Dáil Éireann debate -
Wednesday, 18 Dec 1996

Vol. 473 No. 2

Worker Participation (State Enterprises) Order, 1996: Motion.

Minister of State at the Department of Transport, Energy and Communications (Mr. Stagg)

I move:

That Dáil Éireann approves the following Order in draft:

Worker Participation (State Enterprises) Order, 1996,

a copy of which Order in draft was laid before Dáil Éireann on the 13th day of December, 1996."

The draft order the House is being asked to approve is part of arrangements for the restructuring of the board of Telecom Éireann following the conclusion of a strategic alliance between Telecom and the KPN-Telia consortium.

The draft order is to be made by the Minister for Enterprise and Employment under section 23 of the Worker Participation (State Enterprises) Act, 1977, as amended. Under section 4(4) of that Act, a draft of an order proposed to be made under section 23 must be laid before each House of the Oireachtas and may not be made until a resolution approving the draft has been passed by each House.

The legislation enabling the strategic alliance and the associated board restructuring is the Telecommunications (Miscellaneous Provisions) Act, 1996, which was recently enacted by the Oireachtas. Deputies will recall these issues were extensively debated by the House during consideration of the Bill. I propose to briefly review the purpose of the strategic alliance for Telecom Éireann and then outline the purpose of this order and its place in the context of the strategic alliance.

Telecommunications have an increasingly important role to play in modern society, not only for economic reasons but also for social, personal and leisure time purposes. Telecommunications are becoming more and more important as a driver of economic growth and job creation. To maintain and further improve Ireland's economic competitiveness and job creation potential, Ireland must have a top quality telecommunications sector. The Government's objective is to achieve a telecommunications sector which is in the top quartile of OECD indicators of price competitiveness, quality and availability, as soon as possible.

The telecommunications sector is undergoing a revolution. Developments in technology, rising customer demand, globalisation of business, liberalisation of the sector and competition are all contributing to this revolution. Telecommunications companies which do not adapt to this rapidly changing situation will not survive.

Telecom Éireann, like all other telecommunications companies, is subject to this changing environment. It is essential that Telecom Éireann be equipped with the capacity to survive and succeed in this new environment. This is not just to protect Telecom Éireann; it is because a successful Telecom Éireann will play a major part in the achievement of our objective of bringing about a top quality telecommunications sector for Ireland.

Telecom Éireann has made considerable progress in adapting to the new circumstances by, for example, improving its financial structure and reducing prices. However, further progress must be achieved if it is to become a successful company in the new competitive marketplace. To accelerate the further development of Telecom Éireann the Government and the company agreed it should form a strategic alliance with a major telecommunications operator. Furthermore, it was agreed that the best way to secure a successful long-term strategic alliance would be to enable the partner to take an equity stake in Telecom Éireann.

The Government and Telecom Éireann sought a partner which would have the necessary commercial and technological experience as well as the capabilities and commitment to support the company in growing and developing its business. The Government approved a mandate for negotiation of a strategic alliance in July 1995 and following an open and competitive selection process, the Government in July of this year approved the signature of an alliance agreement with KPN-Telia. A key element of the deal is that 85 separate strategic initiatives have been agreed between Telecom Éireann and the consortium. These provide a comprehensive strategic support programme involving technical support, expert and managerial assistance, software and system improvements across all business categories.

When the strategic alliance agreement is concluded, the process of accelerating the transformation of Telecom Éireann can begin with the assistance of the strategic partner. The success of the alliance will depend on co-operation among all interests involved in the company: the Government, as the main shareholder; the strategic partner; the company management; and, not least, the employees.

The employees, in particular, will be in the front line in bringing about improvements in the company's operations. It is important that they have a voice in the further development of the company. Up to now the worker participation Acts have provided for the participation of employees in decision-making processes of the company through representation at board level. The arrangements which have been agreed and which I will more fully describe later, provide for the continuation of this arrangement, although in a slightly altered form.

However, a further opportunity is made available by the strategic alliance for employees to participate in the fortunes of the company. The Telecommunication (Miscellaneous Provisions) Act, 1996 enables the company to issue, and the Minister to transfer shares in the company for the purpose of employee shareholding schemes. The Government's intention is that the terms under which the shares will be issued will be to encourage active participation by employees as shareholders in the company and that the scheme should facilitate the continued improvement of the company's customer service, quality and commercial success. Proposals from unions for an employee shareholding scheme have been received and these are being examined prior to the commencement of detailed negotiations.

I am satisfied the arrangements made for the participation of employees in the future development of the company will enable them to make a meaningful contribution to the future direction of the company. The draft order before the House today, which includes arrangements for employee directors under the Worker Participation Acts, is part of these arrangements.

The Worker Participation Acts apply to ten State enterprises in total, including Telecom Éireann, and provide for the election of employee directors to the boards of those enterprises. In the case of nine of the enterprises involved, all nine being commercial State enterprises, one third of the board positions are reserved for employee directors. In the other case, a non-commercial State enterprise, provision for less than one third exists.

Currently, the board of Telecom Éireann consists of 12 members appointed by the Minister, of which four are employee directors. This is clearly appropriate where the State is a 100 per cent owner of the company and where the Minister has power to appoint all the directors. The strategic alliance involving the Government, Telecom Éireann and the KPN-Telia consortium provides for the sale of up to 35 per cent of the equity of the company to the consortium, as part of the arrangement. The consortium, as a substantial shareholder in the company, will be entitled to representation on the board of the company. In that situation, a revision of the board structure is required to balance the interests of the Government, the strategic partner and the employees. The provision reserving one third of the total number of seats at the board for employee directors is no longer appropriate in these changed circumstances. It is more appropriate that the number of employee director seats should be determined by reference to the number of directors which the Minister is entitled to appoint.

The Government agreed in the context of the strategic alliance transaction that the consortium will be entitled to appoint three directors to a board of 12, reflecting their shareholding in the company. In restructuring the board the Government sought a solution which would satisfy a number of essential requirements. These are the need to preserve effective control for the State's majority shareholding, the representational interests of the strategic partner, the objective of maintaining a small to medium sized board for the purpose of effective governance, and the need to have meaningful employee representation at the key decision-making forum in respect of company operations.

On the basis of agreement with the strategic partner and following intensive discussions with the trade unions in Telecom Éireann, the Government has agreed a board structure as follows: seven members, including the chairman and the chief executive, appointed by the Minister; three members appointed by the strategic partner; and four employee representatives. Two of the employee representatives will be appointed as directors on the basis of an election under the Worker Participation (State Enterprises) Acts. The other two employee representatives will be alternate directors, appointed on the basis of the results of an election under the Worker Participation (State Enterprises) Acts. The alternate employee directors will be entitled to attend all board meetings but not to vote except in the absence of the directors to which they are alternates.

When an employee shareholding scheme in Telecom Éireann is established the members of the scheme will be entitled to nominate a director for appointment to the board by the Minister. In that event, the employee director who was second placed in the last election will become an alternate director, and the term of office of the alternate director who was placed second of the two alternates in the election will expire.

The purpose of the order before the House is to facilitate the restructuring of the employee representation on the Telecom Éireann board in accordance with the arrangements I have outlined. The order will fix the total number of members of the board of the company for the purposes of the Worker Participation Acts and the number of members to be appointed under the Worker Participation Acts.

The Telecommunications (Miscellaneous Provisions) Act, 1996 provides that an order under the Worker Participation Acts in relation to the board of Telecom may specify that the number of employee directors shall not exceed one third of the number the Minister is otherwise entitled to appoint. The draft order provides that the number of directors of the company will be 12 and that, of those, two will be appointed under the Worker Participation Acts. This is the only provision of the order. However, in addition, the Telecommunications (Miscellaneous Provisions) Act, 1996 enables the Minister to appoint two alternate directors to the board.

The restructuring of the board of the company will take place as soon as the strategic alliance transaction is concluded. It is intended that the draft order before the House will come into effect following the conclusion of the transaction. As well as this order, certain further steps will be taken to complete the restructuring of the board of the company. These include the expiry of the terms of office of two of the current employee directors, the appointment of those persons as alternate directors and the appointment to the board of the three nominees of the strategic partner.

This restructuring of employee representation on the board of a State enterprise in the context of the sale of equity in the enterprise is not unique. Deputies may recall that when the B & I Line was sold by the State, that company was removed altogether from the ambit of the Worker Participation Acts under the B & I Line Act, 1991. In contrast, in the case of Telecom Éireann we are effectively maintaining the existing level of employee representation on the board.

