Friday 19 October 2018

Comeback Queen

::: Newsmaker Eithne Tinney, EBS board member

Eithne Tinney's re-election as a director of the EBS represents one of the most spectacular comebacks in recent Irish business history. But now, having bested the EBS hierarchy, will Tinney be any more successful in addressing the building society's many problems?

Way back in 2000, the EBS chairman at the time, Brian Joyce, had what seemed like a bright idea. What would be more appropriate for a member-owned organisation, than to have a few real-life members on its board?

Unlike the Irish Nationwide, which has never made any secret of its desire to sell itself off to the highest bidder, the EBS has always placed great store on its mutual, member-owned, status.

In August 2000, the EBS publicly advertised seeking members who would be prepared to serve as directors. The hope was that by having a few ordinary members on its board, the EBS would reinforce its mutual status.

Over 300 applications were received from members, and in December of that year Ethna Tinney, an EBS member and a producer with RTE's classical music radio station Lyric, was appointed a director.

Her path to the boardroom of a major financial institution was an unusual one. She trained as a concert pianist and was a soloist with the RTE Symphony Orchestra for many years. Aged 53, she lives in Limerick with husband Brian Fox, whom she married three years ago. Apart from music her other passion is horses.

Tinney was re-elected as a director a number of times but in 2007 her boardroom colleagues told her that they could not would support her re-election for another term at that year's AGM.

The official line from the EBS was that Tinney wasn't up to the job of being a director. According to EBS board documents, which were leaked last year, Tinney performed poorly in peer assessments by her fellow directors. In fact, she had only been nominated for re-election to the board in 2004 after she agreed with Brian Joyce that she would resign if her performance didn't improve.

According to the EBS, her performance didn't improve with chairman Mark Moran stating before last year's EBS AGM that: "Unfortunately, in the light of appraisals of her performance as a director, and the board's assessment of her subsequent performance, Eithne has lost the confidence of the board."

Tinney and her supporters strongly refuted this version of events pointing out that her performance rating improved significantly in subsequent peer assessments. Tinney alleged that the reason she was not nominated for re-election was that, as a director, she had spoken out against a number of decisions taken by the EBS board.

These included a proposed joint venture with Dutch bank Rabobank. Discussions dragged on for about 18 months before being finally abandoned in 2005. Tinney also questioned the EBS policy on recruiting directors and the amount it paid its senior executives.

As both sides fought it out in advance of the building society's 2007 AGM, a heck of a lot of EBS's dirty linen was washed in public. What emerged was a picture of fractured, dysfunctional board.

It wasn't just Tinney who had problems with the way in which the EBS was being run. Leaked internal memos showed that former director Ron Bolger was so concerned about corporate governance at the EBS that he threatened to make a complaint to the Financial Regulator.

Another board member, Cathal Magee, who remains a director of the EBS, spoke of "corporate bullying" by some of his boardroom colleagues.

Whatever the rights and wrongs of the case, what is indisputable is that easing out a director judged -- rightly or wrongly -- to have passed his or her sell-by date requires infinite tact and delicacy.

The departing director must be let down as gently as possible, with the minimum of damage to either their ego or reputation. The last thing any organisation dispensing with the services of a director needs is a public controversy which can have all sorts of unforeseen consequences.

No matter how you look at it, the EBS made a complete pig's ear in dispensing with Tinney's services as a director last year. Informed by chairman Mark Moran that the EBS board wouldn't be supporting her re-election, Tinney was not slow the claim that her only crime was to speak out of turn in defence of ordinary members' interests at board meetings.

Although she was ultimately narrowly defeated in her campaign for re-election last year, Tinney fought a brilliant rearguard action. She utterly routed the EBS' expensive PR machine in the media. She was almost universally portrayed as the plucky David taking on the big, bad corporate Goliath.

Her PR victory was sealed in the aftermath of last year's noisy AGM when it was revealed that a well-spoken woman, apparently an ordinary member, who got up to speak in favour of the beleaguered EBS board at the meeting, was none other than the wife of EBS chief executive Ted McGovern.

McGovern's credibility never recovered from the episode and he resigned as EBS chief executive last July with a bumper pay off of almost €1.9m.

The Tinney affair cast a harsh spotlight on the EBS. For an organisation which makes such a fuss about its mutual status, it hasn't done a lot for its members. Its mortgage rates have long since been undercut by many of its rivals while its deposit rates are also well down the competitive league table. The EBS is relatively inefficient compared to many of its larger rivals with its most recent results revealing an extremely high 56pc cost/income ratio.

Last year's narrow defeat, where Tinney lost by just 800 votes out of some 20,000 that were cast, meant that a rematch was inevitable at this year's AGM.

In the 12 months since she was voted off the board, Mark Moran, who took over as chairman from Brian Joyce at the end of 2006, has refashioned the board and senior management of the EBS.

Fergus Murphy was recruited from ACCBank as chief executive to replace the departed McGovern, while other five new directors have been appointed over the past 15 months -- including Philip Williamson, the former chief executive of the UK's largest building society, the Nationwide, Pat McCann, the former boss of Jurys Doyle, and Liam Mulvihill, the former director general of the GAA.

Despite this much harder-edged board and management team, the EBS still managed to take a €15m hit in 2007 from the rogue solicitors scandal. With house prices falling and activity in the housing market slowing to a crawl, the going is going to be even tougher for the EBS in 2008.

Not surprisingly many of the EBS' members are worried about its future. Tinney successfully tapped into these fears to secure re-election to the EBS board this week. Her re-election represented a humiliating slap in the face for the board which ousted her just a year ago.

The question facing the EBS is can it survive as an independent mortgage bank while the sector upon which it depends for virtually all of its business, the housing market, is tanking? With a large proportion of its members in open revolt the odds must surely be against its survival as an independent business.

The most likely result of this week's membership rebellion is an eventual sale of the EBS and the end of its mutual status.

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