate.
Although the exact parameters of the review remain unclear, well-placed banking sources say there is growing concern within AIB that the board should be seen to move quickly to bring the sense of drift at the top of the organisation to a halt.
Mr Sheehy said in May that he would be standing down but he remains in place until his successor takes office. However, sources say there is concern that the long delay in making the appointment is destabilising AIB at a time of great vulnerability in its business.
Minister for Finance Brian Lenihan remains at loggerheads with AIB’s directors over their wish to appoint Colm Doherty, head of the bank’s capital markets unit and an AIB board member since 2003, to the top job.
A sub-committee of the bank’s board recommended his appointment after assessing applications from a number of external candidates and this recommendation was adopted by the board at large.
While it is believed there has still been no formal recommendation to Mr Lenihan, support for Mr Doherty immediately ran into strong resistance in Government Buildings. Although certain board figures expressed displeasure in very stark terms at the Minister’s position, banking sources said renewed efforts are now under way to resolve the matter.
The Minister, who believes that the appointment of Mr Sheehy’s successor should herald the beginning of a change of culture within the organisation, has argued in private since May that only an external appointment would send out the right signal from the bank.
He received explicit support for this stance from the Green wing of the Coalition last weekend, when that party’s finance spokesman Senator Dan Boyle declared it would veto an internal appointment.
With an appointment from within seen now within certain sections of AIB as a political impossibility for the Government, banking sources say the board will have to review its position.
Looming large in the situation is the strongly-held view of AIB board directors that there is an absolute fiduciary duty on them to select the candidate they deem best-qualified for the job. In light of these strictures, sources say the directors believe it is not possible for them support anyone other than Mr Doherty for as long as he remains a candidate.
Mr Doherty is still in contention for the post, a position he sought in 2005 when Mr Sheehy was appointed in succession to Michael Buckley.
However, Mr Lenihan is seen to be in a very powerful position given that AIB is leaning on the State for significant support on three fronts and may yet require a further State capital injection.
AIB is a beneficiary of the State banking guarantee; Mr Lenihan has already recapitalised AIB to the tune of €3.5 billion; and €24 billion in AIB property-related loans is going into Nama.