The draft order before the House is one element of a process aimed at preparing Telecom Éireann for successful development and growth in a new competitive telecommunications environment. The implementation of the strategic alliance is essential to enabling the company to achieve that success. The board of the company will have a key role to play in guiding the company to success in this new environment. The new board structure for the company has been carefully balanced to reflect the various interests involved and I am satisfied that this will facilitate the effective performance of its functions. I am also pleased that the employees of the company will continue to have a meaningful representation on the board of the company in this new arrangement.

I commend this resolution to the House.

Mr. S. Brennan

Notwithstanding my respect for the Minister of State — I am always pleased to do business with him — I must protest at the absence of the Minister for Transport, Energy and Communications who was in the House for the Order of Business. This is a major debate on Telecom Éireann and it is probably the last opportunity to discuss the disgraceful sell-off of 20 per cent of the company. I appreciate the Minister has official engagements but I would have wished him to be available to listen to some last minute pleas and argument, which up to now he has not had an opportunity to hear about the process of this sell-off. As the decision to sign the final contract for the sale of Telecom Éireann will obviously be the Minister's, rather than the Minister of State's, I would have wished to be able to put some points to him this morning. I ask the Minister of State and his officials to convey my points to him as I am conscious that he is new to the office.

Under this Worker Participation (State Enterprises) Order, the 12,000 workers in Telecom Éireann have been sold out, particularly by the left wing element of this Government, and I am amazed at the absolute silence from that part of the Government on this issue. I never thought I would see the day that a Labour or Democratic Left Minister would come before this House and seek to remove worker directors from a State board. How things have changed.

Mr. Stagg

What about the B & I Line?

Mr. S. Brennan

I am glad the Minister raised that matter now because whoever put that reference in his speech does not know what he or she is talking about. The Minister said, "Deputies may recall that when the B & I Line was sold by the State, that company was removed altogether from the ambit of the Worker Participation Acts". What kind of nonsense is that? Whoever put this gobbledygook together does not what they are talking about. When the whole company was sold, of course the State no longer had an interest in it. It was not responsible for the debts, the profits or losses, but that is not the case with Telecom Éireann.

That was a disingenuous reference. Somebody was obviously conscious of the fact that I was the Minister who sold the B & I Line.

Mr. Stagg

That is a fact.

Mr. S. Brennan

I am proud of that. It was a very successful privatisation.

Mr. Stagg

The Deputy did not sell it. He gave it away for nothing.

Mr. S. Brennan

I did not give it away for nothing.

Acting Chairman (Mr. T. Foxe)

Deputy Brennan, without interruption.

Mr. S. Brennan

If that were the case, why did the Minister not vote against it in the House?

Mr. Molloy

The Deputy has got the Minister there.

Mr. S. Brennan

Prior to this order being drafted as part of his flawed telecommunications Bill, four of the 12 directors on the board of Telecom Éireann were worker directors. Under the order, there are now just two worker directors on the 12 member board. While all kinds of sops have been offered, these amount to shadow rather than substance. There will be two shadow worker directors for the two worker directors but the shadow directors will have no votes. From now on, there will only ever be just two worker director votes on the Telecom Éireann board and the workers' representation has decreased from one-third to one-sixth of the seats. That is the reality.

This side of the House opposed this downgrading of employee participation when the telecommunications Bill was debated. We argued that the four worker director seats should be kept. We did not accept the case for dropping two worker directors so that KPN-Telia, who have purchased 20 per cent of Telecom Éireann, could get on the board. If the Minister was so sure that KPN-Telia will act in the best interests of Telecom Éireann, he should have reduced his ministerial directorships and given those places to the foreign institutions. That has not happened. The Minister has retained his appointments and KPN-Telia, who have purchased 20 per cent of the company, are getting one-quarter of the seats on the board while the worker directors' representation is being reduced from one-third to one-sixth.

Mr. Stagg

It was more than the Deputy looked for in his amendment.

Mr. S. Brennan

We said that, if this was allowed to go through by the Labour Party and Democratic Left, it would diminish the ability of the workforce to influence the strategic direction of this company. We also said that a change in circumstances, whereby the representation of workers on the board is altered from one-third of the board to one-sixth of the Minister's nominees, has serious implication in the event of any further dilution of the State's shareholding in the future.

We warned of the consequences for social partnership as the restructuring of the board runs contrary to the commitments in the Programme for Competitiveness and Work and the programme for Government to extend social partnership arrangements in industry. We highlighted how the reduction in the number of voting board seats would disenfranchise five of the Telecom Éireann trades unions.

None of this seems to matter to the Labour Party or Democratic Left in particular who claim some role in Government for the protection of workers' rights but have neglected to do so on this occasion. They claim to be committed to the concept of employee participation and worker directorships but go along with reducing the involvement of directors on the board of Telecom Éireann from one-third to one-sixth.

They also ignore the arguments we made in relation to the opportunity to strengthen and deepen employee representation at Telecom Éireann. We argued during the debate on the Bill that, in addition to the Minister maintaining the four worker director positions on the Telecom Éireann board, he should also have made provision on the board for whatever employee benefit trust is established to hold shares for the workers.

Mr. Stagg

That is not accurate. The Deputy's amendment provided for two worker directors and one alternate.

Mr. S. Brennan

What is accurate is that the Minister has come before this House this morning to reduce the number of worker directors. We are debating the Minister's proposal to reduce the number of worker directors from four to two.

Mr. Stagg

The Deputy's amendment proposed less than that.

Mr. S. Brennan

I am not legislating here. The Minister has a proposal for decision by this House to reduce the number of worker directors from four to two. If he wishes to change that proposal, he is entitled to do so. It is not too late. It is not my proposal to reduce their number from four to two, it is the Minister's.

The trust which will be set up to hold the workers' shares should also have the ability at some point to appoint its own director. I hope the Minister will take on board that point. Holding shares will place a further onerous responsibility on the employee directors.

The worker directors will need access to the best financial, legal and corporate advice. Some of my colleagues disagree with me on this point, but I am not averse to the idea if it is agreed by the workers in Telecom Éireann that the representative of the employee trust, that is the trust holding the shares, could have a professional director. I acknowledge that people on my side of the House have difficulty with that concept but I do not. This person could help to guide the employees and the other worker directors in acting in their own and the company's best interests in the complex world of finance and corporate law.

The handling of the worker director issue has been no better than the handling of the other matters relating to the sell-out of 20 per cent of Telecom Éireann. This House remains in the dark as to the terms of the deal. Despite the fact that the EU is to give the final go ahead for the Tele-com-KPN-Telia deal in the next few days, there has not been a disclosure of any of the consultants'reports on Telecom Éireann, of assessments made by professional advisers to the Government, of the contract that was signed last July and the date of the final contract. In other words, this is a secret deal.

I invite the new Minister, Deputy Dukes, to publish the documentation concerned with this decision. There is still no explanation as to why 20 per cent of one of Ireland's most successful State companies is being sold for a song in a secret deal or why KPN-Telia holds all the rights and vetoes in this deal. Will the Minister, Deputy Dukes, tell the House what precise vetoes KPN-Telia holds? Will the Minister tell the House that KPN-Telia has no more than the ordinary rights of a 20 per cent shareholder? Will he confirm that the company which will shortly own 20 per cent of Telecom Éireann has no veto on who owns the rest of the company in future or on what the majority shareholder may do?

In the absence of the Government publishing the documentation, I understand that these vetoes exist and that the tail will wag the dog. The 20 per cent shareholder will dictate the pace, future investment, future sell offs and so on in this deal. If that is not the case, I invite the Minister to state that my fears in this regard are not well founded. The only way to do that successfully is to publish the contract documentation, or at least the heads of agreement, between the Government and these overseas companies that led to this secret deal.

The former Minister exhibited a certain attitude to office which I hope the present Minister does not continue. One of the hallmarks of that attitude was a commitment to secrecy, a commitment not to publish and not to tell the House very much. The House was told very little about who owned the remaining shares in ESAT and virtually nothing about the vetoes in the KPN-Telia deal. The House was told nothing about the real players in the ESB Moneypoint deal. I am not suggesting anything is wrong, but because these are public deals of State assets all the information should be published, including names, amounts, dates and vetoes. Why are we not getting that information? What is the big secret? Why is The Labour Party going along with all this secrecy?

I ask the Minister to change the attitude of the Government and his Department in this regard. I am sure there is nothing to hide. Let us have the information. I am disappointed the Minister is not here because he should do business in a different way. He is experienced and has a different attitude to this House. I will give him the benefit of the doubt. He should now publish all the information concerning this deal.

