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Democratic Dogfight at AGM

Posted on: May 17th, 2009

IT has been a week-long orgy of AGMs. The battered shareholders are suffering from AGM fatigue. Irish Nationwide, Allied Irish Banks and finally Irish Life held their annual bashes.

Afterwards, little had changed. Small shareholders turned up at the meetings in the hope of crumbs of comfort. No comfort came. I attended the AIB meeting.

The headlines were grabbed by the incident when the eggs headed for the platform. Dermot Gleeson’s body proved nearly as fast as his mind, as he ducked the wellaimed missile.

Dermot lost the battle in the hall but ran away with the vote on the proxies. All the big battalions came in and backed Dermot’s gang. The vote was overwhelming.

Over 97 per cent supported the present directors. Is this really in line with the views of the ordinary shareholders? Directors who have presided over the bank during the recent unhappy years have now been re-elected.

That is the familiar story of Irish public companies. The big blocks support each other. That way, nothing changes. Small shareholders are fodder for AGMs.

This inbuilt protection for boards is, funnily enough, not universal. Two box-office AGMs remain to be held. The Bank of Ireland on July 3 and, very shortly, the EBS on Friday, May 29, in Dublin’s Burlington Hotel.

There will be no uncertainties at the Bank of Ireland bash. All will go according to plan. The proxies will rule the day. Yet down at the EBS a dogfight looms. Dogfights are democratic. At the EBS, board places are being keenly contested.

Sitting board members are in danger of losing their seats. There are no big investors casting millions of votes in favour of the board. At the EBS it is one person, one vote, not one institution, millions of votes.

Each candidate for election is making a postal pitch to EBS members in an attempt to win their vote — 207,000 members will have a vote. Last year, candidates were allowed to address the annual meeting to make their case.

No quoted company allows any such transparency. First, they hide the directors from shareholders, then they elect them with proxies. The EBS exercise reeks of democracy. Candidates canvassing. Candidates making presentations to meetings of shareholders.

One person one vote. Last year the result at the EBS was the election of Ethna Tinney against the wishes of the board. Ethna topped the poll. The EBS directors wiped the egg off their faces. So there must be something good about the EBS, after all.

In recent times, little by little, EBS members have seized the reins from the clutches of the clique that controlled the society. Ethna Tinney’s success last year was a signal that EBS members would not tolerate any further board attempts to exclude outsiders.

The resignation of chairman Mark Moran at this year’s AGM will mark a further weakening of the grip of the old regime. Yet there is plenty of unfinished business at the EBS. Six candidates are standing for four places.

How should we vote? I can only tell you how my vote is going to be cast. There is just one outgoing board member for whom I intend voting. That is the current chief executive, Fergus Murphy. He is only a wet day in the saddle and untainted by the worst excesses of his predecessors.

Fergus and I have had our spats in the past year. But Fergus is showing signs of steel. He only took over last year and so cannot be blamed for the fatal decision of the old regime to dive into the commercial property market, far too late in the day.

That mistake is the principal reason for chairman Mark Moran’s resignation. Nor can the loss of €15m in Iceland be laid at Murphy’s door. It predates him. Instead of ducking the problem, Murphy bit the bullet of heavy losses incurred by his predecessors.

He took them up front in last year’s accounts. He insisted on a huge increase in the provisions for bad debts. In a bold move he made a provision of €110m, leaving the EBS with a €38m loss for last year.

Such a dose of realism is in stark contrast to the antics of some of his competitors, many of whom were in denial. For years their results contained insanely low provisions for bad debts. Fergus has the whiff of a heretic.

I hear he was not too popular with the other banks for breaking the unwritten code. His actions put pressure on them to make realistic provisions. That is why I shall vote for Fergus. The EBS critically needs a clean-out.

My second X will be cast for Martin Donnellan. Martin is a retired assistant commissioner of the gardai who won a Scott Medal for Bravery. He has guts galore, having taken a case against the State for his compulsory retirement at 60. We met a few weeks ago.

He was passionate about EBS members, demanding a better rate of return for savers. He was seeking fewer executive directors, but spoke highly of Fergus Murphy.

He wanted accountability from those directors who were in situ when the EBS plunged into commercial property. It sounds as if he’d like to see a couple of them walk the plank.

Two of those directors are standing for re-election. EBS members have the chance to send them packing. Both Tony Moroney and Barbara Patton are fighting a rearguard action.

Moroney hardly merits another run. He is chief executive of the loss-making Haven Mortgages division of EBS. Haven was outgoing chairman Mark Moran’s baby and will hardly survive his departure by more than a few months.

Nor should Moroney. Moroney was part of the old Ted McGovern EBS board. McGovern was controversially awarded a €1.8m bonus on his early retirement. Both men emerged from the Irish Civil Service Building Society stable.

Barbara Patton is another long associated with the mistakes of the past. She was part of the board that took a gamble on commercial property. Like the others she opposed the election of outsider Ethna Tinney last year and the year before.

In a head-to-head between her and Assistant Superintendent Donnellan, the gutsy garda represents the face of change. A challenge from Mark Connolly, an insurance employee from Cork, seems worth considering.

Taking out Tinney, there are far too many EBS board members from Dublin. Mark Connolly would help to redress that balance, although it would be better if we knew a bit more about him.

One of the Dublin candidates is Linda O’Shea Farren. During the US primary elections she gave a party in her Dublin 4 pile for Bill Clinton. She unsuccessfully stood for the EBS board last year. Linda stands for lots of offices.

EBS members should exercise the real power of electing directors, a power not enjoyed in practice by share holders in public companies. One person, one vote gives us real clout.

Above all, we can do what could not be done at Irish Life, AIB and other public companies. We can remove directors associated with mad ventures into Iceland and commercial property.