Cantillon

Inside the world of business

Drumm may be first banker sued but should not be last

THE DECISION by Anglo Irish Bank to pursue its former chief executive for €8 million in unpaid loans could not have been taken lightly. Even a bank as badly damaged as Anglo Irish could not have relished the prospect of having yet more of its dirty laundry potentially displayed in court.

But in truth the bank has little choice. Regardless of whether it is split up, closed down, reinvented or some combination of the above, it needs to make a clean break with the past. And that will never be achieved as long as there is a suggestion that its current and former executives are being treated in a different fashion to other debtors.

The perception that some sort of favourable treatment was being shown to them would have made even more difficult the already very hard job of justifying further substantial injections of taxpayers’ money into the bank.

The fact that the bank’s move against Mr Drumm comes just days after the Minister for Finance stated publicly that current and former executives who owed the bank money would be pursued in the courts can be taken as confirmation the action was sanctioned at the highest level.

However, it also leaves open the possibility that Mr Drumm is the subject of a politically motivated witch-hunt.

There is no denying that the apparent failure of the Government to hold senior bankers to account for their actions has rankled with the public. The debacle over the appointment of Colm Doherty to the top job at AIB is a case in point.

There is of course one simple way for the bank to counter this. Mr Drumm is not the only high-profile or well-connected individual who owes the bank money and may be in difficulties. They must be pursued with equally public vigour.

Living in the real world

IT WOULD be nice for Greencore if the world operated on a constant currency basis. If it did, the 5.7 per cent decline in its operating profits and the 15.6 per cent decline in its sales really would turn into the 8 per cent increase in operating profit and a decline of less than 1 per cent in sales trumpeted by the company yesterday.

But, unfortunately for Greencore and its shareholders, the world does not work this way. While constant currency adjustments help give a picture of the underlying trading performance, they don’t magic away the damage caused to earnings by a 13 per cent depreciation in the sterling to euro exchange rate over the course of the year. And likewise, no amount of constant currency reporting will get around the fact that this is the way things will remain for quite some time to come.

Greencore may do 80 per cent of its business in the UK and the arguments for reflecting this in the figures is compelling, but the fact remains that it reports in euro and its shares are priced in euro and dividends are paid in euro.

This unpleasant reality looms large as Liam Carroll’s lenders try to offload the 29.9 per cent stake they now hold in the group courtesy of the collapse of his property empire. Prospective investors may well be impressed by the strides the company has made (on a constant currency basis) in its transformation into a UK convenience food business and the inroads it has made (on a constant currency basis) in the US market.

But they will also be conscious that they are buying their shares on a real world currency basis and there is no real reason for anticipating a recovery in sterling and the dollar in the short term.

Putting off pension plans

BRANDISHING A copy of his new research report, Pensions Policy: New Evidence on Key Issues,ESRI professor Tim Callan admitted he wasn't the first member of his family to have a publication launched by Mary Hanafin: his daughter had received a writer's prize from Ms Hanafin when she was six.

Her book was better, replied the Minister for Social and Family Affairs: it had pictures in it. Still, she thanked Callan and co-authors Claire Keane and John Walsh for their efforts before indicating that the Government would be once more long fingering the thorny issue of pension reform. The UK gave its pensions industry three years before it introduced major changes, Hanafin noted, before indicating that 2014 was the likely implementation date for a switch to a single rate of tax relief on pension contributions.

Of all the ESRI’s research findings, the one Hanafin liked the best was the percentage of pensioners “at risk of poverty”, which had fallen sharply from 30 per cent in 2000 to about 10 per cent in 2008.

It was “very, very encouraging”, Hanafin said. “That raises questions about what we’re doing to the State pensions in the budget,” she segued ominously. “That’s not a secret I can give away today.”

Today

Minister for Finance Brian Lenihan will address the senior executives of many of the multinational businesses operating in Ireland at the annual Thanksgiving dinner of the American Chamber of Commerce Ireland.

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