There has to be a reason the sale of a minority stake in Telecom which could have raised nearly £500 million four years ago can achieve only £183 million for a 20 per cent stake today. We did not receive an explanation for that from the previous Minister and I invite the present Minister to give this explanation clearly. He should not slavishly continue with what is already in place because it is still not too late. The previous Minister told the annual conference of the Communication Workers' Union on 4 May 1995, that one of the reasons for the alliance was to raise badly needed equity for Telecom Éireann. At that time the Minister said that new equity from a strategic partner could shrink the debt down to a level where it would be much easier to cope with. Despite that he practically give away 20 per cent with no major investment or reduction of the debt from the new partners.

The strategic alliance was extremely badly handled by the previous Minister and by Cabinet which allowed it to happen. Some nine of the ten best telecommunications players in the world dropped out of the race because of the way the Government handled this sell off. The Minister was then left with KPN-Telia. I have no doubt they are two respected players, but they are two regional players who knew they had this Cabinet over a barrel because nine out of the ten players had vanished from the scene. They picked up 20 per cent of Telecom Éireann for £183 million when everybody including the workforce knows that it is worth up to four times that price, particularly when you consider the rights and vetoes that have been given away by the Government and Telecom Éireann to the new minority shareholders.

The price of £183 million represents just three times Telecom's profits. It is equivalent to £915 million for 100 per cent of the company or just three and a half times Telecom's real profits of £260 million in 1995. The German Telecommunications company, Deutsche Telecom, recently raised an amount equivalent to 15 times its profits in a public issue even though it is more heavily indebted than Telecom Éireann. British Telecom raised an amount equal to ten times its profits. Why are the Germans able to get 15 times the profits of their company and the British able to get ten times the profits of their company for the value of the shares if we are only able to get three and a half times the value of our shares?

Mr. Stagg

The Deputy should apply that formula to B & I and see what figure he comes up with.

Mr. S. Brennan

I will discuss B & I with the Minister any day he wants to do so. He cannot put down questions to me according to the procedures of the House but I am delighted to talk about the B & I deal which saved this country a lot of money. B & I is still going strong, unlike Irish Shipping which went out of business. People all over the world were left high and dry and no debts were paid. Employees of B & I are still working today. I ask the Minister why the British and the Germans can get these kind of deals and the geniuses negotiating the Telecom Éireann-KPN-Telia deal can only get three and a half times profits.

One of the reasons I am keen to see the terms of the KPN-Telia deal published is to establish what was promised to KPN-Telia in relation to links with the world player AT & T. There had been plans for KPN-Telia to firm up alliance plans with AT & T. This was to be done through KPN-Telia's European grouping, known as Unisource, which is not directly involved in the Telecom deal as only two parts of Unisource now are tied up with Ireland. The AT & T — Unisource deal has stalled and appears to have gone into reverse. Key Unisource executives, including its chief executive who, going on previous comments, did not regard the Telecom deal have now jumped ship. Unisource has also lost its deal in France for an alternative telecommunications network. The French have now signed up with BT and MCI.

One of the issues that may also be buried in the KPN-Telia deal in secret is in relation to public flotation of Telecom Éireann. That may be the real reason Labour and Democratic Left were so keen to keep this deal secret.

Mr. Stagg

That is nonsense. It is rubbish.

Mr. S. Brennan

The chief executive of Telecom Éireann went on a solo run in last week's Sunday Tribune and referred to a possible sell off of shares in a number of years time. A man of his calibre is not known for making these kinds of judgments. What is the deep secret which must be protected and cannot be allowed to see the light of day in this House?

Mr. Stagg

There is no secret.

Mr. S. Brennan

Why has upwards of £6 million been paid to consultants for this deal? To pick one horse in a one horse race has cost the taxpayer £5 million.

Mr. Stagg

The Deputy added £1 million to the total figure.

Mr. S. Brennan

The information I received stated it was £6 million. Why did it cost £5 million or £6 million to choose one horse in a one horse race?

KPN-Telia will quickly gain its money back. From Telecom Éireann's profits, it will receive 20 per cent —£60 million — of the £300 million.

Mr. Stagg

The figure is £500 million.

Mr. S. Brennan

If Cablelink is sold, KPN/Telia will receive a further £30 to £50 million.

Mr. B. O'Keeffe

It is a cartel.

Mr. S. Brennan

It will also recoup its initial £183 million investment. In short, the £183 million the Minister of State received for this deal will be back in the hands of the investors within three years.

Mr. Stagg

£500 million.

Mr. S. Brennan

I predict that KPN/Telia will sell its shares in the company within three years and will make a £200 million killing on this disgraceful secret deal.

Mr. Stagg

If it does, we will take the money back.

Mr. Molloy

I will not delay the House or reiterate the arguments made during the recent debate on the Telecommunications (Miscellaneous Provisions) Act, 1996. This order is being made under the terms of that Act to give effect to the provision for changes in the number of worker directors to be appointed in view of the introduction of a strategic partner to the Telecom company.

When considering the development of Telecom Éireann, I recall it was formerly connected with An Post, came directly under the ambit of the Civil Service and was the responsibility of the Minister for Post and Telegraphs. Major developments have taken place in both services in the intervening years since they were removed from beneath the umbrella of the Civil Service. I was in Government when the decision to separate them was made. The then Minister for Post and Telegraphs, Mr. Pádraig Faulkner, introduced legislation to establish two commercial semi-State companies, An Post and Telecom Éireann. The employees in Telecom who experienced the trauma of that change would agree, with the benefit of hindsight, that it was in the best interest of the company. Those employees gained from the change and the service provide by Telecom Éireann and An Post improved greatly when they transferred to the commercial arena. I do not believe there are any doubts in that regard.

The Telecommunications (Miscellaneous Provisions) Act brought the development of Telecom Éireann a further stage toward a goal which my party would like to see eventually realised. The introduction of a strategic partner to Telecom Éireann will prepare that company for eventual privatisation. This represents a natural progression for Telecom, from its time as a Civil Service State company to its establishment as a commercial State company to the introduction of a strategic partner from the private sector and eventual privatisation.

I recall occasions during election campaigns when my Labour Party colleague in Galway West always sought, at public meetings, to highlight the difference between the principles for which we stood. He indicated he was solidly in favour of maintaining this type of service under the umbrella of the State and did not agree with any attempt to sell off any part of "the State's family silver", namely, State or semi-State commercial companies, particularly those that were successful or had a capacity to generate substantial profits.

It is interesting to recall that Deputy Michael D. Higgins and Deputy Stagg were considered the two champions of the extreme socialist view on State involvement in the economy within the Labour Party.

Mr. B. O'Keeffe

The tigers in the long grass.

Mr. Molloy

They were the "two tigers in the tank", as James Dillon once referred to Vincent Browne and others when they were active members of Fine Gael.

Mr. B. O'Keeffe

They are unleaded at this stage.

Mr. Molloy

The teeth of these tigers were pulled when they were offered positions in Government. Deputy Higgins became a Minister, Deputy Stagg became a Minister of State and these toothless tigers seem, on the surface, to have completely reneged on the raison d'être and political principles they stood for and sought support for when they went before the electorate. There has been a tremendous transformation in the approach of both Members since they assumed ministerial office. One can only come to one's own conclusions regarding the reasons for this.

It is interesting that the Minister of State, Deputy Stagg, introduced this provision to reduce the number of worker directors on the board of Telecom Éireann from four to two. My party is satisfied with the progression of Telecom from a Civil Service State company to a commercial State company to a strategic alliance with a reduction of State involvement. I am certain the next stage will be full privatisation. As forecast, there will be an expansion of the strategic alliance representation or percentage and Telecom will eventually enter the private sector. It is interesting that the debates on this order and the Telecommunications (Miscellaneous Provisions) Act, 1996 are being steered by the Minister of State, Deputy Stagg. It may not be satisfactory for me to hold up a mirror for him to reflect on the position he has adopted and the way he reneged on the political objectives he espoused and the principles he enunciated.

Mr. Stagg

That is rubbish. However, I expect nothing else from the Deputy.

Mr. Molloy

It is important that the parties in this House set our their stalls.

Mr. Stagg

We know the Deputy's party's policy is to sell off everthing.

Mr. Molloy

No one is in any doubt regarding where my party stands on this issue. However, it is interesting that the parties which set out their stalls as being opposed to this kind of development are the ones introducing it while in Government. I will not oppose the Minister of State's actions because I support the progression of Telecom Éireann. He may not be going far or fast enough but he is proceeding in the direction my party desires, namely, the preparation of semi-State companies for eventual privatisation.

Mr. Stagg

The Deputy should join the Labour Party.

