The EBS Building Society has taken the unprecedented step of looking beyond the self-perpetuating directors' club to find a new board member, but there is little hope that other financial institutions will follow its example.
The building society is reporting a strong level of interest from its members in the new non-executive position advertised in the national media and throughout its branch network last week. It is a part-time position, which carries a salary of £20,000 and offers its members the opportunity to make their views known at the very highest level of the organisation. In public relations terms, it is an inspired move, coming at a time when cynicism about the working of the State's financial institutions is at an all-time high.
The DIRT Inquiry and other ongoing tribunals show that such plum jobs appear to have been doled out to members of a golden circle. Again and again the same names are added to the boards of the major Irish companies. First Active and Irish Permanent only allowed dissident members, Mr Henry Murdoch and Mrs Muriel Scorer, on their respective boards after years of running battles between dissident shareholders and the directors. And while the EBS has gone some way towards opening up membership of this elite club, in reality it is still pretty much a closed shop.
All of the banks cite corporate governance guidelines that are followed when it decides to recruit a new director. Such guidelines advocate the delegation of this task to a subcommittee of board members who cast around for someone they believe will fit the bill.
"The nomination committee will look for someone who will bring something to the bank and improve the mix of skills at board level. Ideally, that person will have served on other boards of directors, is viewed as being independent and has a reasonably high profile," according to Anglo Irish Bank director, Mr Tiarnan O'Mahoney.
This general job description goes a long way to explaining the current make-up of bank boardrooms and suggests that, in most cases, a nod to a fellow director in another company will fill the job to everyone's satisfaction.
Most of the directors of Irish financial institutions are professional directors, maintaining a presence in and an income from several companies.
The big names on this circuit are: First Active's chairman, Mr John Callaghan; AIB director and former CRH chief executive, Mr Don Godson; former IDA Ireland managing director, Mr Kieran McGowan; and Anglo Irish Bank chairman, Mr Tony O'Brien. Also on the circuit is a coterie of Bank of Ireland directors: CRH chairman, Mr Tony Barry; former Waterford Crystal chairman, Mr Paddy Galvin; former EU Commissioner, Mr Ray MacSharry; labour law specialist Ms Mary Redmond; PJ Carroll chairman, Mr Laurence Crowley; Gallaher Ireland chairman, Dr Margaret Downes; Pernod joint group managing director, Mr Richard Burrows; and former governor and Smurfit chief operations director, Mr Howard Kilroy.
Membership of the board of one of the major Irish public companies such as Smurfit, CRH or one of the banks gets you inside the golden circle.
Bank of Ireland directors, Mr Barry and Mr Kilroy, both serve on the board of CRH. Mr Barry also works with Mr Galvin in Greencore's boardroom and he, in turn, is a fellow director at Gallaher Ireland with Dr Downes. The Smurfit boardroom is also well represented at Bank of Ireland, with Mr Kilroy, Mr MacSharry and Ms Redmond joining the team.
AIB's chairman, Mr Lochlann Quinn, and former CRH chief executive, Mr Godson, are both members of the board of the Michael Smurfit Graduate School of Business at University College, Dublin.
Another CRH board member, Mr O'Brien, is chairman of Anglo Irish Bank and a former president of the Irish Business and Employers' Confederation (IBEC). Mr Callaghan is a director of BUPA, Esat Telecom, and Glanbia.
Irish Life & Permanent company secretary, Mr Sean Ryan, says Dublin is a small place and approaches to potential board members are usually on an informal basis.
"Generally the board will know that someone is retiring from KPMG or IDA Ireland, for example, and will get in fairly quickly with an approach ahead of another financial institution."
The company has also used the Boardroom Centre, a body that helps to source directors for small and large companies. Its chairman, Mr Tom O'Higgins, says it has some 300 potential directors on its register and generally fills between 30 and 40 boardroom positions a year.
Candidates can find their way on to this register either by sending in their curriculum vitae or by referral from another director. They are then interviewed and may or may not be put forward for a client's consideration.
Mr O'Higgins insists there are plenty of individuals outside of the golden circle who are suitable material for the boardroom of any public company, but that companies aren't brave enough to appoint them. "Perhaps the time has come to have a more transparent way of filling these positions." He says most of the financial institutions prefer to handle their own recruitment for these positions.
When asked about the small group of people who are approached, the banks claim there is a relatively small talent pool available to them. The onerous responsibilities that fall on the shoulders of all directors can also be a deterrent for some people. "A fee of £20,000 is peanuts when you consider the responsibility and time commitment involved. Very good candidates are turning down these positions," according to one banker.
Non-executive directors are expected to attend monthly board meetings and may also be co-opted on to a sub-committee to examine issues such as executive remuneration or audit reports. If the company was involved in an acquisition, the time commitment demanded would increase. The composition of a bank board is something that is closely scrutinised by potential investors and it is in this context that the public profile of the various members is crucial.
This year, Bank of Ireland appointed Esat founder and chairman, Mr Denis O'Brien, to its court of directors to try to project an image that it was at the forefront of Internet and technological developments.
"You could have a brilliant executive running a small company but who is unknown and would never be selected to a major bank board," according to an industry source.
The EBS is in a different position than the banks in so far as it is a mutually-owned building society and, as such, its members should be afforded opportunities in the boardroom. The banks, however, see no reason to alter their practices and are happy with the golden circle.
