Will we learn why Connolly abandoned challenge to INM pay-off?
BUSINESS OPINION:INDEPENDENT NEWS and Media will seek to restore some normality to its boardroom later this month when four non-executive directors will be put forward for election at an extraordinary general meeting.
If they are elected, Leslie Buckley, Jerome Kennedy, Triona Mullane and Len O’Hagan will bring the board complement to 10, including six independent non-executive directors.
Buckley will be deemed a representative of 29.9 per cent shareholder Denis O’Brien, along with current directors Paul Connolly and Lucy Gaffney. Two other non-executives were co-opted recently, Allan Marshall and Terry Buckley, while Frank Murray and chief executive Vincent Crowley survive from the previous board.
It will interesting to see if any explanation is offered or sought at the extraordinary general meeting for the chaos that has preceded the appointment of the four new directors and, in particular, the extraordinary behaviour of Connolly in the boardroom coup that saw Gavin O’Reilly and James Osbourne ousted, sparking a wave of non-executive departures.
There are still quite a few ordinary shareholders in Independent News and Media – not telecoms tycoons, financiers or banks – and they must surely be bemused, to put it mildly, by the eleventh-hour decision of Connolly to abandon his challenge to the legality of Gavin O’Reilly’s €1.87 million pay-off.
Not as bemused as Mr Justice Brian McGovern, who was minutes away from delivering what was quite possibly a landmark judgment on directors’ pay-offs, but bemused nonetheless.
Justice McGovern at least got to make his displeasure clear in court two weeks ago, holding up his judgment in his hand and remarking: “The third secret of Fatima was eventually revealed but this will not suffer the fate of seeing the light of day.”
Ordinary shareholders remain in the dark, a condition to which they are well used. The statement issued by Independent News and Media on July 20th was ambiguous at best, stating: “It was indicated to the court that the issues had been resolved between the parties and that, in those circumstances, the proceedings could be struck out with no order.”
It did not make clear that unless something truly exceptional happened, the only way in which the issue could have been “resolved” was for Connolly to withdraw his application seeking a direction from the court that the payment to O’Reilly was illegal under company law.
This may sound a bit pedantic, but it is important because it puts an onus on Connolly to explain why he waited until the eleventh hour before pulling the plug.
Connolly, who represents controlling shareholder Denis O’Brien on the board, had ostensibly taken his action against the company, of which he was a director, on a point of principle.
It was made clear that O’Reilly was not going to have to repay the money, but Connolly wanted to establish that, under company law, the pay-off should have been approved by shareholders at an annual general meeting.
His lawyers said the court had to decide whether the Companies Act 1963 required such a “compensation” payment to be approved by the members of a company at a general meeting.
Connolly’s difficulty now is that, having occupied the moral high ground, he cannot so easily vacate it. He has, after a fashion, found himself hoisted on his own petard.
Having taken a welcome but frankly surprising stand for the rights of shareholders, Connolly really should explain to these shareholders why he walked away only hours before the judgment was to be given.
Not only might they have an interest in the very important issue that he had raised, they had also paid to find out the answer to the same question.
Independent News and Media’s costs in defending the action will run to hundreds of thousands.
For the moment, we can only speculate what reason he may have had for suddenly losing interest in his groundbreaking case to establish if shareholders had the right to approve pay-offs to their senior executives.
It is hard to believe it was a matter of costs. Both sides are understood to have paid their own costs as part of the “settlement”, and three days in the High Court is not cheap. But, that said, Connolly is a wealthy man and O’Brien an extraordinarily wealthy man.
It is safe to assume Connolly would not have embarked on his crusade without being prepared to foot the bill if it all went wrong.
Surely Connolly will avail of the opportunity afforded by the upcoming extraordinary general meeting to explain himself?