Mr. Molloy

I do not know how the Minister of State can satisfy his political conscience with regard to the proposals before the House. However, it is a matter for him to live with his political conscience and explain to the people from whom he sought support on a different platfrom, his reasons for changing mid-stream. Perhaps, in time, he will join the Progressive Democrats because he seems to be moving in our direction or is he merely doing so as a device to retain office? Do principles not matter when it comes to the crunch?

Mr. B. O'Keeffe

I have seen it all.

Mr. Molloy

Yes, I have seen them travel the full circle.

Mr. Stagg

The Deputy's contribution sounds like an election speech. He should confine himself to discussing the order.

Mr. Molloy

I am aware this is embarrassing for the Minister of State.

Mr. Stagg

It is not.

Mr. Molloy

It is important to state these things because principles were enunciated in the past which differ from the steps being taken. The way the sale of the 20 per cent or 35 per cent, which it may eventually turn out be, was carried out left a lot of unanswered questions. That is most unsatisfactory. We raised these questions during the debate on the Bill and there is no point in rehashing them, particularly when the Minister with full responsibility is not in the House to answer them. We have a newly appointed Minister who was not involved in the negotiations or in making the final decision.

People are puzzled at how £5 million was paid to consultants to advise the Department of Transport, Energy and Communications on how it should seek a strategic partner for Telecom Éireann. It is an enormous amount of money. Outstanding resources are available in the Department and having spent some years in it, I am aware of the quality and abilities of its personnel. Amounts paid to consultants for similar work do not compare to the £4.5 million or £5 million paid to consultants to advise on the sale of part of Telecom Éireann.

Mr. Stagg

The Deputy got a breakdown of the figures.

Mr. Molloy

There is a huge question mark over that particularly when only one company was interested in buying this share and did so practically on its own terms. Most private commentators and the Opposition parties are highly critical of the low figure achieved for such a substantial part of this valuable company. Whatever about selling part of the family silver, to sell it at under its full market valuable is a crime and a huge financial loss to the taxpayer who invested enormous sums of money in the development of Telecom Éireann.

Mr. Stagg

On a point of order, it is inappropriate for the Deputy to refer to the actions of a Minister as a crime. The Deputy might wish to withdraw that imputation.

Mr. Molloy

I did not mean a crime in the sense that the Minister contravened any aspect of legislation.

Mr. Stagg

That is acceptable.

Mr. Molloy

It was tragic to see a valuable national asset being sold under its value.

It is a little disingenuous to seek to retain the four worker directors while reducing them to two. It is a type of "now you see it, now you don't" sleight of hand approach. To pacify one aspect of worker participation, the Minister has said that only two shall be entitled to act as directors but that there shall be alternates who shall be permitted to attend board meetings. I do not know if that is good commercial practice. It is a political compromise which may not be in the best interest of the commercial development of the company. It smacks of a lack of political will to do the job in the way it should have been done.

Mr. Stagg

I presume the Deputy would prefer no worker directors.

Mr. Molloy

If there is State involvement, I have no objection to workers being represented on the board. What role does the Minister see for worker directors? There is confusion about their role, responsibilities, rate of remuneration and for what they are being remunerated. When an employee of the company is appointed worker director, will he continue to carry out his normal duties in whatever position he holds? Will he be free to attend board meetings?

Mr. Stagg

There is no change.

Mr. Molloy

I want to know what the practice is because I had some difficulty with this in the past. It is important it is brought into the open. Is a worker director open to promotion in whatever position he held? Will he continue to be in receipt of his salary and is it topped up by overtime opportunities? Will he undertake normal duties? If he does not do so, what is the basis for the level of remuneration given to him? What does the worker director do besides attend board meetings? Directors receive a low level of remuneration.

There is also the question of expenses. What facilities are made available and who decides on them? Does the Minister have a say or is it a matter left solely to the discretion of the chief executive, the chairman or the board? Who decides on the practice? Is the practice the same in all commercial semi-State companies, that is, that when a person is elected director of the company they enter into a new arrangement with their employer? The Minister should give information in that regard.

Mr. Stagg

There has been no change since the Deputy was Minister.

Mr. Molloy

I want the Minister to tell me what is happening now.

Mr. Stagg

The same as happened when the Deputy was Minister. Did the Deputy not know what was happening then?

Mr. Molloy

There is no point in addressing questions to a junior Minister adopting such an attitude. Perhaps the Minister does not know the answers or does not want to give them.

Practices have developed in commercial semi-State companies which are not good commercial practices. It is appropriate to discuss this matter in the House. I hope the Minister will give a comprehensive response rather than say there has been no change since I was in the Department because I discovered there were different practices in commercial semi-State companies. I would like to know the practice in Telecom Éireann.

If the number of worker directors is to be reduced from four to two and if the practice has been that they do not do work for the company and that they are paid their full salary and telephone, office and travel expenses, I would like to know the full plethora of facilities made available to them. If two of the worker directors are to revert to being alternate directors, what will be the difference in the method of remuneration and the role and the duties they perform as employees? That is an important question which arises now because we will have two classes of worker director. Only two will be voting directors, but the four may attend board meetings. What will be the distinction in their roles? If I could get information on that, I would be satisfied.

Mr. B. O'Keeffe

It is fair to say that now the Tipperary slasher has been sidelined, the ground hurling will still continue. It is ironic that 20 years ago a Labour Minister, Michael O'Leary, introduced a worker participation Bill. I think today of the same former Deputy who now sits on the Bench, dispensing justice, listening to legal argument and reflecting on the Labour Party. He probably thinks he was run out of the Labour Party because it did not consider his thinking sufficiently socialist and left wing. The Minister of State, Deputy Stagg might have been one of the people who edged the former Deputy out of the party.

Mr. Stagg

That is not true. Check it again.

Mr. B. O'Keeffe

The Deputy was in the background. He certainly was not one of his greatest friends.

Mr. Stagg

I was a good friend of his and I still am today.

Mr. B. O'Keeffe

He was committed to this issue and introduced a workers' participation Bill which he considered to be an excellent idea and in keeping with the ethos of the Labour Party. He certainly would have considered it to be in keeping with the ethos of Democratic Left. However, the current leader of the Labour Party, who took over from Deputy O'Leary, is now shifting to the right and dismantling everything the latter wished to achieve.

Is it not also ironic that the Labour Party Leader, Deputy Spring, attends Labour Party regional conferences proclaiming himself "the bulwark of public enterprise. People can depend on me and the Labour Party to look after the best interests of the public sector"?

Mr. Stagg

I presume the Deputy does not agree with the sell-off proposed by this party.

Mr. B. O'Keeffe

I have no problems with selling Telecom Éireann provided we get value for money. That is the major difficulty we have.

Mr. Stagg

The Deputy is in favour of selling it. Tell the workers that.

Mr. B. O'Keeffe

Deputy Spring is some bulwark when he sells 20 per cent of Telecom Éireann for buttons after the deal had been mishandled. Now there is an opt-out. There are 12 members on the board, worker participation has been reduced to two members and there is no change in the number of people representing the Minister on the board.

Mr. Stagg

There is. The Deputy is wrong.

Mr. B. O'Keeffe

Worker participation is being reduced from four to two. The workers had representation on one-third of the board and, for a 20 per cent stake, the Minister is giving KPN-Telia 25 per cent membership of the board.

Mr. Stagg

There is a potential of 35 per cent.

Mr. B. O'Keeffe

That is not in keeping with the ethos of the Labour Party.

Mr. Stagg

We will look after the ethos of the Labour Party. The Deputy should look after his own party's business.

Acting Chairman

The Minister of State will have time to respond.

Mr. Stagg

I do not need lectures from the Deputy about the ethos of the Labour Party.

Mr. B. O'Keeffe

The Minister of State should read the his party's manifesto.

Mr. Stagg

The Deputy wants to facilitate the sale of State companies. He should say it out loud.

Acting Chairman

Deputy O'Keeffe without interruption.

Mr. B. O'Keeffe

The Minister of State should read the Labour Party manifesto where he will see that the Labour Party favours worker participation and worker directors and will work to that end.

Mr. Stagg

What we have achieved is a miracle of negotiation.

Mr. B. O'Keeffe

Democratic Left also includes that aspiration in its manifesto. However, we now see the difference between the idealism and the reality.

Mr. Stagg

We have seen the Deputy's party's amendment. Has the Deputy seen it?

Acting Chairman

Deputy O'Keeffe, without interruption.

Mr. Stagg

Look at the Opposition amendment and look at the reception it got from the Deputy's party colleague, Deputy Noel Ahern.

