Sunday 21 January 2018

Irish Times Trust, unfortunately, seems to be a law onto itself

A FUNDAMENTAL reform and restructuring of the ownership structure of The Irish Times is the only way to secure jobs and the long term viability of the newspaper group into the future. Revelations over the weekend about the "feather bedding" of executives at the group are likely to incense staff at the paper, 250 of whom face losing their jobs.

A FUNDAMENTAL reform and restructuring of the ownership structure of The Irish Times is the only way to secure jobs and the long term viability of the newspaper group into the future. Revelations over the weekend about the "feather bedding" of executives at the group are likely to incense staff at the paper, 250 of whom face losing their jobs.

It is far from straightforward to try and compare the levels of executive pay at The Irish Times with companies of similar size and/or structure. But reports that the chairman of The Irish Times Trust, Major TB McDowell, and his daughter Karen Irwin share an annual remuneration package of £850,000 per year, if accurate, would enable some kind of comparisons.

The Irish Times newspaper group is owned by The Irish Times Trust Ltd. The accounts for this company are filed every year with the Companies Office. Because it is not a publicly quoted company, which is there for the benefit of its shareholders, it does not have to disclose a breakdown of what its chief executive or other directors earned.

Rather in the accounts the company pools the total earnings of "Governors" of The Irish Times Trust Ltd with executive remuneration for The Irish Times Ltd.

This pooling makes it impossible to determine from the published information, just how much key people in the organisation pay themselves. The trust company has eight Governors, while the The Irish Times Ltd has 15. This is a top heavy executive structure for a company with a turnover of £87m and profits of £5.6m.

Comparisons with quoted plcs is difficult to make when it comes to remuneration. Firstly, plc directors do disclose how much they earn. For example the executive chairman of Independent News & Media, Sir Anthony O'Reilly received £307,000 in remuneration last year, in a year when the group had a turnover of over £1bn and made pre-tax profits of £122m.

The comparisons are difficult to make, because executives of quoted companies, such as Sir Anthony, can make significant profits from exercising share options or receiving dividends on shares they have risked their own money to invest in.

Admittedly, The Irish Times executives do not have those avenues open to them, but that may be due to the corporate conservatism of the company over the last 26 years and its failure to take any real risks involving acquisitions.

In that context the old Lady has operated from the "Ladybird" book of financial management. Comparing remuneration at The Irish Times with other big private companies is also difficult. We don't get to find out how much Feargal Quinn pays himself each year, or Martin Naughton or Larry Goodman as directors of private companies. But in each of these cases, the individuals are significant shareholders in the business and they risked their own money to get there.

At The Irish Times, the owner is a trust whose beneficiaries are supposed to be various charitable causes. Given that it appears no money has been given to charity from the trust, it's like saying the shareholders have not received a single dividend in 26 years.

Other remuneration comparisons are possible. For example, The Educational Building Society is not a publicly quoted company, and it is there to serve its members. Last year it paid its three top directors an average of £236,000 each, in a year when it made a profit of nearly £25m. That is around five times the profits of The Irish Times.

The Irish Times favourite comparison to make with itself is with the Guardian Media Group in Britain, which like The Irish Times is owned by a trust the Scott Trust. Like The Irish Times, the Guardian says its trust was set up to protect the company from being taken over and to guarantee is editorial integrity and independence going forward.

Its website also points out that when it moved to trust status in 1936, John Scott realised the dire tax consequences of him dying as sole owner. Similar tax issues were at play when The Irish Times converted to a trust in 1974, but they are not mentioned on the Ireland.com website.

The chairman of the Guardian Media Group earned £50,000 last year. The company has a turnover of over stg£439m and profits of £55m. The company paid £12,800 each to seven members of the Scott Trust. A further £239,000 in total was paid to three trustees, none of whom are directors of the group, and this related to other transactions and consultancy work.

On its website it has extensive documentation on the formation of the trust, the appointment of trustees, the trust's role, and the management/trust relationship. The Irish Times website's only reference to its trust is a one-page extract of its memorandum of articles which talks about its commitment to editorial values.

It does not disclose circumstances surrounding the formation of the trust, the rules of the trust which ensure that Major TB McDowell has an effective veto on all key decisions, his remuneration, or the fact that he has the job for life.

Under the terms of the Scott Trust, trustees retire at age 70. By January, five of the eight Irish Times trustees will be 70 or over, including its chairman. Six of the eight are already over 65.

For The Irish Times to truly compare itself with the Guardian, it should take a leaf from their book of transparency and corporate governance. This would require a root and branch scrapping of many of the current trusts rules.

Alternatively it can dump the trust structure completely. Maintaining the status quo will not protect its profitability or its jobs into the future.

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