Did YOU lose your job recently? Good. You must be loaded. Lots of compensation to soften the blow.
No fault of your own? That is not so good. You are just one of many being laid off because the economy is bunched.
You were a disaster? Much better.
The drinks company with the disastrous record has been rewarding failures. On Monday, the annual report came out. One of the biggest items in C&C’s accounts puts our departing bankers to shame. Most bankers taking an early bath are — rightly — exiting without golden handshakes.
But nothing is too good for Maurice Pratt, boss of C&C until his exit last October. Maurice was given €1.73m as “compensation for loss of office”, €197,000 as a “special pensions payment” and other rewards that totalled a package of over €2.5m for his annus horribilis. Back in 2008, he had to be satisfied with a mere €1m; but in 2009, in recognition of Maurice’s unique contribution to destroying shareholder value in C&C, he was awarded a couple of million. At the year end, the shares stood at 94¢. At their height, they were €13.90. Maurice had to go.
Maurice was a mighty flop at C&C. He pioneered an invasion of the UK. He poured Magners cider into the pubs and supermarkets of our nearest neighbour. It sat on the shelves, undrunk.
Maurice blamed the failure of the UK invasion on bad weather. He couldn’t fathom why every summer was not as hot as the freak tropical suns of 2006. He worked on the assumption that the hottest summer in living memory would be repeated annually. He pumped money into the campaign to quench the Brits’ thirst with Irish cider. A problem arose that the Brits were not thirsty. And they preferred the native competitors’ product from Scottish and Newcastle.
When the campaign went wrong, he embarked on a lunatic spending spree — buying back millions of falling C&C shares at sky-high prices. His shareholders lost another fortune.
Some of Maurice’s C&C colleagues trousered lesser amounts, but nonetheless they trousered millions. In total, C&C coughed up nearly €5m. Brendan McGuinness, former managing director of the cider division, received €1.26m “on termination” when he left the board in April 2008. Brendan Dwan, former finance director, received €1.08m “on termination”. James Muldowney, former director of strategy and development, left with a termination payment of €658,000.
That is the C&C way. Those responsible for the cider debacle are leaving, enriched. All left with bonanzas as “compensation for loss of office”.
Bully for Maurice. Quite a coup.
Maurice’s older clone, C&C chairman Tony O’Brien, claimed in the annual report that the company was “legally obliged” to pay the golden handshakes.
I should love to see his legal advice.
Tony is one of those well-rewarded pillars of business who dislikes answering questions. When I rang C&C on Thursday and asked for Tony, the receptionist offered to put me through. I gave my name.
There was then a short break before she came back and told me that he had left for the day.
Tony has been chairman of C&C for seven years. Nothing wrong with that.
Except: guess what Tony did before he was chairman of C&C ?
Bingo. He was chief executive of C&C. Naughty corporate behaviour.
So Tony was a trend-setter for other honourable businessmen, like Anglo’s Sean FitzPatrick and DCC’s Jim Flavin, in making the seamless ascension from chief executive to chairman. This switch is disapproved of by the combined code on corporate governance and (in theory, but not in practice) by the big investors, the posers in the Irish Association of Investment Managers (IAIM), big investors who make a song and dance about corporate governance.
Nobody in Ireland takes a blind bit of notice of corporate governance, least of all the high priests of the IAIM. That is why Seanie was allowed to hop unhindered from Anglo’s chief executive’s seat to the chair. Ditto Jim Flavin. The IAIM bottled it.
Until last week some of us had forgotten that Tony O’Brien had made the switch.
The objection to an outgoing chief executive climbing the ladder to the chair is that he just might be a pain in the neck for the incoming boss; he might try and impose his ethos on the new man; he might not really want to hand over control. Sean FitzPatrick seems to have retained overbearing influence on his younger successor, David Drumm. Jim Flavin was unchallenged in DCC.
A bit like Sean in Anglo, Tony has not ridden off into the sunset from C&C. He still has a desk there. In total, his combined chief executive/ chairman service comes to 28 years. He will not let go.
Tony and Maurice’s careers have uncanny similarities. The parallels offer an example of how the inside track of Irish business works.
Prior to 2002, when Tony was the full-time C&C boss, he took lots of time off for the presidency at the employers’ group, Ibec. Indeed, he did a two-year stint as president in the useless employers’ outfit. No bother. The Ibec route is the insiders’ path to the best gigs in town.
Behold, a remarkable coincidence.
When Maurice succeeded Tony as the daytime boss at C&C he too managed to find time to be boss at . . . guess where . . . Ibec. He too did a two-year stint at the employers’ group. No bother. An identical path. C&C is generous in giving time to its bosses for futile activities, pastimes of no use to the shareholders.
And there was another coincidence. Tony also happened, somehow, to land a job as chairman of a bank — no less a bank than Sean FitzPatrick’s Anglo Irish — when he was still in command at C&C.
Maurice also happened to somehow land a job as chairman of a bank when he was in charge at C&C. This time it was not Anglo. Maurice is still chairman of no less a bank than the troubled Bank of Scotland (Ireland).
The road from C&C leads to Ibec. The road from Ibec leads to the chair of a bank.
No surprises there, because the banks are big funders of Ibec. That is how Irish business works.
Both Tony’s Anglo and Maurice’s Bank of Scotland (Ireland) were big property lenders.
Luckily for Maurice, Bank of Scotland (Ireland) is not in the sphere of influence of current Finance Minister Brian Lenihan. If it was, he would probably have received his P45 by now.
But perhaps — even worse — he will sometime soon have to explain the bank’s performance to his demanding parent bank, Lloyds of the UK. A trifle harder than explaining his C&C performance to Tony.
Maurice’s wounded Bank of Scotland (Ireland) has been flying below the radar in the Irish property slump because it is not an Irish bank. It was involved in some high-wire property plays, including a €288m deal to buy Dublin’s Burlington Hotel.
A stroke of luck but its exposure to property here is huge. Maurice’s Bank of Scotland (Ireland), almost unnoticed, turned a profit of €272m in 2007 into a loss of €250m in 2008. It has been forced to write off bad loans of €533m. Let us hope he has a better explanation than the “bad weather”.
The Scots and the ultimate parent, Lloyds, will want something a bit more credible. They will not reward him with a couple of million for failure.