Analysis/Comment
RTÉ paying price of reckless mismanagement during boom; 65% of combined surplus of €47 million in 2006/2007 was from pension fund windfalls
By Michael Hennigan, Founder and Editor of Finfacts
Jun 13, 2009 - 1:01 PM

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RTÉ -  -  Ireland's State broadcaster - - which depends on a hybrid revenue model of a flat tax licence fee and advertising, operated like the rest of the Irish public sector during the property boom; staff were overpaid based on an unsustainable revenue model and now it's scrambling to deal with a financial crisis. In the peak boom year of 2006, revenues rose €35 million or 9.5% but excluding a pension fund windfall of €14.5 million, the station only set aside €2.5 million  - - 0.6% of revenues, for the rainy day. Some 65% of the combined surplus of €47 million in the years 2006 and 2007, was from pension fund windfalls.

In 2007, revenues rose €36 million or 9.5%; Personnel related operating costs rose 10.7%; Non-Personnel related operating costs rose 2.8%.

Based on the full-time equivalent staff total (including part-timers and casual staff) of 2,106 in 2007 and 2,061 in 2,006, average per capita earnings were €68,000 in 2007 and €62,600 in 2006 - -  a rise of 8.6%, compared with the Consumer Price Index rise of 4.7%, in 2007.

In 2007, the surplus before tax was €29.6 million but the bulk of that - - €16.2 million  - - was again from a windfall pension fund gain

2007 was the year of the mantra of the "soft landing," from the Government, vested interests and ignorant cheerleaders. Beyond them and idiots, the February news of that year, from HSBC Bank of troubles in the US housing market, signalled that the boom balloon was in danger of bursting.

So after a torrid 2006, when Ireland's biggest bank AIB, sold part of its headquarters to a stretched developer, to fund the voracious appetite for property lending, there was evidence of some doubts about the out-of-control boom. PJ Mara, Director of Elections for Fianna Fáil, was more circumspect at the start of the general election campaign, than in 2002 when he had proclaimed: "It's showtime." Taoiseach Bertie Ahern had to deal with many questions on housing  - - his own  - - and stories of crates of money being ferried in and out of the AIB Bank branch at 37 Upper O'Connell Street, Dublin.

In 2007, the RTÉ Director General, Cathal Goan's pay and benefits totalled €441,000, up from €360,000 in 2006 - - an increase of 22.5% - - he no doubt believed he well earned it, as many more had their well-polished snouts, in the same trough.

In other parts of the public sector, the Secretary General of the Department of the Taoiseach got a 25% pay increase and despite being less than 2 years in the job, the Dublin City Manager was given a 36% hike. He hadn't asked for it and his 2 living predecessors also saw their pensions rocket by 36%.

The average pay of members of the part-time Dáil rose to the level of the pay of a United States Senator and Irish parliamentarians, most of them promoted far beyond their capacities, were amongst the best paid in the world.

In contrast, the average industrial wage was €31,000 and the majority of Irish private sector workers didn't have an occupational pension.

Taoiseach Bertie Ahern in September 2006, in an interview on RTÉ News, in which he gave details of payments totalling IR£39,000 made to him in the early 1990s when he was Minister for Finance.

It was a very rare departure from the standard door-step routine. It had suited Ahern to give the interview and his opinion poll ratings increased in its aftermath.

Ahern told RTÉ News that a group of friends made two separate payments to him in December 1993 and in 1994.

RTÉ has overwhelming dominance in Irish television broadcasting and while individual programmes do focus on maladministration, the Taoiseach of the day and ministers are not subject to extensive forensic interviews. The 3-minute door-step interview is the standard and ministers choose formats where they can bluster and avoid an extensive grilling.

The RTÉ Director General reports to a Government-appointed board and simply, confrontations with politicians in power wouldn't be in the self-interest of the individual. The politicians decide on licence fee changes and crucially could reduce the allocation to RTÉ.

Licence fees accounted for 47% of the total income of over £22 million (€28 million) for the year to 30 September 1977. Advertising amounted to 43%.

In 2007, licence fees accounted for 44% of the total income of €441 million. Commercial revenue amounted to 56%.

In 2005, DKM Economic Consultants, in a report, Competition in Irish Broadcasting, commissioned by the Independent Broadcasters of Ireland, found that the conditions of competition amongst the various Irish radio and TV stations were anomalous. It singled out the system of dual funding of RTÉ, with a licence fee and advertising revenues, as having a seriously distorting effect on competition across the sector.  

A study of RTÉ peak-time programming found that only around 30% of its output could be reasonably classified as public service broadcasting news, current affairs, documentaries, Irish language programmes as opposed to soaps, overseas drama and sport. DKM said the issue was given greater emphasis by the fact that RTÉ's share of all-day adult viewing had dropped from 53.1% in 1997 to 39.2% in 2005, while non-RTÉ channels had increased their aggregate share from 46.9% to 60.8%.

"In terms of funding, RTÉ is still being treated as a monopoly, which it simply isn't anymore," economist Colm McCarthy, then managing director of DKM Economic Consultants said.

Colm McCarthy, who is now an economics lecturer at UCD, suggested that if the Irish newspaper industry was organised as the broadcasting sector, The Irish Independent and the Evening Herald would be Government-owned; The Irish Times would be a licensed private commercial newspaper and The Irish Examiner wouldn't exist as it wouldn't have a licence.

RTÉ wants to have its cake and eat it - -  claiming that it has to pay salaries of more than the Taoiseach, even though its only domestic competition in TV broadcasting, is a small operator, totally dependent on advertising. It is decades since Irish broadcast presenters have got significant jobs overseas. The likes of Dara O'Briain is a rare specie.

