Court told O'Reilly pay-off passed with 'undue haste'
A NON-EXECUTIVE director of Independent News & Media (INM) said yesterday he stood by claims that a €1.87m departure payment to the company's former CEO Gavin O'Reilly was done with "undue haste".
Paul Connolly was being cross-examined as he sought declarations from the Commercial Court that the payment was unlawful under the Companies Act because it should first have been approved by shareholders.
Mr Connolly said there was no discussion on the breakdown of how Mr O'Reilly's €1.87m termination package was arrived at. He believed the payment should not have been higher than 12 months' remuneration. Mr O'Reilly had been CEO for three years, a period during which the share value had "all but been wiped out".
It was important they were not seen to "reward failure" and a compensation package of almost two years' remuneration was "by any stretch a significant amount".
Mr Connolly said that while the amount of compensation was discussed at the meeting, the mechanics and timing were not. It was only later he learned it had been paid out on the day of the meeting.
Under intense cross-examination by Paul Gallagher, counsel for INM, Mr Connolly agreed it was following the appointment of James Osborne as chairman of INM last October that Mr Osborne made an independent assessment of the role of the CEO and that this culminated in the April 19 board meeting.
Mr Connolly said that, as a result of negotiations, a compromise agreement in which the €1.87m figure was agreed. It became the basis for what was presented to the board at the April 19 meeting. He agreed he did not tell this meeting that he too had legal advice at variance with the company's legal advice.
Asked by Mr Gallagher did he not think he should have warned the board that it was proceeding on an incorrect basis, he said at that stage the meeting had "not bottomed out as to what the legal advice would be".
He agreed the document presented to the board on April 19 stated that the termination (of employment) date would be the same date as the payment was to be made. Asked if he recalled the company's chief finance officer leaving the meeting to make the payment, Mr Connolly said there was a lot going on at that meeting.
Asked did he still believe that this was done with undue haste and that it was done deliberately to frustrate the proceedings he later took, he said he was still saying so. When it was put to him by Mr Gallagher that this was a wild allegation, he said he believed it (the payment) was made with undue haste.
In his witness statement, Mr Osborne says that had a compromise agreement not been reached, the company would have "inevitably" been left open to litigation from Mr O'Reilly. The agreement secured certainty of outcome for INM and extinguished prolonged and extremely expensive High Court litigation, he said.
The total amount paid was reflective of Mr O'Reilly's remuneration and was a legitimate pre-estimate of damages which might potentially have been awarded against INM, he said.
It would have embroiled the company in a "fractious blood battle", the ultimate outcome of which would have involved some form of compromise.
The hearing continues.