Eircom chief could be granted share options worth £1m

Eircom chief executive Mr Alfie Kane and Mr Malcolm Fallen, the company's finance director could be granted share options worth up to £1 million later this year.

Documents released to The Irish Times under the Freedom of Information Act show that before the flotation the Government accepted the company could introduce a executive share option scheme - once Eircom was no longer in public ownership.

The only restriction was that the scheme should not be introduced before the company's first annual general meeting where it should be approved by shareholders and should be subject to the Irish Association of Investment Managers guidelines for such schemes. These guideline stipulate that executive can be granted share options up to four times their annual pay.

The flotation prospectus showed that Mr Kane earned €380,700 (£299,825), while Mr Fallen was paid €317,250 (£249,854). Both salaries were to be reviewed last April, and the current remuneration of the two directors is not known. On the basis of the June 1999 figure, both executives could get option packages worth in the region of £1 million.

The options are likely to be granted at the share price at the time of the annual meeting in September. Even the most optimistic forecasters are not expecting any substantial improvement in the company's share price, which closed yesterday at €3.22 down 68 cents on the flotation price.

The documents released yesterday also shed further light on the role played by the company in setting the controversial flotation price. Last week Mr Kane moved to distance the company from the €3.90 flotation price which he said was to high.

The price was set by a Cabinet sub-committee on foot of advice from Merrill Lynch and AIB Capital Markets. Merrill Lynch had recommended a price in the region of €4.26 while AIB had pushed for €3.75. Mr Kane said last week that the companies advisers, ABN Amro had warned that even the lower price set by AIB was too high. Sources said that Eircom had made its views clear to the Government and that they had been ignored.

The documents show that Mr Kane and Mr Ray MacSharry, the company chairman, signed a pricing memorandum the day before the flotation setting out the price agreed by the Government. It followed an Eircom board meeting July 5th at which the directors gave their formal approval for the public offering. The board's approval was needed for the float to proceed.

An Eircom spokesman stressed last night that the company, the board of which includes former Labour leader Mr Dick Spring, had a legal duty to sign all the documentation required to allow the flotation to go ahead".

Speaking in the Dail last night the Minister for Public Enterprise, Ms Mary O'Rourke, said that the ABN-Amro report had received widespread media coverage in the run up to the flotation.

She added that the board had approved a prospectus sent to 1.2 million potential buyers. "Let's be clear about this. The prospectus is, in its totality, the responsibility of the board. The prospectus contained a price range and that price range was approved by the board," she said.

The Minister also defended the price set by the Government. "The pricing of the shares last July involved balancing the need for a fair price for taxpayers and the need for a fair return for retail and institutional investors," she said.