The announcement by the Minister for Public Enterprise, Mrs O'Rourke, that no special arrangements will be made to reward the executives and board members of Telecom Eireann through share option schemes, on flotation of the company, is to be welcomed. This is a State asset, the property of all citizens, and no special deals should be done that would enrich individuals excessively at the expense of taxpayers. It was this practice, more than any other, that caused scandal in Britain during the privatisation programme of the Thatcher years.
Up to this, Mrs O'Rourke's handling of the Telecom floatation has been anything but reassuring. The departure of Mr Brian Thompson as chairman, within months of his appointment, because of a conflict of interests; the immediate appointment of Mr Ray MacSharry as his successor and the consequent resignation of former chairman, Mr Ron Bolger, all contributed to public unease and led to calls by the opposition parties for a postponement of the planned, summer flotation.
The timing of her difficulties could scarcely have been worse. The Minister had insisted that Mr Thompson be brought in through a board reshuffle at Telecom in order to lead a series of presentations to institutional investors in the United States. When he was forced to resign, she immediately elevated Mr MacSharry to the position even though the former EU Commissioner lacked particular expertise in both telecommunications and flotations. Furthermore, she failed to give advance notice of the new appointment to Telecom's partners, the Dutch and Swedish telecom groups, KPN and Telia. As 20 per cent shareholders, whose stake is due to rise to 35 per cent before next June, they deserved better.
In spite of these lapses, the Minister will have recovered some ground with potential investors as a result of her announcement in the Seanad. In Britain, public perceptions of privatisation ventures were seriously damaged by the sight of top executives creaming off exceptionally large cash payments for themselves. Similar activity in the Irish financial sector in recent years created similar public unease. But the Minister has benefited from these lessons where Telecom is concerned. The cost of flotation, at £40m, is expensive, even without the additional expense of granting lucrative share options.
The success or otherwise of the Telecom flotation will influence Government decision-making on whether it will press ahead with a range of other projects. At the moment, consideration is being given by the Department of Public Enterprise to the sale of Aer Rianta, Coillte, Aer Lingus and other State assets. And the Minister for Finance, Mr McCreevy, has just announced his intention to float a merged TSB Bank and ACC Bank on the Irish stock market in May of next year.
Mr McCreevy spoke of the merger offering significant development opportunities to the staff of both banks, along with enhanced services for customers. He did not mention details of the flotation. Specifically, he did not repeat the undertaking given by Mrs O'Rourke that senior executives and board members would not benefit from a share option deal. It would reassure the general public and potential investors, as well as introduce some uniformity into Government policy, if this was now done. The executives and board members of commercial State companies should be well paid. But the opportunity to make huge windfall profits through share options should be delayed until after privatisation and should be based on growth, innovation and profitability.