The self-serving claims from RTÉ presenters, are as spurious as CEOs who rationalised grabbing as much as they could get away with during a boom, because of their own "performance."

Last week, outgoing Shell Oil chief Jeroen van der Veer, in a rare example of honesty from an overpaid hired hand, said his performance would not have been different had he been paid 50% more or 50% less.

RTÉ claims to hold politicians to account and one of its presenters Marian Finucane, earns more than €400,000 for two mornings of week-end work for about 8 months annually!

Irish politicians take more than 3 months holidays each summer and with RTÉ presenters, are the only groups in the country who have the perk of having more holidays than teachers.

Last week RTÉ's Cathal Goan gave testimony to the Oireachtas Committee on Communications, Energy and Natural Resources, on its cost-cutting proposals to bridge a €68 million funding shortfall this year.

He was irritated by questions on the high payments made to some of the staff. Earlier this year, he refused to comment on the appropriateness of the station's top paid journalists being supplied with free cars by the German carmaker BMW. The individuals involved were contractors not staff!

RTÉ is part of the Irish public service culture which dictates that as little as possible in internal information is provided to those who are regularly threatened with shame and embarrassment before the courts for non-payment of the licence tax.

In 2001, it had grudgingly conceded to providing details of the pay of the top ten presenters but with a 2-year lag.

The figures for 2007 will be contained in the RTÉ annual report for 2008, which is currently with the Department of Communications, Energy and Natural Resources.

Goan warned about an “amount of hysteria” which will follow the publication, as the recent 10% pay cut agreed by the big earners will not be included in the data.

The latest figures for 2006 showed that former Late Late Show presenter Pat Kenny earned €849,139, followed by Gerry Ryan on €558,990 and Marian Finucane on €455,190.

Goan said the whole issue had generated“more heat than light.”

“I’m not going to say any more about the salaries or the fees of top talent because they are confidential,” he added.

Very quaint indeed!

Why should they be confidential?

Why vastly overpay people while threatening poor people?

He said there was “absolutely no truth” in suggestions which surfaced in other media that the station could go bankrupt and that a projected €68 million shortfall in revenue this year was actually closer to €100 million.

RTÉ had a revenue shortfall of €26 million in 2008, but broke even, as it is legally obliged to do, by cutting management bonuses and making other cost savings, he told the committee.

Any pension windfall included?

BBC director general Mark Thompson earlier this week told its top-paid presenters that the era of big pay deals was over and presenters would face pay cuts of between 25% and 40%.

Presenter Gerry Ryan was eventually shamed into accepting a 10% pay cut but remains vastly overpaid by the State broadcaster. Who is competing for him?

Goan said 148 people on the station's 2,351 staff earn more than €100,000 a year and seven individual presenters are paid more than €300,000.

RTÉ staff are currently being balloted on pay cuts from 2.6% for any staff earning over €25,000 a year to 12.5% for those earning more than €255,000 a year which would save the company €10 million a year.

Goan said the pay cuts were the “best option” to maintain jobs and services at the broadcaster.

He also said there will be an early retirement scheme offered to staff, but refused to be drawn on questions from Fine Gael TD Michael D’Arcy as to whether a rejection of the pay cuts would lead to voluntary or compulsory redundancies.

“When they have made that decision, we will deal with the consequences of that. Before that it is invidious to talk any more than that,” he said.

Invidious?

This man seems to be a throwback to a past age - - remnants that still abound in conservative Ireland.

RTÉ needs a change of management and mindset for the new era and the monopoly on the licence fee should end.

Despite the cuts, the featherbedding will continue.

What purpose is there in funding reporter Charlie Bird who is based in Washington DC and is costing at least half a million dollars annually?

It is time to tackle sacred cows and vested interests at RTÉ. It is time to end the hypocrisy.

Annual Report 2007

Postscript June 14, 2009: The Sunday Independent reports that an  Indecon consultant report titled RTÉ Licence Fee Adjustment Review, was provided to Communications Minister Eamon Ryan and Cathal Goan in November 2007.

The station was expected to have a net surplus of 5% per annum up to 2011 and RTÉ's financial situation was reportedly "robust''.

However, John Drennan says the the report warned the station needed to"develop a corporate commitment in relation to cost-saving.''

The report said that revealed that RTÉ had "the third highest ratio of staff to population in Europe.''

The consultancy firm was critical of the failure of RTÉ to undertake"any formal benchmarking exercise in recent years with a public service broadcaster or with commercial broadcasters."

It said the station needed to understand the "critical importance of cost control measures within the organisation'' and said "such a process could enhance the efficiency and the effectiveness of the organisation.''

It also noted that "the main driver of RTÉ's operating costs are personnel related.''

The report revealed that in 2006 labour costs were "increasing in real as well as nominal terms.'' In contrast, the report noted that"the BBC has embarked on an ambitious programme to reduce its staff costs.''

It noted that already this had resulted in a "significant reduction of staff at the BBC for the last year'' and"reduced costs of eight per cent''.

The Sunday Independent says the report was also critical of RTÉ's attitude to its transparency and openness commitments describing the station as too "averse to publishing data on the cost per hour of indigenous TV programmes.''

So there again is the issue of the lack of transparency, while the news unit of the service seeks transparency from the rest of the public sector.

Last February, Finfacts highlighted the irony of the RTÉ Radio 1 Liveline programme, being used as a platform for public anger about politicians and maladministration in the public service, while the presenter Joe Duffy earns more than the highest paid politician and public servant in the country.

SEE: Irish Economy 2009: Talk to Joe! - - the asymmetric national agony aunt for confusing times - - and Cowen's €2 billion Budget


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