Mr. B. O'Keeffe

We have serious reservations about the Telecom Éireann and KPN-Telia deal. The arrangements are a major concern and we said as much at the time. Unfortunately, the then Minister took no notice of us. In the long run this will be an extremely bad deal for Telecom Éireann and the taxpayers.

Mr. Stagg

£500 million.

Mr. B. O'Keeffe

For a 20 per cent stake we are giving away 25 per cent membership of the board. That is wrong. The Minister should have examined the matter further. I can see a reason for removing one worker director but I cannot see why the Minister did not also remove one director——

Mr. Stagg

The Deputy's amendment gave them one less.

Mr. B. O'Keeffe

I would give two seats at the board for 20 per cent.

Mr. Stagg

Is the Deputy aware of his own amendment? The Deputy does not appear to be aware of his party's amendment.

Acting Chairman

The Minister of State should desist from interrupting.

Mr. B. O'Keeffe

I would give two seats on the board to the company purchasing the stake. The current arrangement is another cosy cartel created by the former Minister. I am surprised at the Minister of State defending something that is indefensible in terms of his party's policy.

Mr. Stagg

It is more than the Deputy proposed on Committee Stage.

Acting Chairman

The Minister of State will have time to respond. The Deputy without interruption.

Mr. B. O'Keeffe

The worker directors and the former Minister did not have a cosy relationship. The former Minister indulged in a great deal of straight talking but found it difficult to accept straight talking from worker directors. To quote Deputy Cowen, "when in difficulty or in doubt, leave it out". This appears to have happened in this instance.

I cannot help thinking of Government being conducted behind a clear pane of glass and the three items on the agenda of the Department of Transport, Energy and Communications. One item is the Telecom Éireann deal and the secrecy of that deal. None of the terms of reference——

Mr. Stagg

There was no secrecy. Confidentiality was required.

Mr. B. O'Keeffe

The Minister of State knows that, in conducting Government as if it was behind a clear pane of glass, the details of the deal should be made known. It is important.

Mr. Stagg

They should not be made known and the Deputy knows that.

Mr. B. O'Keeffe

I hope the new Minister will look at what has happened in this case.

Mr. Stagg

The Deputy knows that confidentiality is required in commercial transactions.

Mr. B. O'Keeffe

I also wish to cite the second telephone licence.

Mr. Stagg

What has that to do with this order?

Mr. B. O'Keeffe

I am talking about the clear pane of glass——

Mr. Stagg

That has nothing to do with the order.

Mr. B. O'Keeffe

I wish to give the Minister of State a clear picture of everything that has happened in the Department that is anything but clear. With regard to Esat Digifone, there is a major problem with regard to Motorola's view of the deal. They believe this is a banana republic and they would like to see full disclosure——

Mr. Stagg

They did not win and that is what is wrong with them.

Mr. B. O'Keeffe

——because there is concern about the investors in the various consortia——

Mr. Stagg

They were the losers. This is sour grapes.

Mr. B. O'Keeffe

——whether they are Irish or Norwegian. I would like to see the composition of the Norwegian investment and where it came from. How was it promulgated?

Mr. Stagg

It is a State company from Norway and represents Norwegian taxpayers.

Mr. B. O'Keeffe

I hope the new Minister will expand on this. The third item behind the clear pane of glass is Moneypoint and the buy back arrangement. We asked the former Minister, Deputy Lowry, about the investors in that company. He said he had no knowledge about the investors and that it was a matter for the ESB.

Mr. Stagg

What has that to do with this order?

Mr. B. O'Keeffe

It is important in the context of the secrecy and confidentiality with which every task was conducted in this Department.

Mr. Stagg

Rubbish.

Mr. S. Ryan

The Deputy's party members have been hypocrites.

Mr. B. O'Keeffe

I hope a new era has dawned and that openness and transparency will be shown by a Department that has been hiding for years.

Mr. Stagg

I have not heard such rubbish for a long time. The Deputy is capable of much better.

Mr. B. O'Keeffe

We have listened to the Minister of State's rubbish for years. As soon as the Deputy received a State car he became more right wing than the right wing itself.

Mr. Stagg

I appreciated the Deputy's comments.

Mr. N. Ahern

I am sorry I cannot reciprocate on this occasion.

Mr. B. O'Keeffe

The Minister of State should not hold his breath. I am disappointed at the loss of two worker director positions on the board of Telecom Éireann, which is a 50 per cent decrease. One shareholder position may be available in the long-term. When this Bill was published I thought the reduction to two positions would not be final and the number of worker directors would increase again to three and possibly four.

Given my semi-State background, I believe the board should consist entirely of workers. I give credit to the Minister for holding this position and ensuring that in the future this will be the case. I was suspicious that other people might come in through the back door. I regret the loss of two worker positions. If a company is part-privatised, that is probably to be expected. It is sad that the Government has privatised a section of the company.

Mr. S. Ryan

Is the Deputy's party opposed to that?

Mr. N. Ahern

Like Deputy Seán Ryan, I speak for myself. I heard the Deputy's contribution with interest as we come from the same background and were once employees of the same semi-State company.

Mr. S. Ryan

We still are.

Mr. N. Ahern

Yes. Hopefully, I will not be returning for a while.

Mr. S. Ryan

So say all of us.

Mr. N. Ahern

The Deputy is distracting me. When a company is privatised or part-privatised, someone's money is taken and they have to be given a share of the positions on the board.

Deputy Seán Ryan said in his contribution on Second Stage that the privatisation of 35 per cent of Telecom Éireann was incidental. I was amazed at the use of that word. When I think of the many utterances of Deputy Seán Ryan and the Labour Party on this issue in this House and elsewhere, including our previous existence in a semi-State body, I find this extraordinary. Our views on those issues as private citizens are close. We all have to vote for certain issues occasionally and if my party was privatising a company I would reluctantly go along with it. I do not think I would have the neck to come in and say it was incidental and insignificant. A number of people on the other side of the House, particularly Democratic Left and the Labour Party, have a brass neck in condoning something they previously criticised. I would vote for it if my party was doing it but I would not have the neck to be openly seen as a hypocrite.

The Minister tried to score a point off Deputy Séamus Brennan as regards the B & I Line.

Mr. S. Ryan

It was a goal.

Mr. N. Ahern

The Minister is saying Telecom Éireann is the equivalent of the B & I Line. We have made the first step towards that. I agree with privatising but the big ideological argument concerns the first step. As regards Irish Life and Greencore, the argument was about the first percentage. It does not matter any more about next year or the year after when it becomes another 10 or 20 per cent. The Minister is admitting this by equating B & I Line with Telecom Éireann. That first step has now been taken and it will be easy for this or any other Government to say it is slightly extending that point.

Telecom Éireann was the jewel in the crown. For those of us who believe semi-State companies should be kept under State control, the argument has been weakened. There is a hole in the dyke because once a big company has been privatised it will be harder for people in Government or in Opposition to hold and defend that line in future.

The Minister said in his speech that when an employee shareholding scheme in Telecom Éireann is established, the members of the scheme will be entitled to nominate a director for appointment to the board by the Minister. In that event, the employee director who was second placed in the last election will become an alternate director and the term of office of the alternate director who was placed second of the two alternates in the election will expire. Can the Minister clarify this? Perhaps I should read it a third time, but I find it hard to understand. I invite the Minister to reply——

Acting Chairman

This is not question time. I ask the Deputy to continue.

Mr. N. Ahern

I will wait in ignorance for longer. I presume the two people will still be elected at the same time.

In Telecom Éireann and the semi-State company I worked for, the big unions took the first couple of positions and the last position usually went to a coalition of the smaller unions. I do not know whether anything has been or can be done to protect the minor unions. In all walks of life the big bodies take most of the power. When there were four worker directors there was a certain amount of protection for the smaller unions. I have not read the order and I do not know if they can be protected in some way. In a similar manner, in reducing a five seat constituency to four or three, somebody will be squeezed out and it is more difficult for the less important people who may have a genuine point of view to put forward. When it comes to picking the third person for the shareholder stake, there is a danger that the small unions will be pushed out. Perhaps there is no real solution and they cannot be protected.

I am saddened at the way the matter has progressed. This issue, aside from getting into a row about the price we have sold shares for, weakens the view of all of us who believe that the State should have an involvement in semi-State companies. I have not changed my mind and I regret what is happening.

Mr. Kavanagh

I am the Chairman of the Joint Committee on Commercial State-sponsored Bodies, which has the responsibility of overseeing the operations of at least 32 commercial semi-State bodies. We have the opportunity to hear the views of a committee of 11 Members. The Progressive Democrats have recently been unable to cover all the committees and does not have a member on this committee. It has, however, had members on previous Joint Committees on Commercial State Sponsored Bodies. Democratic Left does not have a member on the committee either due to its lack of numbers.

