Tony O'Reilly's cash cow
O'Reilly alone took €110m in payments from Independent Newspapers since 2000, while jobs are being cut and outsourced to make way for even more largesse. By Martin Fitzpatrick
Independent News and Media (INM) has become the most remarkable cash cow the Irish market has ever seen, the beneficiary being Tony O'Reilly.
In the six years since the turn of the millennium alone, O'Reilly has taken €110m in cash terms from INM. That figure counts only his dividend income, salary, bonus and perks. In 2006 alone, his dividend take topped €25m. But the Indo milking machine produces a lot more each year for the former rugby ace and one-time head of Bord Bainne.
The €110 m figure does not, for instance, include the valuable share options he exercises (more millions), nor does it include the breathtaking capital gains he has notched up as the company's shares have appreciated. Since the market lows of 2001, O'Reilly's personal holding has scorched ahead and is now worth some €360m more than in the dark days of stock market gloom. His stake is currently valued at around €620m.
The late JF Galbraith once observed that a chief executive's salary was a warm personal gesture by the individual to himself. Tony O'Reilly has never been one to accept less than the going rate for his job as chief executive. The annual report due out next month will show that he will have pocketed well over €1.5m in salary and bonus.
Other CEOs and executive chairmen (Grafton Group's Michael Chadwick is an example), have declined to accept a salary when they are stuffing their pockets with dividend income. Tony O'Reilly has never been embarrassed by this.
Later on this year he may have an opportunity to be even more open-handed because Independent News and Media is currently poised to conclude an APN deal in Australia that puts it in a position to receive proceeds topping €350m. There is talk that at least some of this is going to be paid out by way of special dividend to shareholders. If Tony O'Reilly wants it to come in the shape of a dividend, there is little doubt it will happen that way. And if it does, then the tax-exiled CEO will be able to put 28 per cent of whatever that dividend is into his already ample pocket (more millions).
There is an irresistible temptation, especially among the Independent News and Media's trade unions, to contrast the largesse being paid at shareholder level with what's happening to the company's employees. Essentially Indo staff have been subjected to the latest O'Reilly mantra that INM must become the “Ryanair of the newspaper sector”. It's mentioned on a number of occasions in the preliminary results announcement that INM's stated objective is to be the industry's low cost operator.
The essential requirement for the achievement of this status is to keep labour costs as low as possible. Thus the Independent organisation in Ireland has been resolutely focused on redundancies and outsourcing. Over two years ago when Independent Newspapers Ireland couldn't get its clerical employees or the balance of its printing staffs (some 200-odd of them) to disappear quietly in the cause of outsourcing, the company tore up its agreements with the unions and offered a ‘Hobson's Choice' of statutory redundancies or the specially tailored Indo package. For some staff this included a re-employment option at lower wages, in locations like Clonakilty, South Armagh or Herefordshire.
Not surprisingly, the long-serving Indo employees took the ‘lump' and moved, bitter and resentful into what was admittedly a buoyant jobs market.
The timing of this outsourcing exercise coincided with the local government elections, thus politicians of any hue were not going to go to war with the Indo in the middle of an election. With the exception of an airing on the Joe Duffy Liveline show, the dispute got minimal media exposure – virtual silence compared with the Irish Ferries protests which were about the same critical industrial relations issue.
This year (another election year) the Indo is taking on the only big organised group of workers left in the industry, the journalists. Ironically the dispute is unlikely to be any noisier this time.
In an extraordinary move, the company is proposing large-scale outsourcing of the editorial production functions. Exactly what impact this will have on editorial quality at the Indo titles is one of the apprehensions of the remaining Indo journalists and their union, the NUJ.
However the intentions of the O'Reilly management are clear and the “Ryanisation” concept as it applies to the Indo titles in Ireland is becoming irresistible.
This may be bad for journalism but it is seen to be good for profitability (the share price has endorsed the move) and big profits crank out big dividends.