THE GOVERNMENT will accept the appointment of current AIB non-executive chairman Dan O’Connor as both chairman and chief executive “on a temporary basis” despite the recommendation by consultants on corporate governance that the same person should not fill both roles.

Taoiseach Brian Cowen also confirmed in the Dáil that internal AIB candidate Colm Doherty would take up the position of managing director with immediate effect and had agreed to accept the €500,000 salary limit for senior bankers.

AIB group chief executive Eugene Sheehy retires on November 30th, the Taoiseach said.

In the ongoing controversy over appointments and salaries in State-backed banks, Labour leader Eamon Gilmore claimed, “now that the banks have got the money and the Nama legislation in their back pockets, the old guard are back to their old ways”.

The party’s finance spokeswoman Joan Burton accused the Minister for Finance and AIB of breaching “all corporate governance rules” to allow one person to fill the roles of chairman and chief executive.

Mr Gilmore said the “test” as to whether the bank was calling the shots “is not on the salary.

“The test is whether the Taoiseach will allow this bank to appoint an executive chairman.”

AIB wanted to appoint the same person as chairman and chief executive, he said, even though the report by consultants Grant Thornton “specifically” said “the same person should not be chief executive and chairman”.

Is the Government going to allow that? he asked. “That is the test.”

Mr Cowen, who read from an AIB press statement, told the House that Mr O’Connor would become executive chairman “on a temporary basis in order to oversee the bank’s work on completion of the key task of capital-raising, the implementation of Nama and the EU restructuring plan”.

But Mr Gilmore asked: “Who’s calling the shots here? Is it the old guard that was there when the problems started and contributed to it?”

Mr Cowen insisted that the appointments of Mr O’Connor and Mr Doherty “are part of a wider series of management changes with the emphasis on attracting new external talent”.

Mr Doherty “will be responsible for the day-to-day running of the bank and has agreed to take up his new role for a salary of €500,000”.

Chief executive of the National Treasury Management Agency, Dr Michael Somers, confirmed as deputy chairman, will also chair the AIB board risk committee.

Mr Cowen said “the roles of group finance director and group chief risk officer will be filled by external appointment”.

The Labour leader asked the Taoiseach how many executives in the guaranteed banks were paid more than the €500,000 salary cap the Government wanted to apply.

Mr Cowen said that was a matter for the Minister for Finance and “the cap we introduced was in respect of the appointment of CEO or other senior positions”.

But Mr Gilmore said “the old guard is still in place” and in AIB 10 of all 10 directors “who are there now were there then and in Bank of Ireland the figure is 11 of 13”.

Ms Burton said the AIB document the Taoiseach read from “goes on to state that only after the establishment of Nama and EU restructuring sometime in 2010 will the issue of assessing the AIB group management structure be addressed”.

She demanded that the Taoiseach disclose to the Dáil “the termination, severance and retirement package” of the outgoing chief executive.

Questioned about the document Mr Cowen said he had a copy of the statement that AIB issued “because that was the agreement that was reached”.

Labour’s Pat Rabbitte said “that’s a dog’s dinner of a compromise and the Taoiseach knows it”.