Tuesday, 11 October 2011

Banker and MEP – an unhappy combination

In the latest dramatic episode in the escalating eurocrisis, the troubled Dexia bank has been dismantled and split up into smaller bits (including a large 'bad bank'), most of which have been nationalised and now belong to the French and Belgian governments. Dexia shares had dropped from 20 euro to less than one euro when trading was terminated last week.

In assessing the collapse of the bank, Belgian media have paid a lot of attention to the role of Jean-Luc Dehaene, the chair of Dexia's board. The veteran Christian Democrat politician, who is also a member of the European Parliament, became number two in the bank's leadership team after a previous almost-collapse in 2008. The Belgian government wanted Dehaene in the post to counter-balance Dexia's CEO Pierre Mariani, who is a close ally of French President Nicolas Sarkozy. Newspaper commentators have concluded that Dehaene's performance as a banker has been a failure. While Dehaene initially expressed his intention to change Dexia, refocusing it on traditional consumer banking instead of the high-risk speculative banking which the bank had embraced before the financial crisis, there has been little to show for it in terms of real change. Dehaene repeatedly ran into controversy when he defended paying out large bonuses to the Dexia leadership, in a situation where the bank was clearly still in trouble.

Dehaene is a very busy man who, until recently, was also a board member of four other corporations. According to one newspaper, these jobs earned him 257 500 euros per year, on top of his salary as an MEP, which was estimated at 134 000 euros. In March this year Dehaene was reported to have resigned from board posts at AB InBev, Lotus Bakeries and Umicore, leaving him with the jobs at Dexia and biotech firm Thrombogenics.

Interestingly there has been little focus on Dehaene's job as a member of the European Parliament. Dehaene, a former prime minister of Belgium, was elected in 2004 and successfully ran for re-election in 2009. He clearly did not consider the job of MEP as incompatible with heading a large bank. Dehaene ranks among the least active MEPs in recent years, having drafted one Parliamentary report, given four plenary speeches and tabled just one question since 2009.

While the report and speeches were not on issues directly of interest to Dexia, Dehaene has on dozens of occasions voted on issues of interest to Dexia in the European Parliament's plenary sessions, such as on banking regulation and eurocrisis measures, including most recently the so-called 'six-pack' of measures that are likely to result in a deepening of austerity policies across Europe.

The conflicts of interest arising from a director of Dexia voting on these issues can only lead to the conclusion that MEPs should not have second jobs as bank directors. The case of Dehaene also shows that being an MEP should not be treated as a side-job.

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