Lifting lid on Irish Water reveals unusual governance

‘There is a large section on Ervia’s website on transparency ... These pages are empty’

From Fine Gael's proposal to reintroduce water charges in their 2011 manifesto to the suspension of charges following the 2016 election, here are a few key moments in the story of the State’s most controversial utility.

 

One of the most controversial aspects of the Fianna Fáil-Fine Gael deal is the treatment of Irish Water. While Irish Water will not be abolished, under the deal, no fewer than three advisory bodies/committees are to be established to oversee the utility’s efficiency: a statutory external advisory body, an expert commission to examine a long-term funding model for water services, and an Oireachtas committee to make recommendations to the Dáil. The objective is to restore public confidence in Irish Water.

Before judging these new arrangements, let’s look at the current governance at Irish Water.

As it is, the governance of Irish Water is unusual, in that it is structured as a wholly owned subsidiary of another State body, Ervia (formerly Bord Gáis Éireann). Initially, the board of Irish Water comprised 14 directors, of whom 10 were independent non-executive directors (ie, they did not work in Irish Water on a day-to-day basis) and four were executive directors. Then, the minister for the environment at that time, Alan Kelly announced he would be putting in place a new unitary board, combining Irish Water and parent company Ervia.

In setting it up, Kelly said, “The new board will provide for stronger governance and improved setting of strategic objectives.” By the end of November 2014, all the non-executive directors were gone, leaving Irish Water with a solely executive board, comprising (according to the 2014 financial statements) Michael McNicholas, chief executive of the parent company, Ervia; John Tierney, managing director of Irish Water; Brendan Murphy, Ervia group finance director; and Michael O’Sullivan, Ervia group commercial regulatory director.

Oversight

The position of chairman of Ervia is currently vacant, following Rose Hynes’s resignation in October 2015. How can the board of Ervia be operating effectively without a chairman? In November 2015, Irish Water announced that John Tierney would be stepping down as managing director at the end of April 2016. Who is Irish Water’s managing director now? Does Irish Water currently have a managing director?

There is a large section on Ervia’s website on transparency, including web pages for Ervia and Irish Water board meeting minutes. These web pages are empty. Transparency indeed. I would have liked to read these minutes to better understand how Ervia exercises control and oversight over Irish Water. Governance of subsidiaries can be quite tricky.

Irish Water has been beset by governance problems which has eroded public confidence in the utility. Although only established in July 2013 (the legislation was rushed through the Dáil in four hours), by early January 2014 John Tierney disclosed that it had already spent €50 million on consultants, which figure was quickly increased to €86 million. Then, shortly afterwards, it was revealed that 300 Irish Water staff were contractually eligible for incentive bonuses, averaging €7,000 each (€2.1 million in total).

Ironically, these arrangements were based on an existing scheme in the parent company, Ervia, the very body charged with control and oversight of Irish Water.

In September 2014, we learned that former Fine Gael county councillor, and driver for a Fine Gael junior minister, Hilary Quinlan, had been appointed to the board of Irish Water by Phil Hogan when he was minister for the environment. Quinlan was paid €13,800 in fees.

These events left the reputation of Irish Water in tatters.

Irish Water is currently overseen by at least five bodies: its own board; the board of Ervia; the Public Accounts Committee; the Joint Oireachtas Committee on the Environment, Culture and the Gaeltacht; and the Commission on Energy Regulation.

Controversies

For governance to work well, absolute clarity is required on roles and responsibilities. How will the three new advisory bodies/committees work with the five existing oversight bodies? How will all these bodies “provide for stronger governance and improved setting of strategic objectives”? Will Irish Water managers spend all their time being held to account or will any real work get done? Will the addition of three further oversight bodies improve governance of Irish Water?

I suspect not. Niamh Brennan is Michael MacCormac professor of management and academic director of the UCD Centre for Corporate Governance

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