I was very interested in the comments of other speakers, particularly Deputy O'Keeffe lecturing the Labour Party on its participation in, and policies for, semi-State bodies. He must have had a lapse of memory because I recall that Irish Life and Greencore were commercial semi-State bodies sold off by the Fianna Fáil Administration. Members of the committee, such as Deputy Cullen and Deputy Séamus Brennan, repeatedly call for the privatisation of many semi-State companies or the part privatisation of the successful elements of semi-State companies.

Mr. N. Ahern

People are judged by the standards they set for themselves.

Mr. Kavanagh

When the former Deputy Michael O'Leary was Minister for Labour 20 years ago he brought in the Worker Participation Act. There was some opposition at the time from the then Fianna Fáil Opposition to that Act which provided for worker representation on boards. Twenty years have elapsed since then and perhaps there is a need for change and for different views on the future of many of these companies to be taken on board. I do not criticise the decisions made by Fianna Fáil to privatise two of our most successful companies, which are now booming in the private sector; their share prices have greatly increased and their managements have been updated and improved.

Mr. N. Ahern

What about the staff numbers?

Mr. Kavanagh

I do not see why the Labour Party should not consider the question of where the semi-State companies can usefully do a job on behalf of the State which cannot be done by others. Parties are, of course, entitled to reflect a private sector view if they wish. However, a party cannot walk on both sides of the street at the same time. They cannot say from the backbenches that they want to uphold worker directorships and oppose privatisation and, at the same time, have representatives on semi-State boards who demand the privatisation of semi-State companies where possible. I am glad to see Deputy Séamus Brennan coming into the Chamber to advise his colleague that he wishes to see liberalisation and privatisation occurring in many semi-State companies. I ask him to inform his colleagues on the backbenches of the policy of Fianna Fáil which is, in many cases, to privatise either part or all of the semi-State bodies.

I remind the Opposition we are having a very interesting debate on the ESB at the moment. There is an acceptance that, because of EU directives and regulations, changes have to be made in semi-State companies. They cannot exist in the form they did 20 years ago because we must implement these directives—liberalisation is being forced on us, if that is how we wish to look at it.

At meetings of the joint committee I have listened to the Opposition arguing for the part privatisation of certain areas of CIÉ and Bord na Móna. Some of us had the opportunity two weeks ago to attend an international conference in London dealing with telecommunications and I recognise that small players are lost in that area. They have to join big players because of the nature of the industry.

The decision by the Government to sell 35 per cent of Telecom Éireann to KPN-Telia has maintained a very large public sector involvement in telecommunications. The Minister could have retained the number of worker directors on the board but that would have meant increasing the number of directors by at least six to preserve a balance which would represent the shareholding of the new partner. We all recognise that the way to solve problems with directors in private or semi-State compaines is not to increase the number but to maintain an efficient sized board which can make decisions without requiring a mini Dáil or Seanad to operate over all the semi-State companies.

The Minister solved the problem by setting the maximum number of directors at a particular level while, at the same time, reflecting the worker interest in this company. There will be two voting worker directors and a further two will be there to make the voice of workers known without having voting rights. The only alternative would have been to increase the number and have more private sector directors on the board.

When the Government makes a decision on the lines of what has been demanded by the Opposition during meetings of the Joint Committee on Commercial State Sponsored Bodies, which are seldom held in public, those Opposition views should be reflected in its contributions to the debate on that decision. No semi-State company can sit back and say it will always be a public company under the aegis of the State. The Opposition has criticised semi-State bodies for running hotels and other activities which it believes should be run by the private sector. That criticism can be made but I opposed it when I was Minister for Labour because I bought the Great Southern Hotel group and maintained them as hotels. They would otherwise have been broken up and sold off and perhaps their subsequent success would have been lost to us.

There should be consistency. What happened 20 years ago was right for that time but the world has moved on. As very active members of the EU, as we have seen over the past six months, we have to take a broader view. However, the State can still provide in many areas where the private sector failed to do so. The private sector failed to provide competition in several areas in the past and the State had to step in and provide the necessary commercial activities.

We should always be prepared to review the running of companies. We also have to implement EU directives and regulations which means that competition may be forced on us in particular areas. When the State has to improve semi-State bodies by making alliances with private partners those partners must be included on the board. However, many semi-State bodies need strong representation from a party, such as the Labour Party in Government, to ensure we do not rush towards a mad privatisation of every semi-State body. The Deputy can be assured that view is reflected strongly by the Labour Party at our committee, often in opposition to the views of the Deputy's party.

Mr. N. Ahern

The Labour Party did it.

Mr. Kavanagh

We accepted a responsibility that was foisted upon us by the introduction of strategic alliances. We have not sold off companies as Deputy Ahern's party did. The floodgates were opened when Greencore, the Sugar Company and Irish Life were sold. I have accepted that in the private sector they have been a major success.

Mr. N. Ahern

Why does the Government not close the floodgates?

Mr. Kavanagh

The Deputy should not accuse us of not defending the public sector. As long as I am in this House I will do so, and I am glad to do it. What I want the Deputy and his party to accept is that there are many people in that party who believe the future for many public companies is to privatise them. That is certainly the policy of the Progressive Democrats. My intervention is simply to point to the party policies in this area. Let the parties tell the House and the public what their policies are, and let us not have one backbencher saying he is in favour of the public sector and people on the Front Bench saying they are for the private sector. At least let us be honest about it.

Mr. N. Ahern

The Labour Party is telling us one thing, but doing the opposite.

Mrs. O'Rourke

I am glad of the opportunity to say a few words on this matter. I do not intend to speak at length because the detail of the strategic alliance between Telecom Éireann and KPN-Telia has been well laid out over many debates in this House by my colleague, Deputy Séamus Brennan. What was viewed with seriousness was the lack of openness and transparency in laying before the House and the public generally the exact components of the contracts and other matters appertaining to the new relationship. Where it is intended to sell 20 per cent of a shareholding of a company to an outside consortium, the people have a right to know about it. I wonder if situations like this will be covered by the new Freedom of Information Bill, which will be in the Seanad tomorrow and will wend its way through the Dáil thereafter. I wonder whether the legislation can be applied retrospectively to give people the right to find out the terms of the contract entered into by the Government with Telecom Éireann's new partners. If it could, I am quite sure a citizen of the land who wishes to know will come forward. We asked that the documents be laid in the Library and put before the House. That has not happened. Therefore we can only surmise as to the detail of the agreement. I hope my colleague, Deputy Brennan, will be able to avail of the new legislation to arrive at the facts of this sale.

Deputy Kavanagh, for whom I have a great regard, said Irish Life was privatised under Fianna Fáil and the Government got a golden handshake. On seven separate occasions I raised this matter by way of parliamentary question and by way of question on the Adjournment. I have to contradict the Deputy and say that all is not well with the conditions of the workers in Irish Life, and they include sales managers at all levels and staff at administrative level. Each time I raised it in the House the Minister for Finance said it had nothing to do with him. The Minister for Enterprise and Employment also said it had nothing to do with him, that Irish Life was out in the brave new world and could take care of itself.

Mr. Stagg

I presume from what the Deputy is saying, she is on the side of Deputy Ahern in this argument about privatisation.

Mrs. O'Rourke

I did not privatise that company, and there is no point in the Minister of State saying I did. I am answering Deputy Kavanagh who said that everything in Irish Life is wonderful now. As late as yesterday I received a detailed submission from a group of sales people at an intermediate level detailing what I would regard as shabby behaviour towards them by the management within that company.

Mr. Stagg

That is what the private sector does all the time.

Mrs. O'Rourke

Deputy Kavanagh pointed to Irish Life as a wonderful example of what could be done by privatisation. However, Irish Life is a shabby example to the market forces in which we are all now passively or actively engaged. There is no excuse for lack of civil behaviour on the part of management towards workers.

Mr. Stagg

I presume the Deputy is on the side of Deputy Ahern in this argument about privatisation.

Mrs. O'Rourke

My second point is that this purports to be a draft order on worker participation in State enterprises, but it is really a draft order on diminished worker participation in State enterprises. The Minister should read the small print which states there are to be fewer worker directors on the board of Telecom Éireann than heretofore to make way for two of the directors from KPN-Telia to take their place on the board. It may be simplistic to ask—nobody seems to be able to give me an answer—why not leave the four worker directors and increase the number of directors. Deputy Kavanagh said the alternative was to increase the number of directors and that was not considered feasible. He referred to it as creating a Senate—I do not know what he was getting at. Surely it would have been better to have kept on the two worker directors.

