Tuesday 16 January 2018

Co-op power creates friction with institutional investors

GLANBIA has been compared to Kerry Group many times over the years, with the two companies considered almost the same business at different stages in development.

Like Glanbia, Kerry comes from a co-op-based dairy business.

Today it is a multibillion euro company with interests all over the world.

Kerry Co-op still holds 17pc of the company.

That's big enough to guarantee significant dividends, but not enough to cause a problem for the day-to-day strategy of chief executive Stan McCarthy.

It's probably fair to say Glanbia boss John Moloney would take that.

Relations between Kerry PLC and the co-op are said to be strong, with those of chairman Denis Buckley and the chief executive particularly good by all accounts.

Co-ops, however, bring unique challenges to public companies.

Under normal corporate governance practice, non-executive directors should step down after nine years.

Mr Buckley has served as a director of Kerry since 1986.

The board at Kerry is, like Glanbia's, unusually large, with 16 members.

That is due mainly to several non-executive directors who are nominated by Kerry Co-op.

If the Glanbia deal goes through, the number of Glanbia Co-op directors on the PLC board will fall from the 16 it has currently.

That is something that will likely please some of the company's institutional investors.

At this year's annual general meeting, shareholders voted against a number of the co-op's nominations to the board, including chairman Liam Herlihy.

At the time, Mr Moloney attributed the vote to big investors who wanted a smaller board.

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