Shareholders may fume but MacSharry likely to win the day for Eircom

When Mr Ray MacSharry stands up to address Eircom shareholders at 11 a.m. today, he is likely to do so from strength. With strong support from institutional and corporate shareholders, all the resolutions are likely to be carried with a large majority. But he will still have to face many angry shareholders.

The small shareholders are numerically dominant. But a few large shareholders control a major slice of the equity and are likely to carry the day for Eircom.

Mr MacSharry can decide to conduct the meeting abrasively. By sticking to the rules and allowing shareholders to address only the specific motions, for a limited time, he could bulldoze the resolutions through. Given the mood of non-institutional shareholders, however, who have seen their share price dwindle from the issue price of €3.90 to €2.64, that would be counter-productive.

So Mr MacSharry is likely to start the proceedings with an address that could last 15 minutes. It will aim to deal with some contentious issues and could focus on the proposed share option scheme. With the share price languishing, the timing is unfortunate. He is likely to give some assurance about the timing of the scheme and may also have something to say about the issue price of the options.

It will be Eircom's maiden meeting as a publicly quoted company. Such meetings tend to be self-congratulatory; Eircom's will involve self-scrutiny.

The meeting room at the RDS can accommodate around 5,000 shareholders. In addition, there is an over-fill facility that can bring the numbers up to 7,500. There are parking facilities for fewer than a 1,000 cars, according to a company spokesman. To get a seat shareholders should go early and registration begins at 10 a.m.

Just seven resolutions will be considered. The most contentious are six - the share option scheme - and seven - the long-term incentive plan. The first resolution, to receive and consider the statement of accounts for the year ended March 31st, 2000, and the report of the auditors, should be straightforward. Mr MacSharry, the group's chairman, commenting on the results, said profit before tax and exceptional items rose by 17.8 per cent to €337 million (£265 million). True. But if the exceptional charges and redundancy and transformation costs are taken into account, then nil growth would be indicated, while using only the ongoing business, growth would be 11.3 per cent, or below the growth indicated by Mr MacSharry.

Resolution two should not cause any problems. It calls for a final dividend of three cents per share to be paid.

Resolution three calls for the re-election of four directors; Mr Alfie Kane, Mr Marten Pieters, Ms Annika Christiansson and Mr Paul Mackay. Mr Kane, chief executive, and the group's finance director, Mr Malcolm Fallen, received a total remuneration package of £1.7 million (€2.2 million) last year. Mr Pieters represents Dutch group KPN which is selling its 21 per cent Eircom stake. Ms Christiansson represents Swedish group Telia which plans to sell its 14 per cent shareholding early next year. Mr Mackay, a chartered accountant, is principal of Paul W. Mackay and Associates.

Resolution four is straightforward. It gives directors the authority to fix the remuneration of the auditors.

Resolution five follows the practice of other publicly quoted companies. It gives the Eircom board the right to issue new shares, to a maximum amount of €183.99 million, up to a period of 18 months, without reference to the shareholders. This will allow Eircom issue shares for takeovers.

Resolution six has several separate resolutions, one of which deals with the share option scheme. The resolution allows up to 5 per cent of the equity to be issued. The others allow the company to allot securities for rights issues, to buy its own shares and to issue treasury shares.

Resolution seven deals with the contentious long-term incentive plan. The exercise of the options and share awards only becomes effective if the growth in the company's earnings per share is not less than the growth of inflation plus 5 per cent per annum compound. The price of the options has not been defined (it isn't defined in other companies' schemes either) but the timing means the executives who participate in the scheme would benefit from the low share price.