Dividends for Denis O’Brien as INM pensions suffer
‘Most sinister business dealing I’ve ever seen,’ says ex-employee
Don Lavery, former news editor of the Irish Independent and now a deferred pensioner. Photograph: Alan Betson
Harry has spent 43 years working for what is now Independent News and Media (INM), the company in which Denis O’Brien has a minority but influential shareholder interest.
Harry has less than a year to go before retirement. His colleague Nuala has worked for 20 years with INM and is due to retire early in the new year.
INM is in rude good health, financially. Only this week, in a morning equity briefing, stockbroking firm Davy predicted confidently that at the end of this year, the company would have net cash reserves of €86.4 million.
But, nevertheless, all is not well.
Harry and Nuala – who are real people, whose cases are cited in a toughly worded letter from the chairman of INM’s pension trustees to the group’s chief financial officer – are just two of the staff whose projected pensions are about to be hit for a second time if the company has its way.
In 2013, Harry’s projected pension of €40,000 a year was cut to €24,400 and it is predicted to fall now to €16,800 – a loss of €23,200. For Nuala, her pension in 2013 went from €23,800 to €14,500. Now it is projected to fall to just €8,600.
The pension cutbacks will occur in parallel with a financial restructuring that will allow INM to resume paying dividends to shareholders, something the financial services company Goodbody thinks it should do.
“We have long been of the view that a dividend payment would be to the best interest of INM’s shareholders in the absence of value-enhancing acquisitions,” said Goodbody analyst Brian Devitt in a recent Morning Wrap.
“We’re in Alice in Wonderland territory,” says the National Union of Journalists’ Irish secretary Seamus Dooley, who is involved in a nascent NUJ/Siptu joint campaign to stop the company’s pension plans.
What’s planned is this: on November 7th, INM wrote to the members of its two defined benefit (DB) pension schemes announcing that it was stopping – with immediate effect – putting any more company money into them.
Two separate schemes are affected: one for senior management, which has a membership of a few dozen, and a second scheme that includes some current staff, but mostly several hundred early retirees whose pensions have been deferred until they reach 65 or 66.
The trustees of the schemes, including their chairman, INM company secretary Michael Doorly, knew nothing of what was afoot and neither were they consulted about the impact of the proposals beforehand.
Neither was the Irish Pensions Trust, a private company that helps the trustees administer the schemes and whose experts dealing with INM are furious, according to people who have spoken to The Irish Times this week.
Doorly penned the stiff rebuke a letter, cited above, on November 22nd to INM’s chief financial officer Ryan Preston, saying that “there is no legal or moral justification” for the company’s proposed action. His letter cites several examples, including those of Harry and Nuala, of the likely effects on final pensions.
In the dark
Now, however, the trustees are expected to sort everything out even though they were in the dark – a place in which they remain, according to sources. Meanwhile, hundreds of people worry about their futures.
In preparing this article, INM’s chief financial officer Ryan Preston declined to be interviewed. Responding on his behalf, a PR company said: “As the company is engaged in a process with the trustees it is inappropriate to comment.”
Those threatened by the plans see only a reneging on promises made, not a process. “This could not happen in the UK,” says Dooley. “The law there does not allow a profitable company walk away from its pension commitments.”
One senior figure close to retirement tells of a meeting arranged by INM’s human resources department which got, he says, “hot and heavy” because no information – facts, figures, projected pensions once the schemes are wound up – was forthcoming.
“‘We can’t talk about it’, they said, ‘That’s for the trustees’. But the trustees won’t talk about it either. They say they can’t talk about it legally,” this individual has told The Irish Times, reflecting the anger of colleagues.
“‘This is only a process’, they say. A process. ‘We‘ll be bringing this back to the management and telling them how you feel about it.’ Well, well done Sherlock, but you could have figured that out beforehand.”
Defined benefit schemes, in which the pension paid amounts, typically, to about two-thirds of final salary and is guaranteed, have become notorious. This is because the pension pot – the fund fuelling the amounts paid out – is never sufficiently full.
Three months ago it was estimated that Ireland’s 26 semi-State and State companies were estimated to be carrying a collective pensions hole of some €6.8 billion.
Private companies have been shutting down their DB schemes. The Irish Times closed its scheme in 2015 after negotiating with staff. INM negotiated and altered its scheme in 2013, also after negotiating with staff.
According to people affected by that deal, pensions went down then by up to 40 per cent, but people accepted what they were assured was a 10-year deal with no viable alternative.
“What we were told then,” said one staffer, “was that our reduced pension was safe – ‘you ring-fence that, that’s fine, what you have now, you’ll always have, that’ll never go away’, they said.
“I have it on tape. I taped the fellow. I have detailed figures and your man said that is ring-fenced, that’s safe, don’t worry about that.”
Now, however, a pension already hit with a 40 per cent cut will fall by a further 30 per cent.
A former member of INM senior management, who also spoke on condition of anonymity, said that with the turnaround in the company’s fortunes, it was unclear why “pensioners should now have to suffer, other than there is neither moral filter nor compass and a proper sense of proportion” inside the company.
Another former mover and shaker inside the company was likewise caustic.
“What they’re trying to do is put money onto the balance sheet. This is the most sinister business dealing that I’ve ever seen,” he said. “They want to get pension money back onto the balance sheet, give themselves a dividend and then get more money [to Denis O‘Brien] by buying Newstalk, money he wouldn’t have to share with anyone.”
Tearing up agreement
By tearing up the 2013 agreement, as critics see INM’s proposal, and ceasing payments into the DB scheme, the INM balance sheet will look about €24 million the better. But to start paying dividends to Denis O‘Brien, financier Dermot Desmond and other shareholders, changes have to be agreed at an Emergency General Meeting on Monday and then be ratified by the High Court.
Siptu and the NUJ, many of whose members are INM shareholders, have taken a room in the Alexander Hotel in Dublin and plan to make their presence felt.
“It is disgusting what is going on,” says Seamus Dooley. “Two of Ireland‘s wealthiest men, Denis O’Brien and Dermot Desmond, being enriched at the expense of pensioners. And if INM can do it, other companies will be able also.”
And what of Harry and Nuala?
“What is happening here has implications above and beyond a media organisation,” says Seamus Dooley. “It highlights the need for urgent pension reform . . . There’s a High Court precedent [Aer Lingus] for a company being forced to take pensions into account when restructuring.”
Either way, pensioners, deferred or otherwise, tend to be stubborn types who do not to lie down quietly.