Vol. 120 No. 1
I have notice from Senator Ross that on the motion for the Adjournment of the House he proposes to raise the following matter:
The recent decision by the Minister for Finance not to reappoint a director to the board of Irish Life Assurance Company Limited and the appointment of two new directors.
I should like to thank the Minister for coming in at this late hour to take this matter on the Adjournment. I do not intend to refer to these people by name but it is very difficult not to do so. I apologise in advance if I refer to the directors involved by name and I hope I will not do so.
I was very disturbed when I saw that the Minister for Finance had failed to reappoint one particular director of Irish Life the week before last. The reason for this was that this man had been a director of Irish Life for 43 years. He had 43 years experience of which he was managing director for 17 years. He retired as managing director in 1983 and continued on as a non-executive director from 1984 to 1988. This man, who had been chief executive and continued on the board, had come to Irish Life straight from university and had served a lifetime in the company up to a couple of weeks ago. He had advanced through the ranks of Irish Life, which was unusual for a member of that board.
This director, who was not re-elected by the votes of the Minister for Finance, was not a political appointment. He came up through the ranks. It has been normal — and I regret it enormously, as do many other independent Senators — for certain members of the board of Irish Life to be appointed by Governments as a political favour. In other words, people are appointed because of political loyalties. I regret this but it has happened. They have also failed to be re-elected when the Government who appointed them have gone out of office and the next Government have decided to appoint somebody else as a political favour. It is nothing else. These people may be well qualified but the Government make a political decision to appoint them. Many of them have been very closely identified with political parties.
The chief executive who became a non-executive director was not appointed due to political favour. His was not a political appointment originally and that is why this is such an alarming removal. He was a man who moved up, who was a career man in Irish Life. Had it been one or two of those who had been appointed by the Opposition when they were in Government it would have been regrettable but more understandable. In this case it did not apply. That director was, after 43 years, treated disgracefully. I regret this enormously because he had given such long service to Irish Life and because his was in no way a politicial appointment.
It leaves Irish Life with only one executive director. All the other directors are non-executive. It would seem to me that to have an ex-managing director, an exchief executive on the board would have been very sensible at a very crucial time. Now they are left with only one executived director and a board which is lacking in experience. Five out of the nine non-executive directors of Irish Life now have fewer than two years experience between them. The director in question had, on top of that, presided over glorious years of expansion for Irish Life. He was regarded and recognised as the architect of this great expansion. It is an unworthy way to reward a man and to thank him for the dedication and the duty which he has given to this company.
The second point which I would like the Minister to answer concerns the timing of this removal. The director was given unprecedentedly little notice of the fact that he was not going to be re-elected. The normal practice in Irish Life is that the Department of Finance are given notice well before the annual report goes to the printers of who is and who is not going to be standing for re-election. Once that is conveyed to the Minister involved and the Department they know and usually convey whether those individuals will get support. In this case the director was allowed to put his name forward; his name appeared as going forward for re-election. He was not notified until it was too late that he was not going to be re-elected because he was not going to get the support of the Government. Not only was he not re-elected, he was also humiliated, which I believe is an appalling way to reward a man who has given such dedication and such a lifetime of service to this State company.
There are other elements of these appointments which are alarming. I do not question, because I do not know anything about her, the ordinary board appointment that has been made. It would be totally unfair for me to query her ability in any way. I am sure she is a very able person, but I was a little alarmed when the Taoiseach said in the Dáil today that she was appointed because she was a woman. Those were his words. It is a pity if that is why she was appointed. It is a bad reason for appointing someone. Irish Life may well lack a woman on the board as a director but to appoint someone because she is a woman and to remove somebody else because the Government want a woman on the board is ill-considered and is based on a false doctrine of tokenism.
The appointment of a new chairman also gives certain cause for concern. The new chairman undoubtedly was a very distinguished civil servant and a very distinguished Governor of the Central Bank, but it seems to me that these two people have been parachuted onto the board of Irish Life without any consultations with the board. I would like to hear whether these appointments were superimposed, whether the board had prior notice of them, whether the board were consulted and whether the board were happy with them.
The picture that is building up is that Irish Life is being manipulated as an arm of the Government and Irish Life is not acting, or being allowed to act, in an independent way. It is undoubtedly true that the last chairman retired voluntarily and it would have been very easy for the board of Irish Life to decide of their own accord who would be the next chairman. I do not believe they got adequate notice of the Government's intention and I do not believe they were adequately consulted on this point. It broke with the long-standing tradition of not appointing civil servants to this board. The suspicion is undoubtedly abroad — and I have heard it voiced in many parts of the business world recently — that the appointment was made because he is the Minister's man. That is a very dangerous type of accusation because it threatens the independent stance of Irish Life. He is safe, he is not in the first flush of youth, but his beliefs are very much in keeping with the thinking of the Government. That is a pity.
