A leading global corporate governance advisory firm has said it remains concerned that executive pay at Permanent TSB (PTSB) and Bank of Ireland remains solely comprised of fixed salary.

In separate advisory notes issued before tomorrow’s Annual General Meeting, Glass Lewis said it acknowledges the remuneration restrictions that the companies are operating under following the state’s recapitalisations in 2009 and 2011.

"As such, we consider such an unusual remuneration structure acceptable, particularly in light of the low total levels of pay relative to sector and market cap peers," it said in both notes.

But in the PTSB note it also said it views high fixed pay raises with skepticism, as such remuneration is not directly linked to performance and may serve as "a crutch" when performance has fallen below expectations.

In this regard it said it noted that Chief Executive Officer, Jeremy Masding, and Chief Financial Officer, Eamonn Crowley, had received base salary increases of 10% and of 8.9% respectively on January 1, 2018. 

"Further, we note that a large increase in base salary has a compounding effect on the amount of short- and long-term incentives granted to an executive, since such awards are often granted as a fixed percentage of base salary," it said.

However, the advisors recommend that shareholders vote to approve the PTSB remuneration report at tomorrow’s AGM.

Pay at the banks that were bailed out by the state is currently capped at €500,000 a year, while variable pay is restricted.

Glass Lewis said it acknowledges that Mr Masding, who is on a basic salary of €466,000 a year, has not received a salary increase since 2016.

"Nonetheless, notwithstanding these considerations, we generally prefer to see smaller incremental increases granted over a longer time and believe the (remuneration) committee should exercise restraint in any future benchmarking exercises following these significant recent increases," it said.

Meanwhile, Glass Lewis has also expressed concern about the absence of variable pay at Bank of Ireland.

But, as with PTSB, it said it acknowledges the remuneration restrictions that the company is operating under following its recapitalisations by the state.

"We generally believe that a majority of compensation should be performance-based so as to promote alignment between executives' and shareholders' interests," it said in the Bank of Ireland research.

"However, in this case we recognise that the absence of variable pay must be viewed in light of the Company's unique circumstances, specifically the framework agreed between the Company and the Irish Minister for Finance upon recapitalisation of the Company, which appears to be the reason for the cessation of performance-based bay (sic) arrangements."

It recommends that shareholders vote to approve the Bank of Ireland remuneration report at tomorrow’s AGM.

Francesca McDonagh, the Bank of Ireland CEO, earns a salary of €950,000 a year plus an allowance of €8,000.

She is not subject to the €500,000 cap because she was appointed from outside the bank.