O'Brien goes on offensive with IN&M report

Businessman Denis O'Brien has gone on the offensive against Sir Anthony O'Reilly's Independent News & Media by publishing a report which says the organisation is at risk of being branded a "crony" firm which serves Sir Anthony's interests over those of minority shareholders.

IN&M rejected Mr O'Brien's report, stating that it had the "highest corporate governance standards" and will issue defamation proceedings if it does not receive an apology.

"This is a paid for, partisan report commissioned by a shareholder with an agenda as yet unknown . . . The board of IN&M is satisfied that it complies at all times with the provisions of the combined code," it added.

But Mr O'Brien's report said IN&M fell well short of best-in-class corporate governance when compared to either home or global market peers.

"The firm's Achilles heel is a board composed of directors who nearly all have affiliations in some fashion with the principal shareholder, who is also the chief executive," it said.

"The board profile, which reflects a dated style of corporate governance, appears inconsistent with the company's changing 21st century business ambitions."

Sir Anthony himself rejected the charges in the report, which was written by Dr Stephen Davis of the Yale School of Management and Davis Global Advisors.

"Issues of governance are a matter for the board of which I am a member and is an issue which the board assiduously addresses. I would also like to add that IN&M is ahead of its peers in financial performance," he said.

Widely seen as a prelude to a possible bid for the company by Mr O'Brien, the 18-page report said substandard practices in board independence at IN&M unnecessarily undermined investor confidence and contributed to a likely rise in the cost of capital through a discounted stock price.

There were doubts over the formal independence of every single non-executive director, it said. The company's judgment about the independence of its board was "comprehensively repudiated" by every single analysis covering its proxy voting.

"Independent findings that IN&M harbours substandard corporate governance are beginning to proliferate, with the risk that the drumbeat of such charges may find a permanent echo in the marketplace," it noted.

The report said said investors would not regard IN&M chairman Dr Brian Hillery as independent under many guidelines. It said Dr Hillery is chairman of Providence Resources, in which Sir Anthony has a 45.8 per cent stake, and is brother in law of IN&M director Joseph Davy of Davy Stockbrokers.

Citing research by proxy adviser Glass Lewis, the report also said Dr Hillery permitted a total of €1.4 million in extra payments to directors in the past two years without disclosing the purpose of such fees.

The company's spokesman said all such payments were laid out in its annual report and accounts.

Dr Hillery said: "As chairman of the board I would also like to reiterate that the group is in full compliance with the principles and provisions of the combined code of corporate governance."