Mr. Stagg

Not according to the workers' representatives.

Mrs. O'Rourke

The Deputy knows what I mean. That is another question which will also have to be unfolded when we get the Freedom of Information Bill.

Mr. S. Ryan

Give us the benefit of your knowledge.

Mr. Stagg

Or even your thoughts.

Mr. S. Brennan

One of the benefits of Opposition is being able to ask questions.

Mrs. O'Rourke

I have followed this with great interest from the workers' point of view and I think we will rue the day this House passed a Bill which chopped two worker directors from the board of Telecom. I agree with the concept of stakeholding. It is the rage in the UK—Tony Blair is moving from town to town, hamlet to hamlet and county to county promoting the idea of stakeholding. The concept is interesting and it is a good idea because it creates interest in the company, a feeling of having a stake in it and wanting to see that stake properly realised. It must be asked, and as time goes on it will be frequently asked, why 20 per cent of the company was sold for £183 million which is widely regarded in commercial circles as a paltry sum for one fifth of what will be a very valuable arm of commercial activity. I wish to say directly to the workers in Telecom Éireann that while the deal was approved officially what is at stake is that two worker directors will be taken from the board of Telecom.

Mr. Stagg

The Deputy's party did not oppose it.

Mrs. O'Rourke

The Minister of State knows my record on defending workers' rights. The waters have been muddied because of this dubious commercial transaction, where 20 per cent of a valuable State holding is being sold for a paltry sum to KPN-Telia.

Mr. Stagg

£500 million.

Mr. S. Brennan

Not so. It is a con trick.

Mrs. O'Rourke

It is a con trick amounting to a dubious sale and a diminution of workers' rights. The coalition Government of Fine Gael, the Labour Party and Democratic Left have produced a Pandora's box for the workers of Telecom Éireann this Christmas.

Mr. S. Brennan

On a point of order, having checked the record I can confirm that the Labour Party opposed the B & I legislation and did not vote in favour of it, as I indicated earlier. I withdraw that remark and apologise to the Minister of State.

Mr. Stagg

I thank the Deputy.

Mr. S. Ryan

Given the allegations made on the other side of the House it is important that somebody on this side in addition to the Minister of State put on record the position of the Labour Party on semi-State bodies, including Telecom Éireann. The Labour Party considers that these bodies have a crucial role to play in the wider community. We want to see a strong, well managed and dynamic public sector because it has a major contribution to make to the country's future. Nobody in the Labour Party would wish to participate in a Government hostile to the involvement, continued growth and development of the semi-State sector.

The legislation enabling the formation of a strategic alliance by Telecom Éireann has been debated. I expressed views on Second Stage regarding worker participation and numbers and I asked the Minister of State to meet with the unions and the worker representatives with a view to producing a Bill that would represent the views of the membership of the company, including the unions and the workers' representatives. However, the ultimate priority was to establish a board to undertake a strategic alliance which we all, including the unions, consider to be necessary to meet changes in the telecommunications industry which are taking place throughout Europe.

It is important to note how Fianna Fáil changes its approach to these matters. Like Deputy Kavanagh, I am a member of the Oireachtas Joint Committee on Commercial State-sponsored Bodies. At every opportunity Fianna Fáil members of this committee effectively seek the privatisation or sale of sections of some of the most valuable semi-State bodies which play a major role in development, such as the ESB, Telecom Éireann, Bord na Móna or Aer Rianta.

Like Deputy Séamus Brennan, I welcome, albeit from a different perspective, the appointment of Deputy Dukes as Minister for Transport, Energy and Communications. The Deputy expressed the hope that the Minister would examine and change the policy of the previous Minister and take a different approach. He even questioned the need for Aer Rianta to diversify. Everybody knows the dilemma Aer Rianta faces over duty free shopping, which is due to be abolished in 1999. While I hope the Government will do something to delay this, the company will be in difficulty if it does not diversify to meet this challenge.

The Deputy also asked the Minister to reconsider the need for a second commercial airport for Dublin. It is my view, and that of the majority of people in north Dublin, that such an airport is unnecessary.

Mr. S. Brennan

I never said that.

Mr. S. Ryan

The Deputy asked that the matter be reopened.

Mr. S. Brennan

No. I asked the Minister to explain his intentions in that regard.

Mr. S. Ryan

That means asking him to reopen the matter. I welcome the strategic alliance between Telecom Éireann and KPN-Telia. The question to be addressed is what kind of board will ensure the best results for Telecom Éireann. Deputy O'Rourke suggested that its membership be increased to 19. If Fianna Fáil was in Government it would not recommend such a number for a board that must take strategic decisions.

Deputy Brennan also suggested that the Government, with the support of the Labour Party, was reducing worker representation on the board. He is technically correct, but the decision was taken after much consultation. However, his suggestion that there be four worker directors on the board must be considered in the light of the relevant amendment he proposed to the legislation.

Mr. S. Brennan

The Deputy should refer to all my amendments. He should not be selective.

Mr. S. Ryan

The Fianna Fáil amendment proposes two members and one substitute.

Mr. S. Brennan

That came from the communications workers union.

Mr. S. Ryan

What we are talking about here——

Mr. N. Ahern

That was part of the Government amendment.

Mr. S. Ryan

I have spoken with the workers' representatives and they are satisfied they now have four people on the board to put forward their views.

Mr. S. Brennan

The next amendment which I tabled provides for four.

Mr. S. Ryan

Whether it be three or four I have never seen a worker representative win a vote on any of these boards. The agreement arrived at through consultation with the unions and the workers' representatives, in the interest of Telecom and its workers, is superior to the amendment put down by Deputy Brennan on behalf of Fianna Fáil. This morning he had the audacity to say the Labour Party reduced the number from four to two. What is proposed this morning is superior to that recommended by Fianna Fáil. This is hypocrisy of the highest degree from Fianna Fáil.

Mr. N. Ahern

The Deputy should wash his mouth.

Minister of State at the Department of Transport, Energy and Communications (Mr. Stagg)

I thank Deputies for their contributions on the motion. The reason the Minister, Deputy Dukes, is not present is that he is attending a special Council of Telecommunications Ministers in Brussels, convened during our Presidency.

The purpose of the order is to facilitate the restructuring of the board of Telecom Éireann in the context of the strategic alliance between Telecom Éireann and the KPN-Telia consortium. As part of the strategic alliance agreement, provision must be made for board representation for the partner. While representation for the partner is to be provided the Government wishes to see a continued meaningful role for employee directors on the board together with continued provision for voting control by the majority shareholder. The formula agreed with the strategic partner, taking account of detailed discussions with the trade unions in Telecom Éireann, is a board comprised as follows: seven Minister's appointees — which is a reduction in the number of ministerial appointees — three partner appointees and four employee representatives, of which two are alternate directors with the right to attend all board meetings but not to vote except in the absence of the directors to whom they are alternate.

It is not normal for the deliberations of the board of Telecom Éireann to be decided by a vote. That the two alternate directors will not have a right to vote, except in the absence of the directors to whom they are alternate, would not normally be an issue in board deliberations. This new board structure reflects both the scale of the alliance transaction, the position of the majority shareholder and the importance attached to the participative role of the employees. More importantly it does this in the context of a manageable board structure which will see the main board continue to act as the key decision-making forum in the company. The proposed board structure is designed to maintain employee representation on the board of the company while ensuring an appropriate balance of voting strength among the various interests on the board. The solution of providing for two alternate directors to offset the reduction in employee directors from four to two raised substantial policy and legal questions. The arrangement worked out has no precedent that I am aware of and this required careful consideration of a number of questions relating to the status of these alternate directors.

The approach adopted was to base the concept on an already existing formula containing the Articles of Association and this formula was adapted to the needs of the emerging situation. I am satisfied this is the most practical approach. I am also happy the solution addresses the concerns of the employees, the Government, the company and the strategic partner. Any move to retain four votes for employee representatives would require a board membership of at least 19 to protect the position of the shareholders. In consequence the real work of the board would inevitably be devolved to sub-committees, thereby effectively weakening the impact of the employee directors in the process. The board size would also inevitably complicate the transaction of board business at a time when the company needs to become sharper and quicker to respond to an increasingly competitive market place.

The solution to the board restructuring in Telecom Éireann, as set out in the Act, does not bypass the employee directors. It does not shuttle the representational interest of the staff into a meaningless cul-de-sac. Employees will continue to have a strong role at the key decision-making forum of the company.

