The move to replace five of the six Government-appointed directors on the Telecom Eireann board was driven purely by the forthcoming public offering of Telecom shares. The Minister for Public Enterprise, Ms O'Rourke, was advised of the need to have in place a board with experience of running public companies and with a strong telecommunications pedigree. Four of the five Government appointees agreed to her request that they retire, while the fifth, Mr Paul Mackay, is refusing to go. The sixth, company chairman and accountant Mr Ron Bolger, is to become vice-chairman.
The Government's advisers - AIB and Merrill Lynch - are understood to have urged the Minister strongly that to maximise the price at which the Telecom shares will be sold, a heavyweight board of people with proven public limited company (plc) experience was crucial. The current 12-person board comprises Mr Bolger - recently reappointed by the Government for a second term - Telecom chief executive Mr Alfie Kane, two worker directors, three appointees of Telecom's strategic partners KPN/Telia and five other Government appointees.
The decision to replace five of the six Government appointees shows the extent of the reshuffle - Ms O'Rourke could not have done much more. She also could not have waited much longer. Telecom is due to have its initial public share offering in June - provided the markets are not in turmoil - when the Government is expected to sell 35 per cent of the company, holding on to 15 per cent for sale at a later date. The promotion and sale of the shares will thus have to start shortly and the Government's advisers are understood to have suggested, in particular, that potential US investors would want to see a strong board.
Waiting until after the flotation, or switching the directors as their terms expired was not seen as an option, as the goal is to launch the company on the market at the highest possible price.
All sides were at pains last night to point out that the move was no reflection on the departing directors to whom, it is understood, Ms O'Rourke is likely to offer other State board positions, if they are interested. However, they were not seen as having the necessary public company or telecoms experience. Mrs O'Rourke first contacted them by phone before Christmas and met each individually in recent weeks.
The only replacement so far announced is US heavy-hitter Mr Brian Thompson, former vice-chairman of Qwest, who has been centrally involved in the Government's e-commerce strategy. He is to become chairman - working closely with vice-chairman, Mr Bolger - and will undoubtedly increase the company's kudos with investors, particularly in the US. The Minister is likely to announce the remaining board members over the next couple of days, with senior public company figures likely to feature.
The episode again calls into question the way in which directors are appointed to state boards. If the existing board was not seen as having the appropriate experience to run a public company, then was it the best for managing Telecom as a state-owned company in a highly competitive environment? All governments have often - if not always - appointed their political friends and there is no move yet to get an independent agency to do the job.
The move also puts question marks against other State company boards. Many believe that if the Telecom float goes well, other companies will follow - possibly Aer Rianta, Coillte and even Aer Lingus. Where does this leave the existing boards of these companies? Recent appointments in the State sector suggest that the old-fashioned political carve-up is still the favoured method of selection, even as the restructuring of the Telecom board shows the need for a more commercial approach.
