O’Brien’s guns misfire
Eamon Dunphy and I plan to hold a series of seminars.
As veterans of the war with Eircom, we will offer a crash course for dissident shareholders. Our prize pupil will be the absent hero of the Battle of Culloden in Belfast last week, Denis O'Brien.
At the end of the course we hope to award Denis a doctorate in corporate warfare.
Denis ducked the Independent AGM in Belfast last Wednesday. It had been billed as the fiercest spat in Northern Ireland since the terrorist ceasefire. The Daily Telegraph led its Business Section with ‘Tycoons go to war over media group’. Suggestions that Denis himself would surface in Belfast were advance spin, mere titillation to excite the media. Instead, he sent along some hired guns.
O'Brien has launched a destabilisation strategy. A report he had commissioned on the Indo's corporate governance was leaked to rival media groups.
Hardly behaviour in the interests of shareholders, but definitely in the interests of Denis.
The target was Sir Anthony O'Reilly, the biggest shareholder and chief executive.
The attack misfired. So the first seminar will address the technique of rallying dissident shareholders.
There is a single precondition: there must be more than one dissident shareholder.
When Eamon and I headed for the Eircom AGM, we were part of an army with a grievance. While Eircom shares were heading south, the directors were helping themselves to goodies galore.
At the recent EBS AGM, members were up in arms partly because the directors were hiking their fees while members were being sold below-par products.
In both cases the floor of the AGM was overwhelmingly against the board.
Denis, please note.
Last Wednesday in Belfast not a single shareholder grievance was aired at a packed meeting. Any old headbanger could have lobbed a grenade. None did.
If O'Brien's scattered human stooges had not been present, most of the resolutions would have been passed unanimously.
The difference between the Eircom and Indo AGMs is obvious. Shareholders in Independent Newspapers have never been better off. On Wednesday its stock stood at €3.66, close to its high. In the last year it has outperformed the Irish index. A record dividend is due to drop into shareholders' letterboxes . The stock yields 3.5 per cent. While the future looks bright, the past is dazzling. Any shareholder who invested €1,000 in the Indo's shares in 1973, when O'Reilly took over, will now have €580,000.
Happy shareholders do not nurse grievances. Denis does.
And the second seminar will be about the dangers of making investment decisions on the back of personal emotion. It affects your judgment.
Which begs the real question: would Denis want to own the Indo if it was not Tony's baby? Denis was bested by Sir Anthony in the skirmish for ownership of Eircom. The defeat still seems to hurt.
Hence the report Denis commissioned. Its conclusions matched Denis's agenda. It criticised the company's corporate governance. It highlighted the boss's so-called ‘cronies.' And it suggested that the publicly-quoted media business was a family concern. It concluded that every single non-executive director failed one or other of a hotch potch of “independence” test.
Partly true . The two O'Reilly children (who are non-executive directors) are not technically independent because they are blood relations. No big discovery there. They are already singled out by the board itself as not independent. But the O'Reilly family owns nearly 30 per cent of the shares. They are surely entitled to 20 per cent of board seats to protect their stake? The family fortune is on the line.
No excuse in the eyes of Denis.
Hold it a second; Question to the star pupil: Who is that guy, Denis O'Brien, the one who has sat on the board of Esat Telecom, Communicorp, E-Power, E-Island, Island Capital?
Sounds familiar. Surely not one of your own children?
No, it is Denis's Dad.
So it is fine to appoint your Dad, but not your offspring! Zero marks for logic.
Lesson Number Two : Never bring your glass house onto the battlefield with you.
But the board of the Indo was far too gentle to throw stones at the stooges. If Denis expected his bete noir to rise to the bait on Wednesday he was disappointed. Chairman Brian Hillery referred the questions from O'Brien's plants to the chair of the corporate governance committee, Brian Mulroney.
Brian is no ‘crony'. He is a former Prime Minister of Canada. He has just been appointed a director of Blackstone in preparation for its IPO; he is a director of Forbes International. An unlikely candidate to be in Tony's pocket. He had no relationship with the boss prior to being on the board. Denis, please note.
Brian swatted the stooges. Lethally, he pinpointed an appaling inaccuracy in the report. It made him a director of Avis Budget Group . He has never been anything of the sort.
He staked his reputation. There was not a “scintilla” of evidence to back up the hints of misconduct.
O'Brien's plant was flattened.
Next, the chair of the key Remuneration Committee, Ivor Kenny, waded in. Ivor wrote the book on corporate governance. Denis, please read for homework.
Ivor was withering. The report was “baseless, tatty”. It made one good point. The annual report failed to specify the details of extra payments to non-executive directors. Ivor spelled them out.
Ivor's reply contained one gem: my Seanad colleague Maurice Hayes, former NI ombudsman, had received 15 grand. What did Maurice do for that? A bit of soft consultancy ?
What a disappointment for Denis. Maurice doubles as a hack. Not a very well paid one either. His 15 grand was a modest reward for his articles on Northern Ireland throughout the year. It seems that the commissioning editors are showing an overzealous thrift and independence of the board.
God forbid that Denis' trawling will prompt Maurice to demand a pay increase. He may soon be joining the rest of us on the picket line.
It was left to nonagenarian, Kevin Anderson — a concerned shareholder with no agenda — to put up the best challenge to the board. Kevin expressed principled opposition to a resolution forcing disclosure of the identities of those buying shares.
It took a 90-year-old to put up a fight.
Denis is the only discontented shareholder. The share price has been stellar.
The verdict is not just mine. I am a biased shareholder and downtrodden employee. On Thursday I scanned the UK press for an objective commentary. I finally found a piece by Damian Reece , City Editor of the Daily Telegraph.
Headed “O'Brien's case is Undermined”, Reece writes that “O'Brien didn't turn up... He sent a couple of stooges along instead... O'Brien's failure to put his mouth where his money is, undermined his case rather.”
And crucially, commenting on the composition of the board, Reece goes on “perhaps he (O'Brien) was scared off by the latest grizzled politician to join O'Reilly's board— Ken Clarke. Round one, fought yesterday, certainly went to O'Reilly.”
Sir Anthony does not own the Telegraph.
We will have to withhold Denis's doctorate. He must try harder.