Business Irish

Monday 24 April 2017

Newstalk brawl brings corporate policeman to INM

Use of whistleblower law by a company CEO is unprecedented
Unprecedented action: INM Chief Executive Robert Pitt with Leslie Buckley, the Chairman of Independent News & Media plc Photo: Frank McGrath
Unprecedented action: INM Chief Executive Robert Pitt with Leslie Buckley, the Chairman of Independent News & Media plc Photo: Frank McGrath
Dearbhail McDonald

Dearbhail McDonald

Little did I know when I wrote an irreverent business diary item on Ireland's new whistleblowing law that it had been invoked weeks earlier by Robert Pitt, chief executive of INM plc - my employer - and another senior exec at Ireland's largest media company.

Last January, I wrote how the new tipsters' law was leading to an unwelcome surge in unfair dismissal cases that can attract up to five years compensation instead of a maximum two years under standard employment laws. I noted that under the Protected Disclosures Act 2014, a whistleblower cannot be penalised in any way by their employer if they make a protected disclosure.

Whistleblowers, who are wholly protected by the law even if their assertion or suspicion of wrongdoing is proved to be incorrect - you are protected once you have a reasonable belief - can also sue if they or their family experience coercion, intimidation, harassment, or discrimination.

The law has largely been deployed by second- and third-tier workers or managers. Its use by the CEO of a publicly listed company is unprecedented.

Last week, INM, which publishes the Sunday Independent, the Irish Independent and independent.ie, disclosed in its full-year results that it is co-operating with an Office of the Director of Corporate Enforcement (ODCE) inquiry into the proposed acquisition of radio station Newstalk.

The ODCE inquiry was prompted by a protected disclosure from Mr Pitt and another senior executive.

The scale of the latest crisis to affect INM cannot be overstated: the company law policeman has been brought to the boardroom's door.

The Newstalk row had in fact been simmering for some time. Last November, INM confirmed to the stock exchange that "an issue" arose late last year between Mr Pitt and INM chairman Leslie Buckley over the price to be paid for the radio station.

Digicel founder Denis O'Brien, the largest single shareholder of INM, owns Newstalk via his Communicorp Group. Mr Buckley, Digicel's vice-chairman and founding director of its board of directors, has been chairman of INM since August 2012, having previously served on the board from March 2009 to June 2011.

Mr Buckley is widely regarded as one of Mr O'Brien's closest business associates.

Mr Pitt and INM did not comment on the inquiry. Efforts to contact Mr Buckley were unsuccessful.

However, the "issue" that arose between Mr Pitt and Mr Buckley related not to the fact of the proposed acquisition by INM of Newstalk but the price that INM should pay for the asset.

Mr Pitt reportedly did not want to pay the price sought for Newstalk by Communicorp. Mr Pitt commissioned a valuation from Davy Corporate Finance that came in significantly lower than Communicorp's valuation.

But the price disagreement evidently morphed into a much more significant row and Mr Pitt reportedly raised the issue with the company's senior independent director, former KPMG managing partner Jerome Kennedy.

In its November statement to the stock exchange, INM said the board established a subcommittee to review the dispute, with the subcommittee subsequently reporting that "no issue of concern arose".

The company said discussion of the acquisition ended at a preliminary stage and was never considered by the board. But the matter did not simply rest there and was escalated when Mr Pitt made a protected disclosure to the ODCE, a prescribed body under the Protected Disclosures Act.

Blowing the whistle about an employer to an employer is one thing. However, making a protected disclosure to a prescribed body is another, involving a much higher standard of proof for the employee and much higher stakes for the employer.

All that is required for a disclosure by an employee to an employer is a reasonable belief that the information shows or tends to show that the wrongdoing is occurring.

However to make a protected disclosure to a prescribed body means that not only must you reasonably believe that the relevant wrongdoing is within the remit of the prescribed body, the information you disclose and any allegation in it are required - under the legislation - to be "substantially true".

This new law, even in its infancy, has radically changed the dynamic between employee and employer including the State which has been on the receiving end in early skirmishes.

But its use by Mr Pitt and another senior INM executive could cast many of corporate Ireland's epic boardroom battles - including INM's own legion of boardroom bust ups - into a ha'penny place.

Robert Pitt, in many respects, is now untouchable, at least for the duration of the ODCE inquiry, if not beyond.

No matter what decisions the key players make, INM's chairman and board still have to deal with the ODCE's inquiry.

INM was correct when it informed the stock market last Tuesday that its compliance with the company law watchdog's requirement to produce records in relation to the possible acquisition of Newstalk does not involve any conclusion that there has been a breach of the law by the company or its officers.

And it may (or may not) well be the case that the independent review commissioned by INM and led by Senior Counsel David Barniville - former chairman of the Bar of Ireland - will paint the dispute in a much more favourable light.

Regardless, the disclosures have brought the ODCE into the heart of INM's governance structures, policies and procedures.

The intrusion into the planned but aborted acquisition of Newstalk is now inevitable, but will the ODCE conduct a broader corporate governance trawl?

Corporate governance has been both a shield and sword deployed by various protagonists in INM's previous boardroom brawls.

The production of reports and counter governance reports was a common feature of the battle for control for INM previously waged between Mr O'Brien and Tony O'Reilly.

The ODCE inquiry appeared to matter little to analysts last Tuesday when INM produced its full year result - INM's shares closed up 9.1pc to 12c on the day the ODCE inquiry was revealed.

But the collapse in all but name of the relationship between CEO and Chairman - it's safe to assume that that relationship has been tested by recent events - means the developments will continue to require the full attention of the board.

A functioning relationship between chief executive and chair is critical for the health and future direction of any company. This is especially the case for INM which is separately dealing with issues over planned acquisitions and its defined benefit pension schemes while navigating - like all media companies - the existential challenges facing that sector.

It's one corporate story that looks set to run for some time.

Sunday Independent

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