Air Companies (Amendment) Bill, 1993: Committee and Final Stages.

Sections 1 to 8, inclusive, agreed to.

I move amendment No. 1:

In page 6, between lines 20 and 21, to insert the following subsection:

"(4) Notwithstanding the provisions of subsections (1) and (3) of this section the directors to be appointed to the existing companies shall include persons selected from the members of the Aer Lingus Group plc Board appointed under the Worker Participation (State Enterprises) Acts, 1977 to 1988, provided that such persons are willing to accept office. The number of persons so selected shall be such number as will comprise one third of the members of the Boards of each of the existing companies, or shall be at least two persons, whichever is the greater.".

In the Bill, there are a number of arrangements being made about the election and appointment of directors which confuse me. Section 8 requires the directors of the holding company on appointment to cease to be directors of the existing companies. Does that resignation preclude them from participating as directors of what are now known as the existing companies but will have a different nomenclature in the future? I would like clarification on that point.

My amendment is based on the position in CIE. I recognise that in section 9 the Minister is adding to the original draft of the Bill. It now says that for the purposes of that subsection "the directors shall include a representative of employee interests". I want to establish that "a representative" does not preclude more than one representative. I recognise that even elected worker directors are appointed by the Minister but I want clarification that subsection (3) could allow a Minister to have worker directors elected before appointment. My amendment states that, notwithstanding the provisions of subsections (1) and (3), the person selected should be appointed under the procedures of previous legislation and that the number of persons so selected shall be such numbers as will comprise one third of the members of the board of each of the existing companies or two, whichever is the greater number.

In my Second Stage contribution, I recognised the serious commitment the Minister has given. I realise that he has received much criticism over the last year. It is obvious that, whether people agreed or disagreed, there was total commitment from the Minister and the worker representatives who were dealing with the issue, and they all took flak from both sides. From his dealings with the workers' representatives involved, the Minister should have nothing but the greatest sense of security in having them represented on the boards of what I call the sub-companies — not the group companies but Aer Lingus, Aer Rianta Shannon and the various subsidiaries which need to be reflected in the new pyramid structure of the board. As it stands, this piece of legislation allows worker directors to be elected to what is now the main group board. The previous position was that they were members of Aer Rianta and Aer Lingus and were simultaneously elected and appointed to both. The boards always met together. The Minister might tell me the position is exactly the same as what existed before but under a different name. However, in the structure and operation of the company, the boards of the other companies in the group will now have more authority.

Aer Rianta Shannon will have extraordinary authority over, for example, the transatlantic route. I do not know whether decisions made by Aer Rianta Shannon will be subject to the main group board. Obviously there will be a certain level of accountability. What I am saying is in line with Government policy, with the aspirations of the 1977 and 1978 Acts relating to worker participation and with commitments given in previous discussions with the Minister on what was then called sub-board participation.

If one calls the group board the main board and the other boards sub-boards — I recognise they are not sub-boards, they are companies in their own right — in terms of an analogy, it would be the same operation in the pyramid structure of a company. Workers should also be represented in the same way in the decision making process. In fact, they will now be taken out of the decision making process at company level, unless the Minister has something in mind. I recognise the flexibility which the Minister has under the Act. Perhaps my fears could be allayed by clarification from the Minister and an indication as to whether he intends to include workers on the boards of Aer Lingus, Aer Rianta Shannon and the other companies, including the holding company for the subsidiaries. That would make a huge difference.

On a practical level, does the Minister accept it is not healthy that final decisions of the board of directors of one of the companies require ratification by the group board in terms of the synergy operating in a group of companies, if it is the only time worker directors have an input? If, for example, the board of Aer Rianta Shannon decides it is no longer interested in the Shannon stopover, but wants to develop Shannon as a base where all planes would come, and the Dublin-Shannon-Chicago route becomes the Shannon-Chicago route, it would not be in anyone's interest and worker directors might have greater autonomy than others to make decisions and vote. Furthermore, there would be a geographical influence in the composition of that board and anyone with any political wit could see that the Minister would be under pressure to ensure local representation on that board.

