AGM: The bank's annual general meeting is an opportunity for small shareholders to speak to the board and this year they should have a lot to say, writes Siobhán Creaton, Finance Correspondent

The 13 directors of AIB bank will be asked to resign their positions sometime after 11 a.m. next Wednesday.

It will be a familiar call for some of the 12 men and one woman, who will have to endure some hours of criticism and anger from shareholders at its annual general meeting. It is unlikely any of the directors will be unseated but the bank will be expected to accept shareholder concerns and offer plenty of reassurance that there are no further surprises in store for investors.

The up to 500 shareholders who will assemble at the five-star Culloden Hotel in Belfast next week have a lot to be upset about. Just three months ago they learned that the Republic's biggest bank had lost €760 million because its lax management and controls had allowed a rogue trader to rack up such losses.

They will have heard AIB chairman Mr Lochlann Quinn and chief executive Mr Michael Buckley explain, on radio, television and in the newspapers, how Mr John Rusnak, a foreign exchange trader at its Allfirst subsidiary in Baltimore, managed to dupe the bank over five years.

The meeting will be an opportunity for them to get a first-hand account of the Allfirst fiasco. They should use the time to elicit key information from the chairman and chief executive to allay concerns about their investment and not get side-tracked fighting futile battles.

AIB's annual meeting is always a lively affair. The bank has its own group of dissident shareholders who religiously attend the meetings. One of them, Mr Niall Murphy, has proposed the removal of the entire board of directors with the exception of Mr Quinn. Another is calling for the chairman's head and there will be a resolution put to the meeting proposing that Mr Murphy becomes a director.

The board is recommending that shareholders vote against these motions. They probably will.

There will be much argy-bargy about this issue but without the backing of the large investment institutions, which have invested millions of their clients' monies in AIB, it will not effect any change.

Institutions contacted by The Irish Times have expressed a broad level of satisfaction with AIB's handling of the affair and do not have an appetite for any further blood-letting.

Many of the pertinent questions in terms of what happened at Allfirst and why AIB failed to spot the massive fraud over a five-year period were answered in Mr Eugene Ludwig's report. His investigation was ordered and paid for by AIB, which in turn used it to blame the entire disaster on six employees at Allfirst's small treasury operation in Baltimore.

Mr Quinn should be asked to explain why Mr Frank Bramble retired with a $2.9 million (€3.1 million) lump sum?

Mr Bramble was, until recently, the head of AIB's US operations. He was also chief executive of Allfirst for most of the years Mr Rusnak was perpetrating this fraud. Why was he absolved of any responsibility?

What contribution will Allfirst chief executive Ms Susan Keating make to rebuilding Allfirst?

Many of the fund managers are still upset at the board's decision to retain Ms Keating as chief executive. AIB's decision to move Mr Eugene Sheehy to Baltimore to oversee the running of that subsidiary has appeased them to a degree and they have generally decided to wait and see how quickly he can rebuild the badly bruised Allfirst franchise. Shareholders should ask the board about the level of confidence it has in Ms Keating to assist with the crucial turnaround of the business she heads. Is she likely to leave the bank later this year and if so under what terms?

Has the relationship between the AIB and Allfirst board's improved?

A key factor in Ms Keating staying on at Allfirst was a threat by its board of directors to resign en masse if she was removed. Would those directors support Ms Keating's departure in the future?

What will happen to Allfirst?

What happens to Allfirst is the most crucial concern for investors.

In recent meetings with the bank, fund managers from the large institutions have told AIB they expect to see signs of considerable progress at Allfirst within a year.

Shareholders should ask the chairman whether the bank will be investing any further capital at its troubled subsidiary? What targets have been set for Mr Sheehy? And when is AIB likely to put the "for sale" sign up in Baltimore and has it received any tentative approaches already?

An exit from the US market has been demanded by the institutions because of the weaknesses in the bank's ability to manage this business that have been exposed by Mr Rusnak. Small shareholders should do likewise.

What is the total cost of the fraud?

We know Allfirst's rogue trader cost the bank €760 million in terms of his trading losses but what was the total cost of the debacle? Shareholders should inquire as to how much AIB paid Mr Ludwig? How much was spent on public relations and the expense incurred during the crisis on the investor-relations exercise it was forced to undertake to support its share price?

What monies can be recovered?

The board should also be asked to explain what it intends to do to recover any monies it can. Is there any hope of recouping funds under its insurance policies? Has a claim been lodged? AIB has hired fraud investigation specialists Kroll to find out what happened to the money. What progress is it making and can shareholders expect its investigation to recover some of the lost funds?

What is the board going to do to improve its stewardship of the bank?

Another crucial question is what have the directors learned since February 6th? The board of directors are the people charged with overseeing the activities of those appointed to manage the bank's day-to-day business on behalf of shareholders. With greater vigilance could Mr Rusnak have been caught much earlier?

Shareholders should ask whether they think it is acceptable that Mr Buckley, AIB's head of finance, Mr Gary Kennedy, and former AIB chief executive, Mr Tom Mulcahy, were unable to attend at least 75 per cent of board and committee meetings at Allfirst in 2000? Does this still happen?

Does the audit committee, comprised of the bank's directors, accept any responsibility for failing to spot the fraud? Mr Don Godson chaired that committee until June 2001, when Mr Adrian Burke assumed that role.

Is it reviewing its remit and what assurances can it offer shareholders about its ability to guard against any future shocks? AIB's auditor, PricewaterhouseCoopers, will also be in attendance. It has not been invited to tender for AIB's business this year. Who is the bank considering for its audit work and what criteria will it use in this selection process?

Will AIB merge with Bank of Ireland?

One more pressing issue for shareholders is the overtures to AIB from Bank of Ireland about creating one large Irish financial institution. Has Bank of Ireland sent any of its representatives to meet Mr Quinn or the bank's advisers on the matter? Is it a realistic prospect or merely a game to try to fend off a foreign institution? Will it mean huge job losses and branch closures?

The chairman and his boardroom colleagues will have prepared well for this meeting. They have already cancelled the bonuses paid to Mr Buckley and the other top executives in acknowledgement of the massive loss in profits last year. Mr Bramble has retired and Ms Keating is not on the board and will not be in attendance.

Another pacifier has been the payment of a dividend to shareholders. Their shares have also performed well, now trading almost €1 higher than on February 6th when the fraud was revealed.

The meeting is the only opportunity for small shareholders to communicate with the board and this year, in particular, they should have a lot to say.

When they eventually break to enjoy the buffet lunch they will either feel comfortable to hold onto their AIB shares or disillusioned enough to sell them. They should use this meeting to make those decisions.