Governance issues around remuneration hits the Irish Farmer’s Association midship

Fascinating events in the Irish Farmer’s Association (IFA) in the Republic….

The revelation that General Secretary Pat Smith’s pay packet was as high as €535,000 per year was followed two days ago with news that the President Eddie Downey was paid €147,000 per year.

Mr Downey was also in receipt of another €52,000 in director fees for the FBD insurance company – which the IFA has a stake in – and the IFA position on the board of Bord Bia. Deputy President Tim O’Leary from Cork is to fulfil Mr Downey’s duties for a temporary period.

However, grass-roots members are still extremely unhappy and emergency meetings were held in Galway and Cork last night to gauge opinion among the farming community.

Extremely unhappy is putting it mildly. The average annual income for small farmers in the west is around the mid €20,000s. What’s more surprising though is that no one at board level actually seems to have known what remuneration packages were being paid.

See former IFA Economist Con Lucey’s letter released by the Times yesterday.

The IFA is a lobbying wonder. It has a staff of about 90 and no government over the last 40 odd years or so dare move to the left or right in Brussels without prior reference to its powerful machine.

It has delivered huge subsidies to its members, but the scale of the salaries may be shocking to those members because its funding model does not alone rely on direct members fees.

As Eoin Burke-Kennedy noted in yesterday’s Irish Times:

Perhaps the most controversial aspect of the Irish Farmers’ Association’s funding model is what’s known as the “factory levy”.

The tariff is collected on all farm sales to co-ops, processors, marts and merchants. It equates to 0.15 per cent, or 15 cent per €100 in sales.

While the IFA does not give detailed breakdowns of its income, sources suggests the levy generates between a third and a half of its €12.9 million income.

That’s a lot of money and assets. It may also explain the upward creep in executive pay from when it was pegged to that of the Secretary General in the Department of Agriculture (which also perhaps reflects the rise in value of the private sector in the Republic) .

There are now calls for mass resignation from the board and much greater transparency in the organisation’s financial governance. But it is not clear that that is going to be where it stops. All member organisations have this problem to a greater or lesser extent.

Where does expertise run in and member ownership run out? And how do you tell the difference? As Lucey noted in his letter of resignation, these things matter, but aren’t always immediately apparent on the inside:

First, the condition that the General Secretary attends the meetings of the AC, while not a member, is an anomaly. It is apparent that his presence is intended to influence the meetings; if the purpose is solely to provide information then it should be by invitation of the Committee. This condition is undesirable, as it is likely to stifle open discussion at the Committee. It is unnecessary, as recommendations from the AC go to the Executive Board, and there is adequate scope at that point for the General Secretary to influence the outcome. And it is in conflict with the very purpose of the Audit Committee.

Second, it is now clear to me that I should not have accepted the position of Chairman of the AC. The Chairman should have qualifications and experience in Accountancy / Auditing (which I have not), and should be “emotionally detached” from IFA (which also I am not). My parting advice is that the AC should be continued and that an appropriate person should be found for the Chair.