A dispute between the chief executive and the chairman is pushing the upcoming AGM of Ireland’s largest print media group, Independent News & Media plc (“INM”), into the headlines. In his letter to shareholders prefacing the notice of meeting, INM’s board chair Leslie Buckley discloses that chief executive Robert Pitt has reserved his positions regarding his voting intentions at the AGM. It is the first time in history that an executive of an Irish company has chosen to do so.
Mr. Pitt’s move is the latest development in a long-running governance struggle at the Irish media conglomerate, centred on the influence of 29.88% shareholder Denis O’Brien. After simmering quietly for several years, things bubbled up in late 2016, when a company announcement confirmed media reports of a disagreement between Mr. Buckley and Mr. Pitt over a potential acquisition by INM. Reportedly, during discussions regarding a purchase of the Irish radio station Newstalk, board chair Buckley was pushing for a price that was above the valuation established by INM’s economic advisers.
As it happens, Newstalk is currently owned by the Irish media conglomerate Communicorp Group Limited, which is wholly owned by Denis O’Brien. And Mr. Buckley, along with Paul Connolly, serves on the INM’s board as a representative of Mr. O’Brien.
Mr. Pitt’s concern with the conflict of interest led him to raise the issue with then senior independent director Jerome Kennedy— and ultimately with the authorities. In March it was revealed that Pitt and at least one other senior executive had also contacted the Irish Office of the Director of Corporate Enforcement to make complaints under Irish whistleblowing legislation. The board commissioned an independent review, which is thought to be nearing completion, and the ODCE is also investigating; however the future of the ODCE itself is in question after the collapse of a high-profile case against former Anglo-Irish chief Seán Fitzpatrick.
O’Brien’s relationship with INM has borne several controversies, and resulted in the ouster of the O’Reilly family, which controlled and ran the company for decades. A 2009 dispute with the company’s then-CEO and largest shareholder, Sir Anthony O’Reilly, yielded a contested election and ultimately an agreement allowing O’Brien to nominate three directors, including Buckley. However, later in the same year O’Brien called for two EGMs, where he tried to replace the then board chair Brian J. Hillery and the senior independent director Baroness Margaret Jay, and to revoke an authority granted to the board to issue shares. Neither was successful, and two years later Buckley failed to secure reelection at the 2011 AGM.
O’Brien did better in 2012, joining forces with 15% shareholder Dermot Desmond to force out CEO Gavin O’Reilly (the son of Sir Anthony), then leading a shareholder revolt that resulted in the removal of board chair James Osborn and CFO Donal Buggy, plus the rejection of the company’s remuneration report. After a year in the garden, Buckley was reelected, replacing Osborn as chairman. At the same meeting, the board had unsuccessfully recommended shareholders to vote against the re-election of O’Brien’s representative Paul Connolly, after he had launched legal action against INM over a severance payment made to outgoing CEO O’Reilly.
Since then, INM has effectively been under Mr. O’Brien’s control – at least, until Mr. Pitt came along. While the current CEO is himself a relatively minor shareholder, owning less than 1% (274,318) of INM’s 1,392,144,452 shares, for the top executive to blow the whistle on his own board and decline to support its meeting agenda carries high symbolic value — and indicates serious problems in the working relationship between the board and management. Even without disclosing his intentions, it seems a safe bet that the chief executive will vote his shares against the chairman of the board; it will be interesting to see how many independent shareholders follow suit.
Also worth noting is the departure of Jerome Kennedy, who announced that he would retire from the board with the close of the AGM. While deemed independent with no ties to O’Brien, Kennedy had been appointed as senior independent director concurrent with O’Brien’s coup at the 2012 AGM. It’s unclear whether his departure reflects concerns over what the outstanding investigations will turn up, or simply calling time on what must have been a somewhat thankless position.
What is clear is that INM has not yet announced his replacement as senior independent director, and now features only two independent directors on a board of eight. Absent additional representation of minority shareholders, it looks like it’s up to management, and the regulatory authorities, to keep an eye on Mr. O’Brien.