The real issue at stake is whether Irish Life, at this very critical time when privatisation is on the line, when it is almost certainly coming, is a State-owned company solely or whether it is a State-run company as well. It is no secret that Irish Life have been well run like a private company for the very good reason that they have to compete in a very competitive financial world with private companies. One of the obvious symptoms of that is that the Devlin salary scales have not in practice applied in Irish Life. It would have been impossible for Irish Life to recruit the sort of talent which they undoubtedly have in the financial world and to compete without paying well over these scales, as they have done. But these appointments, and this removal of a man who has done so much in that period, indicates to many that the Department of Finance's heavy hand is going to be guiding Irish Life in the near future. If that is the case, if it is going to be taking directions from the Department of Finance, then so be it, let us find out and let us know. What is important is that we know what the thinking behind these appointments is.
I believe that Irish Life now face privatisation with a highly inexperienced board but possibly a more pliable one. I would like to hear what the thinking behind this is. I can anticipate the Government saying it is their prerogative to appoint people to the board of Irish Life and to remove people as they come up for re-election. I do not believe that is enough. It is their prerogative and I accept that, but that does not mean they should not be accountable.
As a final point, I should like to ask the Minister whether he would consider that there should be a total review of the system of appointing people to semi-State bodies, to State bodies and even of judges. It is a great pity that we have this merry-go-round of political parties appointing some people, their coming up for re-election on the semi-State bodies, their not being re-appointed because their party is not in power and vice versa, going backwards and forwards. As a result of this people are not necessarily appointed exclusively on merit. There is a great deal to be said for the American system where judges, political appointments of that sort and and people in high positions in State bodies and semi-State bodies are questioned about their role and those who appoint them are also questioned about their role.
I find these appointments disturbing. I do not see any deep sinister plot here but they are disturbing simply because they indicte a change in the way this great company have been organised and they fail to recognise the man who actually steered that organisation and remove him from the board.
It is unusual to find in the course of a debate that one cannot agree with anything a Senator has said. This is the case but there is absolutely no need for the Senator to be disturbed.
I regret that the Senator has felt it necessary to make an issue of the appointment of directors to the board. The position in relation to Irish Life is quite clear. Like all other State-owned bodies it is up to the responsible Minister to select who he will appoint to the board on the State's behalf. In the case of Irish Life which is an ordinary share company, and in which as Minister I hold a 91 per cent stake, the appointment of directors is the exercise of a shareholder's right. The Senator, with his wide experience of company law, would not, I am sure, object to the exercise of shareholders' rights.
In the normal course of events two directorships of Irish Life fell due for filling or re-appointment. In the case of one director the incumbent made known to me his decision not to seek re-election. The Government considered the position and settled on two names to go forward as the nominees for election as directors at the annual general meeting of the company. These names were communicated to the company in the normal way and during May 1988 I wrote to both retiring directors, thanking them for their long and valuable service to the board. As the Senator knows, one of the retiring directors had decided on his own initiative to seek re-election but later withdrew his name. At the annual general meeting of the company on 26 May my representative, who exercised a proxy on my behalf, conveyed the appreciation of the Government in unstinting terms to the retiring directors. I can only re-echo those sentiments. Both directors had a long association with the company and played no small part in developing it into the major financial institution which it now is.
Changes in the board of directors of the company are by no means a rare occurrence. For the record, the following changes have been made to the board in recent times:
in 1981 two of the Minister's nominees were co-opted to fill vacancies that arose on the board in 1980; they were subsequently elected at the annual general meeting;
in 1982 two directors retired and one nominee was elected;
in 1983 one of two retiring directors was re-elected, a nominee was elected to fill the second vacancy;
in 1984 one nominee was co-opted to fill the vacancy existing since 1982 and another was co-opted to fill a vacancy arising from the resignation of a director; both were subsequently elected;
in 1985 two retiring directors were re-elected;
in 1986 one retiring director was re-elected and a nominee was elected in place of a second;
in 1987 two nominees were elected in place of two retiring directors;
This year as the Senator is aware, the situation was the same as that in 1987.