If the decisions of the sub-companies are taken by boards which do not include the proper quota of duly elected worker directors, nobody will win. My amendment ensures that those elected as worker directors to the group board will also be appointed as worker directors to the boards of the other companies, such as Aer Lingus, Aer Rianta Shannon and the holding company for the subsidiaries. It would result in a level of cohesion and responsibility which would fit in with the general structure and shape of those companies.

I have raised a number of issues which require clarification. I did not read the debate which took place in the other House so I am probably covering ground already dealt with. Under section 8 of the Bill workers who are members of the board of Aer Rianta must resign on appointment to the new group board. Could the Minister clarify whether that excludes them from being re-appointed as worker directors or in some other capacity to the new board of Aer Rianta Shannon? In the new section 3, the word "a" in regard to a representation of employee interests worries me. I know the literal interpretation of "a" means at least one, but I want to be sure it does not mean only one, if the Minister decides otherwise. I ask the Minister to clarify whether that allows someone to be appointed following an election. Although I have not studied every line of this Bill, I do not see anything in it which would prevent this from happening. My amendment allows for such matters to be considered.

I support Senator O'Toole's amendment. The co-operation of the workforce has been important in getting us to what I describe as this stage of the rejuvenation of Aer Lingus and their continued enthusiasm for the future of the company is essential. The involvement of the workforce in the direction of a company is important. Given the position of the company and group of companies at present, I ask the Minister to consider this. In section 9 the participation of the workforce appears to be minimal. Like Senator O'Toole, I believed the maximum participation of worker directors was intended in this area.

On Second Stage I raised a number points about the composition of the boards of the subsidiary companies. I also raised the point Senator O'Toole raised in regard to the number of employee worker directors on the boards of these companies. I am interested in how each subsidiary company will liaise with other boards and with the main board.

I stated during the Second Stage debate that because Aer Lingus plc will be a holding company for the whole group, key strategic decisions affecting the group will by taken by the board of that company. For example, decisions in relation to acquisitions, significant borrowing, new projects and significant fleet modifications are matters which would be decided at group board level. In this way, worker directors representing employees will maintain influence at board level in regard to key decisions. The fact that worker directors will be on the board of Aer Lingus Group plc emphasises the primacy of the core air transport business. The arguments put forward regarding precedents do not give a complete picture. There are various precedents in this regard and this is one of the reasons why there are various ways to address this issue.

A number of Members referred to CIE. The directors of the three operating companies are appointed by the chairman of the main board with the consent of the Minister. Worker directors appointed to the three operating companies must include two worker directors from the main board. That is one way of dealing with this matter. In the ESB, for example, there are worker-directors on the boards of the four holding companies, but there is no legislative provision requiring their appointment to those boards. There are worker directors on the boards of Telecom Éireann's subsidiaries, but again there is no legislative provision requiring their appointment. There are no worker directors on the boards of An Post's subsidiaries. There are worker directors on the board of Aer Rianta International, but not on the board of the Great Southern Hotels.

There is no fixed precedent in relation to this matter. As I said in my Second Stage speeches in this House and in the other House, I need maximum flexibility to ensure we get the right balance in relation to this matter. Regarding section 8, it is true that they must resign from the boards of the two existing companies, Aer Rianta and Aer Lingus plc. However, their resignation would not preclude them from appointment to any of the mainline operating companies in the new situation, but it does not guarantee them a place. Senator O'Toole asked if they are precluded from membership of a subsidiary board if they resign and go on to the main board. The answer to that question is no.

In the amendment I moved in the Dáil I wanted to make explicit what was implicit in all my remarks on this aspect which is that a representative of employee interests will be on the boards of the subsidiary companies. Having served as Minister for Labour it goes without saying that I am a firm believer in worker participation. I believe that people at operative level have a vital contribution to make in deciding how the company should meet the competitive challenges facing it. In case there is any doubt, I am complying in full with the Worker Participation (State Enterprises) Acts of 1977 to 1991.

