Fishing from a small gene pool: Irish boards and interlocking directorships

Irish boardrooms are among the least diverse in Europe, and the gene pool from which non-executive directors are fished has always been relatively shallow.

This can create issues with a network forming among those people who keep popping up as directors on more than one board, a practice commonly known internationally as “interlocking directorships”.

In a small economy such as Ireland, a degree of interlocking among major company boards is inevitable. In the run-up to the last crash, however, it became a problem, especially with the number of bank directors who sat on the boards of other Irish listed companies.

Studies such as the 2010 “Mapping the Golden Circle” report by the Tasc think tank suggested the interlocks contributed to the groupthink that brought down the economy. The Institute of Directors also blames interlocks in part for the lack of gender diversity on Irish boards.

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A report published last year by researchers from Insight Centre for Data Analytics at UCD, Trinity College Dublin and the University of Washington found that Irish listed company interlocks were at their most intense just before the banking collapse, before easing off between 2010 and 2013 as the focus intensified on corporate governance.

An analysis this week by The Irish Times, however, suggests that the improvement has stalled. While the banks have cleaned up their act and almost eliminated directors with Irish listed interlocks – Bank of Ireland and PTSB have one each – many of the new companies that have listed in recent years, especially property Reits, have resorted to filling their board seats from the same old pool.

The UCD study found that the proportion of interlocks peaked in 2007 and 2008, when more than 8 per cent of directors of Irish listed companies held more than one Irish listed board seat. This declined to 6 per cent by 2013, where the proportion appears to be stuck on the dial. This 6 per cent of directors hold 12 per cent of all Irish listed board seats.

We analysed the boards of 51 companies listed on the Irish Stock Exchange, leaving out Diageo and Tesco, which hardly ever trade here.

About 55 per cent, or 28 of those 51 companies, had directors with interlocks. Some of those companies, such as Cairn Homes and Smurfit Kappa, have just one director with an interlock.

Ryanair, however, was far and away the most interlocked board, with five of its 12 directors – Julie O'Neill, Michael Cawley, Howard Millar, Kyran McLaughlin and Stan McCarthy – holding board seats elsewhere on the Irish Stock Exchange. This will drop to four (still one-third of its board) when McCarthy steps down from the Kerry Group in coming months.

Many companies have more than one Irish listed and interlocked director, including Applegreen, Hibernia Reit, Paddy Power Betfair, Green Reit, Dalata, I-Res Reit, Kerry, Conroy Gold, Karelian Diamonds and Origin Enterprises, which all have two interlocks each. Total Produce has three, while Aryzta will have two if and when, as expected, its new chief executive Kevin Toland is appointed to its board.

Including Toland, six Irish listed company chief executives also sit on other Irish listed boards. The others are FBD's Fiona Muldoon (who also sits on Bank of Ireland), Richard Conroy (he runs both Conroy Gold and Karelian), Philip O'Quigley of Falcon Oil & Gas (he also sits on Providence Resources), and Smurfit Kappa's Tony Smurfit (he also sits on the board of C&C).

Corporate governance

UCD corporate governance expert Niamh Brennan estimates that non-executive company chairpersons of major listed companies should be able to devote about three days per week to their roles.

“It is very time consuming to do it properly. A chairman is a three-day a week job, if you’re going to have the flexibility to do it properly,” she said.

Five men each chair more than one Irish listed company which, under Brennan’s yardstick, must eat up at least six days of their week.

Gary McGann chairs exchange heavyweights Paddy Power and Aryzta, Danny Kitchen steers Hibernia Reit and Applegreen, while Gary Kennedy has Green Reit and the London-listed Greencore. All three men also chair other sizeable companies that are not listed or Irish.

Brian Hall chairs both Aminex and Great Western Mining, while Conroy is effectively the executive chairman of Karelian and Conroy Gold.

“There is a trade-off with experience. You want someone who is classified as being at chairman level,” said Brennan. “But does the individual have the time?”

Brennan warned against confusing the commonly used term of interlocking directorships (which essentially just means someone who has multiple directorships) with the serious problems of boards that are interlocked with multiple directors sitting on both (you come and sit on my company board and I'll sit on yours).

The latter form of pure interlocking is "a big no-no" under corporate governance rules, says Brennan. The worst pre-crash example of this was between Anglo Irish Bank and the Dublin Docklands Development Authority. Anglo's chairman Sean Fitzpatrick sat on its client, DDDA's board, while DDDA's chairman Lar Bradshaw sat on the board of Anglo. Brennan later became DDDA chairwoman and commissioned a report on the company's corporate governance.

“That sort of thing used to be about the distribution of power. And in times past, when it came to having bank directors on your board, it was also about gaining access to resources or capital,” said Brennan.

This most egregious form of mutual interlocking has been eliminated. But there is still a network of extremely well-connected individuals who keep popping up on Irish company listed boards. We have compiled a list of 10 of the most powerful Irish listed company directors:

The Network: the 10 best-connected company directors on the Irish circuit

Robert Dix

A former KPMG partner, Dix left the firm as the economy imploded in 2008. He has since fostered so many corporate and political links that the Daily Mail newspaper has tagged him as "the most connected man in Ireland".

Dix’s current roster includes directorships of stock market-listed Dalata Hotel Group, which is Ireland’s biggest hotel company, and housebuilder Glenveagh Properties, Ireland’s newest listed company.

He also chairs Bank of Ireland Private Banking and is listed as executive chairman of Quinn Finance, which comprises the global property assets formerly owned by Sean Quinn. He is also a non-executive director of insurance group, Allianz Ireland; Blackstone's European property arm, Carbon Finance; and Actavo, the Denis O'Brien-owned industrial services group once known as Siteserv.

