Lingering questions at An Post

Opinion: Has a much needed tranquillity descended on An Post? With the ballot by members of the Communication Workers Union (CWU) on the Labour Court's recommendation to settle the fiery dispute poised to be ratified by next Thursday, it would seem so. Don't be deluded.

Three questions need to be answered. First, why did the Labour Court amend its previous recommendation so as to benefit one of the sides? Second, what impact will this have on An Post? Third, why is such a non-cohesive board allowed to exist?

An Post has 14 directors. That is decidedly top heavy, and the composition is clearly distorted. Seven are non-executives. Five are employee directors, one is the postmaster director and one is Donald Curtin, chief executive of the group.

Having five employee directors is bizarre, particularly when there is only one director from management. It will be recalled that the employee directors were vigorously opposed last year to the closure of SDS, and its integration into An Post, even though SDS was not viable on its own. Management should have at least three directors and that would emphasise the need for a more commercial approach by the group.

Non-executive directors can play a valuable role. Indeed, Paul Kavanagh, a director of a number of companies who resigned as a non-executive director of An Post last May, is an inspiration. In his unpublished and telling resignation letter to Noel Dempsey he is understood to have complained bitterly that the board had become ineffective in its drive to profitability. While conceding that management and some board members have a clear view of what is needed, he is understood to have said, every time they take the necessary initiatives they are frustrated by certain elements that pay lip service to these needs, and then cynically disrupt, delay and frustrate the efforts.

Crucially, he is understood to have argued it has become an ideological contest with little regard for the consequences. As he sees it, the inevitable consequences of the current agenda being pursued by the unions will lead to greater downsizing and redundancies. He rightly argues that a short-term fix is not what An Post needs and talks about the need to be flexible, competitive and innovative.

The last annual report, in its explanation of corporate governance, said: "given its status as a State company, its shareholding structure and the appointment by the Minister, the board believes that the criteria normally used by the board of a listed company in considering the independence of its directors do not apply to the company. Accordingly, the board has not evaluated the independence of directors against the criteria set out in the 2003 Combined Code".

Now that is not very enlightening. Why shouldn't the independence of the directors be challenged? And shouldn't their vested interests preclude them from voting on conflict of interest issues?

A further question is the role played by the Labour Court. The union has recommended acceptance, so baring unforeseen circumstances the members should agree, thus avoiding disruption to mail deliveries over Christmas. So is this the beginning of sanity returning to An Post after it has been traumatised with crippling feather-bedding and archaic practices?

Looking at the court's recommendations that pay increases due under Sustaining Progress be made without linking them to a major rationalisation of the collection and delivery services, as the July court recommendation did, it is easy to see why the CWU was so quick to accept them. But the changed court recommendation in favour of one party - the CWU - raises a fundamental question: why make the modification when An Post's financial position has not changed? Is it because CWU put a gun to everyone's head by threatening a strike? If so, that would create a dangerous guideline for others to follow.

The assessors engaged by the Labour Court via the Labour Relations Commission were very clear in their conclusions. These said An Post was in a position to pay the full 5 per cent of Sustaining Progress but maintained that "the company cannot afford any further elements of Sustaining Progress, or of the mid-term review elements, other than in the context of securing finalisation on rationalisation and restructuring requirements".

Pointedly, the assessors concluded that without the rationalisation changes "the best that can be expected is the continuance of modest opening profits capable of continuing to fund the proposed - and ongoing - 5 per cent increase in pay".

An Post accepted the first proposals and also the second amended one. Grant Thornton was commissioned to analyse the costs and implications of a number of amendments proposed by CWU. In making its second recommendation, the court noted the union is "committed to delivering significant change in the collection and delivery service of An Post". Clearly the court sought a compromise route. It dealt with the issues under 16 headings, some of the proposals are postponed and subject to further discussions which could eventually be referred back to the court. That's the last thing a commercial operation needs.

The recommendations will lead to extra costs - €13 million this year and €20 million next year - being sustained by An Post. An Post is still expected to break even in 2005. The outcome for 2006 depends on cost savings, but in light of the court decision it won't be surprising if An Post reactivates its request for a price increase in the standard stamp from 48 cent to 60 cent.