I wish to address a number of points made by Deputies during the debate. The amendment tabled by the Opposition on Committee Stage and debated at some length was for two worker directors and one alternate. Not only was there to be two worker directors but authority was to be given that effectively the union would be entitled to have a person who was not a worker as one of the two worker directors. That would effectively reduce the worker directors to one, with one alternate. We have improved on that position considerably. I thank Deputy Ahern and others across the floor of the House for the idea that worker directors should be workers and people in the company. There was extreme pressure from Fianna Fáil to allow for one of the directors to be a non-worker.

Mr. N. Ahern

The Minister knows where that came from.

Mr. Stagg

I appreciate where it came from, but I had to deal with the argument in the House. Ireland accepted the Maastricht Treaty by an overwhelming majority. Arising from that treaty we have to separate roles within the companies we now have. We had a choice. The Minister could have retained the right to regulate, the power to determine policy down to detail and hive off the stockholding or, we could retain the stockholding or the majority part of that stockholding and give away the right to regulate. We have made a decision to give away the regulation, to put it outside the authority of this House and outside the democratic control. That is a major decision and a major shift in the balance of power in our society. This House will no longer have that regulating authority over very large chunks of our economy and services. I am not convinced which is the most valuable, and whether to hive off the shareholding and retain the right to regulate would have been a more powerful position for the people to retain. In years to come we will look at that seriously.

Arising from Maastricht had we made the other decision that would have required the mass privatisation of State companies. Under the Maastricht Treaty we will effectively be obliged to give the major control of State companies to the regulator who will not be responsible to a Minister or to this House. That is what we are dealing with. Let us stop the shenanigans and stop playing politics. The reality is that the authority of this House will be greatly reduced by the Maastricht Treaty and the knock-on decisions and directives arising from it. Some people particularly on the Opposition side of the House still argue that not alone should we give away the regulation but the stockholding as well. The regulation is going and irreversible decisions are being made. There are examples of giving away. Irish Life was mentioned by both sides of the House. One Deputy said that as a result there were good financial results. There are good profits for the private owners of Irish Life. A Deputy from the Opposition was able to point out it was a bad deal for workers in that privatised company. That is something about which we need to be conscious.

Deputy Molloy has a cheek to lecture the Government on privatisation. As we saw on a recent television programme, when he was Minister he sold a chunk of real estate in Blessington valued at £100 million to a private company for £1 million. That was not a good deal for the public. During the same period public lands in County Kildare were sold to the private sector. It ill becomes Deputy Molloy to lecture the Government on the need for value for money given that he did not get a good deal for the public in the sale of real estate in Blessington.

Deputy Ahern referred to the last in, first out system. Under the worker director scheme, the last two elected worker directors will become alternate directors. If a shareholding scheme is adopted and a worker director is appointed the elected worker directors will move down one step, which means the last person elected will be the first out. However, it may happen that the last person elected is the person appointed under the shareholding scheme. Deputy Molloy asked about the position of the alternate directors. It will be the same as that for directors and, apart from not having the right to vote, there will be no change.

The Government selected the KPN-Telia consortium which has a genuine long-term commitment to the market. These companies have the necessary strategic and financial resources and experience to bring major benefit to all telecommunications customers. It is nonsense, therefore, to suggest the sale of equity in Telecom Éireann should be considered simply in cash terms. It also explains why the Opposition's suggestion that the shares should be offered to pension funds is nonsense. The idea that shares could be offered on an exclusive basis to Irish pension funds only is unworkable and unrealistic.

The transaction structure of the Telecom Éireann alliance comprises four key components: (1) an initial payment of £183 million for the transfer of 20 per cent of the equity; (2) an option on an additional 15 per cent on payment of a further £200 million; (3) valuation clawbacks on the partners' stake leading to potential total proceeds for the State of more than £500 million — this means the company will be valued after a three year period and if there is an additional valuation the Government, the shareholder, will take 60 per cent of the increase in value and will be entitled to payment for it — and (4) significant contributions of human resources, technology and access to global services by the partners. No other investor could meet this key requirement demanded by Telecom.

The initial proceeds of £183 million are linked to the transfer of the 20 per cent stake. However, the price for the 20 per cent stake and the 15 per cent option will not be fixed for three years and it is likely to amount to £500 million for a 35 per cent stake. Given the potential of the market and Telecom Éireann's state of development, the Government was, rightly, not prepared to agree a final price at this stage.

No development such as the alliance can be achieved without all parties being prepared to change. We have addressed the changes required to the board structure of the company in a wholly realistic manner. This has been done in a way which is sensitive to the interests of all parties involved. I am particularly pleased that during the passage of the Telecommunications (Miscellaneous Provisions) Act through the House it was possible to address the key issues involved in restructuring the board having full regard to the views of Members as well as to those of semi-State employees and worker directors. The order is designed to implement the solution agreed by both Houses when the Telecommunications (Miscellaneous Provisions) Act was approved by them.

I commend the order to the House.

Question put.

The Dáil divided: Tá, 72; Níl, 53.

Tá

• Ahearn, Theresa.
• Allen, Bernard.
• Barry, Peter.
• Bell, Michael.
• Bhamjee, Moosajee.
• Bhreathnach, Niamh.
• Boylan, Andrew.
• Bradford, Paul.
• Bree, Declan.
• Broughan, Thomas.
• Browne, John (Carlow-Kilkenny).
• Bruton, Richard.
• Burke, Liam.
• Byrne, Eric.
• Carey, Donal.
• Connaughton, Paul.
• Connor, John.
• Costello, Joe.
• Crawford, Seymour.
• Creed, Michael.
• Crowley, Frank.
• Currie, Austin.
• De Rossa, Proinsias.
• Durkan, Bernard.
• Finucane, Michael.
• Fitzgerald, Brian.
• Noonan, Michael (Limerick East).
• O'Keeffe, Jim.
• O'Shea, Brian.
• O'Sullivan, Toddy.
• Owen, Nora.
• Pattison, Séamus.
• Penrose, William.
• Quinn, Ruairí.
• Rabbitte, Pat.
• Ring, Michael.
• Fitzgerald, Eithne.
• Fitzgerald, Frances.
• Flaherty, Mary.
• Flanagan, Charles.
• Gallagher, Pat (Laoighis-Offaly).
• Gilmore, Eamon.
• Harte, Paddy.
• Higgins, Jim.
• Higgins, Michael.
• Hogan, Philip.
• Howlin, Brendan.
• Kavanagh, Liam.
• Kemmy, Jim.
• Kenny, Seán.
• Lynch, Kathleen.
• McCormack, Pádraic.
• McDowell, Derek.
• McGahon, Brendan.
• McGinley, Dinny.
• McGrath, Paul.
• McManus, Liz.
• Mitchell, Gay.
• Mitchell, Jim.
• Moynihan-Cronin, Breeda.
• Mulvihill, John.
• Nealon, Ted.
• Ryan, John.
• Ryan, Seán.
• Sheehan, P.J.
• Shortall, Róisín.
• Spring, Dick.
• Stagg, Emmet.
• Taylor, Mervyn.
• Timmins, Godfrey.
• Upton, Pat.
• Walsh, Éamon.

Níl

• Ahern, Dermot.
• Ahern, Michael.
• Ahern, Noel.
• Aylward, Liam.
• Brennan, Matt.
• Brennan, Séamus.
• Browne, John (Wexford).
• Byrne, Hugh.
• Callely, Ivor.
• Connolly, Ger.
• Coughlan, Mary.
• Cowen, Brian.
• de Valera, Síle.
• Dempsey, Noel.
• Doherty, Seán.
• Ellis, John.
• Fitzgerald, Liam.
• Flood, Chris.
• Foley, Denis.
• Foxe, Tom.
• Geoghegan-Quinn, Máire.
• Haughey, Seán.
• Hughes, Séamus.
• Jacob, Joe.
• Keaveney, Cecilia.
• Kenneally, Brendan.
• Killeen, Tony.
• Kirk, Séamus.
• Kitt, Michael.
• Kitt, Tom.
• Lawlor, Liam.
• McCreevy, Charlie.
• McDaid, James.
• Moffatt, Tom.
• Morley, P.J.
• Moynihan, Donal.
• Nolan, M.J.
• Ó Cuív, Éamon.
• O'Donoghue, John.
• O'Hanlon, Rory.
• O'Keeffe, Batt.
• O'Keeffe, Ned.
• O'Leary, John.
• O'Rourke, Mary.
• Power, Seán.
• Ryan, Eoin.
• Smith, Brendan.
• Smith, Michael.
• Treacy, Noel.
• Wallace, Dan.
• Wallace, Mary.
• Walsh, Joe.
• Woods, Michael.

Tellers: Tá, Deputies J. Higgins and B. Fitzgerald; Níl, Deputies D. Ahern and Callely.

Question declared carried.

Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.