Dual role of Smurfit chairman attacked

THE Jefferson Smurfit Group has come under' renewed attack over the dual role of its chairman and his contract terms. The head of an investment firm has said Dr Michael Smurfit's deal breaches the' guidelines drawn up for such companies and is not "best practice".

Smurfit is trying to deal with the criticism and has called a meeting with Mr John Lawrie, chief investment manager at Scottish Provident Ireland, who raised the issue yesterday.

Mr Lawrie told a press briefing he was "very concerned" at the Smurfit group's own remuneration committee's report. "However, I have been approached by the company who wish to explain the position. I'm looking forward to meeting them," he said.

Scottish Provident holds around 2.75 per cent of Smurfit stock, the family holds around 7 per cent and Investment Bank of Ireland around 15 per cent.

Mr Lawrie said it "is a matter of serious concern when leading companies don't adhere to the highest standards, particularly regarding the Cadbury Report".

Cadbury recommended that the role of chairman and chief executive ought to be separated. Dr Michael Smurfit combines both roles.

Smurfit finance director Mr Ray Curran, who will be meeting Mr Lawrie today, pointed out that the contract in question had been entered into before the introduction of the guidelines referred to by the fund manager. "It is a 10 year contract of which three and a half years still" he said.

He said the group was surprised that the issue of the longevity of the contract should be raised now since it had been available for inspection by shareholders every year at the annual general meeting.

He said the chairman's contribution to the group had been outstanding and the board believed it was in the best interest of, shareholders that his services be retained for a long as possible. Subsequent events had borne that out, he insisted.

Mr Lawrie, whose company holds 2-3 per cant of the overall Irish market, said companies which did not adhere to best practice in corporate governance were undermining support for the market as a whole.

He stressed that he "does not believe in service contracts with severance clauses. A director may be entitled to more than three months' notice but not to many years," he said.

He said the Smurfit group told him Dr Smurfit's controversial four year contract was the "unexpired portion" of a contract. He noted that the 1990 Companies Act specified that no contract should be for longer than five years.

Dr Smurfit's contract was initially signed in 1988 and renewed in 1990 for a period of 10 years.

Citing the example of ILP, which recently listed in London, and Elan, which is effectively quoted in the US, Mr Lawrie warned that the Irish market could be by passed by international investors.

"Because of the size of the Irish market international investors tend to look at it in a slightly patronising way," he said. "It is very important that it portrays itself as efficient and transparent with high standards. The larger companies, particularly those also quoted in London, must adhere to the highest standard of corporate governance.

"Large scale institutions outside Ireland will tend to be less tolerant of breaches of good practice than in larger markets where such breaches might go unnoticed," he added.

Picking out CRH as a good example, Mr Lawrie said it acted on the "highest standards" and as a result many British institutions looked at it and it had a high proportion of international shareholders.

However, analysts point out that CBH has a comparative sector in Britain making it easier to tell its story while Smurfit is rated in line with mostly US paper stocks.

Other areas where Irish companies needed to be careful included share options schemes, Mr Lawrie added. "There needs to be some kind of cap on share" he said. On monetary union, he said that, although he was pro-European, federal structure needed to be more developed than it was likely to be in 10 years' time in order to make an orderly transfer to a single currency.

"There is a great danger that the sacred cow of low borrowing and convergent economies are not a good basis for forming a" single currency," he said.