Lower profile directorships include mobile tech company Gozo Systems, the local division of US company Change Healthcare, AllGlass Windscreens and Echo Water.

He was previously director of Center Parcs Ireland, which is developing a huge holiday village in Longford.

Michael Cawley

Nobody currently has more Irish-based plc board seats than the former Ryanair deputy chief executive, who has collected four of them since quitting his executive role three years ago. Cawley sits on the boards of Kingspan, Paddy Power Betfair, Hostelworld and his alma mater, Ryanair.

When Leo Varadkar was minister for tourism three years ago, he appointed Cawley as chairman of the State’s tourism authority, Fáilte Ireland, a position he still holds.

Before he joined Ryanair, he was finance director of the Gowan Group, one of the largest private businesses in the State. In 2016, he returned to sit on the board of the motors-to-windows conglomerate.

Somehow, he also makes time to be director of electricity supplier Prepaypower and he was recently appointed chairman of peer-to-peer lender, Linked Finance.

Gary McGann

Since leaving the helm of the Smurfit Kappa Group in 2015, McGann has not had an executive role. Just as well, because he’d never fit it in.

McGann has three high-profile plc board seats: he is a director alongside Jerome and Gary Kennedy of Green Reit, while he also chairs both Paddy Power Betfair and food group Aryzta, two of the heavyweights of the Irish stock exchange. He stepped off the boards of Multi-Packaging Solutions and Smurfit Kappa when he took the reins at Aryzta.

He also chairs the massive building group, Sicon/Sisk, and the local arm of the global insurance giant, Aon. He is also on the board of children’s charity Barnardos, employers’ lobby group Ibec and the UCD Smurfit Graduate Business School.

Rose Hynes

The only woman to make it on to our top 10, the lawyer and Guinness Peat Aviation alumnus is easily one of the most experienced company directors in the State.

Hynes has served at various stages on the boards of seven public companies, including Aer Lingus and Bank of Ireland. Currently, she is the only woman to chair an Irish listed board – agribusiness group Origin Enterprises.

She also chairs the semi-State Shannon group, which includes the airport, and chaired Ervia, the company that owns Irish Water and the gas network, from its inception in 2009 for six years.

Hynes is also the senior independent director at Total Produce and the unlisted plc, One51. Her private directorships include aviation leasing company Blade Engine Securitisation, and a slew of interlinked companies associated with US leasing veteran Richard Wiley.

Jerome Kennedy

Another KPMG alumnus, its former managing partner has for two decades been one of the most sought-after directors in the State, the quintessential “safe pair of hands”. He has also borne witness, however, to his fair share of boardroom strife.

Kennedy served five years on the “court” of Bank of Ireland from 2007 until 2012, the most tumultuous period in the bank’s history as it suffered a near death experience. He was also senior independent director at Independent News & Media until he departed this year, at the height of a bitter schism between its chief executive and chairman.

Nowadays, Kennedy makes do with just two plc directorships: food distributor Total Produce and property company, Green Reit. He also chairs Caulfield McCarthy, a major retail chain and the biggest franchisee of SuperValu.

John Moloney

Moloney ran food group Glanbia for 12 years until he “retired” four years ago. Since his retirement, however, he appears to have become busier than ever. He straddles the public and private sectors, which can have extra clout in the Irish business world.

Moloney is chairman of the State forestry agency, Coillte, and London-listed fuels-to-electronic conglomerate DCC. He also has plum board seats at two of Ireland’s most successful multinationals, food company Greencore and the Smurfit Kappa Group.

The former civil servant is also chairman of privately-held sports science company, Orreco. Moloney also sits on the board of homelessness charity, Focus Ireland.

Gary Kennedy

The former chief financial officer and director of AIB, who left the bank in 2005, now officially lists his occupation as “chairman”. He steers the boards of Greencore, the property company Green Reit, and UK-listed distribution company Connect.

As if three major plc chairmanships was not enough, Kennedy also sits on the board of Friends First Assurance. He cut his teeth as a director of IDA Ireland in the late 1980s, and he was also appointed for a term as post-crash public interest director at Anglo Irish Bank.

Danny Kitchen

He doesn’t have the highest media profile of our 10 but former Irish Nationwide chairman Kitchen joins McGann and Gary Kennedy in the club who chair two separate Irish listed companies. Kitchen chairs both the forecourts retailer Applegreen and Hibernia Reit property company.

Enough, you would think to keep him busy. Yet Kitchen also chairs the listed Workspace Group in the UK, and sits on the board of Jersey-registered, Aim-listed LXB Retail properties. He also sits on the Irish Takeover Panel.

Kyran McLaughlin

After lawyers and accountants, stockbrokers are the most prominent non-executives on the boards of Irish companies. Davy’s deputy chairman, Kyran McLaughlin, is the best-connected stockbroker in Ireland, and a formidable board presence. He has advised on many of the largest Irish flotations of the past 30 years, and served on a raft of public boards, including Elan.

McLaughlin has been a director of Ryanair for 16 years, while he currently chairs the Dublin-listed drug company, Malin Corporation. He also sits on the board of retail chain Field’s Jewellers, and previously sat on the board of Coroin, the owner of the Maybourne hotel group in London.

Ronan Murphy

The former senior partner of PricewaterhouseCoopers (PwC) is now carving out a lucrative role on the boards circuit. Murphy is the chairman of the recently-listed renewable energy infrastructure fund, Greencoat Renewables. He is also a director of stockbroking firm Davy; Nasdaq-listed medical research company Icon; and Liberty Insurance, which previously operated as Quinn Insurance.

Murphy is also a council member of the State think tank, the Economic and Social Research Institute, where he sits alongside his fellow Greencoat board member and prolific corporate director, lawyer Emer Gilvarry.