Indeed, the principal difference this year from last is the long association between the two retiring directors and Irish Life. While recognising the important contribution existing directors can make, I believe that it is healthy and valuable to introduce new faces to the board on occasion. I would say that as a general principle applying to all boards, not just that of Irish Life. The application of this principle does not imply dissatisfaction with or even ingratitude to outgoing directors.
Reference has been made by some to an unbalanced board following the recent AGM. I find these comments somewhat wide of the mark. The two new directors are very well qualified and, I know, will make a valuable contribution to the board. The experience they have lies in related financial fields, and both of them have important expertise at director level in commercial and administrative fields. The Taoiseach made it clear earlier today that one of the appointments was made specifically because there was no woman member on the board. Together the directors on the board bring to bear a wide range of knowledge and skills from the business, accounting, legal and financial worlds, throughout the whole island.
I have no doubt that this board structure is well equipped to deal with what promises to be an interesting few years for the company. Important decisions fall to be taken concerning the company's future. Irish Life is expanding into new markets and searching for new horizons. It has in some ways out-grown the local market. Some of the basic facts on Irish Life portray this. Funds under the management of the company total nearly £3 billion; these include policyholders' funds of £2.5 billion. Its market share in Ireland is over 40 per cent. Irish Life has major investments in every sector of Irish economic life, including holdings of gilts of about £1.3 billion. The company has, in addition, a number of subsidiary and affiliated companies at home and abroad. In the financial services sector it has a majority shareholding in a major domestic insurer, Church and General, and a 25 per cent shareholding in Irish Intercontinental Bank.
It has exercised its commitment to the development of the economic structure of the State in a responsible manner over the years. This commitment is further shown by the company's active participation in the International Financial Services Centre. The Government acknowledge and appreciate the important role played by Irish Life in these spheres. I as Minister of course do not direct the normal investment management operations of the company. It makes its decision on the same criteria as other investment institutions with whom it competes.
The strength of the company is manifest in its successful expansion into the highly competitive UK market. Irish Life established branches there in 1967 and since that time its premium income has increased from £3 million to £57 million. The company has recently expanded into the US market with its purchase of Inter State Assurance Company in Iowa. It is a sign of the company's vitality that it is ready to compete in the US insurance market. I am sure that Senators will join me in wishing the company every success in this new venture.
Inevitably any discussion on Irish Life nowadays get round at some time to the question of a capital restructuring of the company. I do not wish to go into the ins and outs of this matter here tonight. The arguments for and against a capital reorganisation were set out very fully by me on 1 March last. As I have said on a number of occasions, the Government are examining this question fully and an early decision will be made. Irish Life plays an important part in the commercial life of the State. It is only right that all the issues involved should be carefully weighed.
Some years ago when the Bill which allowed Irish Life to take over Church and General was being debated, Senators on both sides of the House paid warm tribute to the company and its performance. Amongst the Senators who spoke there was a visible pride in the achievements of the company. Some remembered the very humble beginnings of the company; others were conscious of the fact that in the insurance field the company was not alone in direct competition with far bigger foreign based institutions, but was showing these institutions how to do business.
I believe Senators will recognise that the Government are anxious that the success story should continue and that, in exercising their duty in the appointments to the board, this Government, like others who preceded us, have discharged their functions in a responsible way.
I thank the Minister for what he has just said. I would ask him to answer one or two of the questions I put to him. I find it totally unsatisfactory. What consultation went on with the Irish Life board about these appointments or were they imposed? Why was the director who was not re-elected not given adequate notice and treated in that way? Thirdly, why is there so little experience on the Irish Life board now, when five out of the nine directors have less than two years' experience? Is this satisfactory? Finally, what criteria were used to appoint the new chairman and to remove the non-executive director?
The Senator was not listening. These names were communicated to the company in the normal way during the month of May, well in advance of the annual general meeting which took place on 26 May. As regards consultations with the board, 91 per cent of the shares are held by the Minister for Finance and it is his right.
The Government should be accountable.
The Government are accountable. I am here tonight answering queries in regard to this.
It is totally unsatisfactory.
That is the Senator's view but it is not the view generally held either by the board of Irish Life or the community at large. The Senator questioned the ability of the new board in so far as he made reference to their experience. I have no doubt whatsoever that this board will make a contribution to the future of Irish Life in the same way as any of their predecessors.
I can take it from the Minister's reply that there was no consultation with the board whatsoever.
The Seanad adjourned at 12.30 a.m. on Thursday, 9 June 1988 until 10.30 a.m.
