Stentor's action towards press is totally unacceptable
Mr Sean Patrick Cruise O'Brien has created a record. It is a record all chief executives of publicly-quoted companies should shun. But it is now firmly etched in corporate history. By banning the press from attending the annual general meeting of the troubled telecommunications firm Stentor, of which he is chief executive, he has given his company the dubious distinction of being the first publicly-quoted Irish company to have denied such access for about three years. That, coming at a time of greater transparency, makes it totally unacceptable. He, and his company were, of course, legally entitled to take the stance they did. Also, the stock exchange listing agreement does not specify that the press should be allowed to attend annual general meetings or extraordinary general meetings.
However, it has been a well-established tradition for journalists to attend, and report on, the proceedings of such meetings. This provides a safety check and provides all those shareholders who cannot attend with an account of the proceedings. Such meetings usually provide the only forum for shareholders to voice their grievances against (and praise for) their directors. When a company decides to exclude the press, it is fair to conclude that it does not want the proceedings to be published. A closed meeting in effect hides these views from the public and potential investors. So what was Stentor hiding?
It has plenty to feel sorry about. The preliminary results, circulated to the shareholders and the press, showed how precariously it is poised on a financial knife edge; losses of £6.7 million in the year to March 31st, 1998, and shareholders' funds of £1.5 million. A subsidiary table showed losses of £5.4 million in the five months to the end of August and a deficit of £3.9 million in shareholders' funds. But the annual report (not circulated to the press, but available prior to the a.g.m.), shows how heavily the accounts are qualified by its auditors, PricewaterhouseCoopers. The accountants do not mince their words and the report, making grim reading, runs like this.
"The directors have been unable to provide us with evidence that supports their opinion that it is appropriate to adopt the going concern basis." It goes on: "The adjustments to the financial statements, should the going concern assumptions be invalid, could be so material to the reported loss for the year, to the carrying value of assets and liabilities, and to the classification of liabilities, that the financial statements would be seriously misleading." And it adds the rider: "It is not possible to quantify the potential effects on the financial statements, should the going concern basis of preparation of the financial statements be invalid." As a result the auditors have been unable to determine if "proper books of account were kept by the company in this regard". And they were unable to express a view that the accounts present a "true and fair view". That certificate was signed on September 30th, 1998.
Since then a number of directors have resigned, including the chairman and finance director (and one new executive has been appointed). There is speculation that Mr O'Brien might also resign. And crucially Stentor has announced a bailout of up to £8.5 million by Co-Operation Benefit Fund, a shareholder, which could end up with 95 per cent of the company.
Details of that deal will have to be scrutinised closely by the suffering Stentor shareholders, who are unlikely to get more than a nominal amount on the shares, which reached 195p sterling at one stage on London's AIM. Only two other companies have taken the retrograde step of banning the press since the beginning of this decade. In 1992, AIB refused to allow photographs at its a.g.m. That bank, which persuaded the State to bail out its troubled Insurance Corporation subsidiary and is now the subject of a probe by the Revenue over non-payment of DIRT, was trying to avoid a repeat of pictorial presentations of protests. That ban, however, was short-lived, but never should have happened.
Then in 1995, Ewart, the Belfast property company, now part of Dunloe Ewart, barred the press from its a.g.m. It was then in the throes of board changes and the outgoing chairman, Mr Paul McWilliams, decided to bar the press. That again was a retrograde decision.
However, the decision of Stentor is far more serious because of its precarious financial state and because of the questions it should have faced on its stewardship. There should be no place for publicly-quoted companies that shun transparency.