O'Reilly and accountability: Cronies and the jet set

Allegations about a ‘crony' board, questions about lavish parties and the use of a corporate jet

The issues raised by Denis O'Brien as a shareholder in IN&M are: The alleged “crony” character of the board (too many close associates of Tony O'Reilly, who, because of that, are unable to exercise an independent role.

The acquisition and retention of “vanity” projects, such as the London Independent, which has been a significant drain on the company's resources.

The unaccountable remuneration (including expenses) of Tony O'Reilly.

The remuneration of directors.

The use of the company jet .

On this latter issue, in response to questions from Denis O'Brien, the company secretary, Andrew Donagher, stated in a letter dated 12 June 2007.
“Given the group's global spread of assets, the Board deems it appropriate and of commercial benefit to the Group to lease one aircraft – a Gulfstream IV– for use by Group executives in carrying out their duties. For security reasons, the Group insists that the Group Chief Executive (Tony O'Reilly) flies on this aircraft at all times. The annual cost of this aircraft is fully consistent with the operation of aircraft of its type.

“The aircraft is for business use by Independent News and Media (INM) executives and employees and use of the aircraft by all executives is approved by the Chief Executive.

“On occasions where the aircraft is used by any executive for non-INM business-related purposes, a commercial rate is applied and paid to the Group”.
Manifest Information Services Ltd is a British independent agency that evaluates the performance and governance of public companies. It published a commentary on Independent News and media (IN&M) prior to its AGM on 13 June last.

Manifest made several criticisms of IN&M, which were followed through by Denis O'Brien. 

Manifest stated:
“There will be (after the AGM) 19 directors on the Board after the AGM, which may be considered by some shareholders to be somewhat ‘unwieldy'...
“Manifest notes that the lack of true independence on the Board amounts to what some would call ‘cronyism'. Indeed there has been press comment regarding the lack of signals to shareholders in relation to succession planning and the long-term plans of the company.

Recent action by the company in the market in relation to share buybacks has been perceived by some commentators as a defensive measure to protect the interests of the dominant shareholder.

Shareholders may certainly wish to question the tight control seemingly held on the company and the board by the O'Reilly family, and the close ties of an overwhelming majority of the non-executive director to O'Reilly.

Indeed the close relationship between the CEO and the recently deceased senior non-executive director was even highlighted in a Dáil debate in 2002 in relation to the payment of a significant debt by O'Reilly. Shareholders will also note that concerns arising from the governance problems at Hollinger, the Conrad Black company, and other media concerns have pushed media governance to the forefront of many investors' minds.