Section 8 provides that at group board level, where all the strategic policy decisions of the business will be taken, the provisions of the worker participation Acts will apply. The section also provides that existing worker directors, appointed by virtue of the relevant Acts, will be appointed directors of the group board for the remainder of their term.

I am also aware, as I am sure are Senators, that the worker participation legislation extends beyond simply representation at board level. In discussions with the Irish Congress of Trade Unions and affiliated unions representing employees in Aer Lingus, I undertook to strengthen structures for participation by employees within Aer Lingus. When this Bill was published, it was suggested that I intended to exclude worker directors, or representatives of employee interests, from membership of subsidiary boards in the Aer Lingus group. That has never been my intention. I always intended that representatives of employee interests would have a part to play on boards of the airline's main operating companies. To that end I moved an amendment to the Bill in the Dáil to provide that the board of directors of the existing companies, that is Aer Lingus plc and Aerlínte Éireann plc, will include a representative of employee interests.

Obviously the same would apply when Aer Lingus Express is set up but because that company is not yet a legal entity it is not possible to make that provision in the Bill. I have no problem with that from the point of view of consistency. As we have a representative of employee interests on the boards of the two existing operating companies it would be important that, in the event of a third operating company being set up as a legal entity, the same would apply.

In view of the approaches to this issue in various parts of the semi-State sector, there is a need for flexibility. I have given assurances and feel I have gone as far as I can. I am glad that my bona fides has not in any way been called into question. I am simply seeking flexibility and the fact that there is no legislative provision for a certain course of action does not preclude that course of action. There are more precedents for that line of approach than a straitjacket where specific numbers are mentioned in relation to all cases.

In relation to this corporate restructuring package it is intended to have a unity of purpose and consistency of approach both in relation to the group and the operating companies. Clearly there will be a substantial overlap of representation vis-à-vis the group and the operating companies. It would not be my intention to begin empire building all over the place. At this critical time, as we enter into the implementation phase of the recovery proposals, we must ensure that the corporate structure will be such as to allow a consistent approach at corporate level and at subsidiary level which is in line with the agreed procedures and management approach adopted under this strategy. That would be my broad response to the concerns expressed in this House by my party colleagues, colleagues in the Lower House and other interest groups. I am simply insisting that I have that flexibility. The absence of a representative of employee interests in legislation affecting other companies has not precluded participation at sub-board level. My approach has always been one of partnership. I require flexibility and I do not believe it is in the best interests of the company or the implementation of the recovery programme that we should insert that level of inflexibility into our arrangements. I want, however, to repeat the assurances I have given both here and in the Lower House.

I thank the Minister for the broad outline of his views. The Minister has clarified a number of issues for me. I recognise that my speech may have sounded somewhat jumbled because I was using the sub-board structure of companies like the ESB as an analogy for what I wished to see taking place in the Aer Lingus group. The boards of the operating companies within the Aer Lingus group should be treated in the same way as the sub-board operations in other semi-State bodies where worker participation has taken place without change or specific provision in legislation. It is not my objective to have wording inserted in this Bill requiring something to take place if there is no need to do so. The Minister has told me what happened in other semi-State bodies without specific legislation. I know the Minister well enough to accept that he does not use throw-away remarks or use unnecessary words when he wants to get his message across.

I listened very carefully to what the Minister said and I am worried that he is not prepared to say more than that. I want to hear the Minister say he is prepared to say that it would be his philosophy or approach that in filling the boards of the operating companies he would take a similar approach to what has taken place in the ESB group of companies since the change in legislation allowed them to form sub-operating companies. I accept the Minister's bona fides in this matter; he has been straight and direct with anybody who has had discussions with him. The Minister should be absolutely direct on this issue. If the Minister is prepared to say that the approach he will take to the establishment of boards of the operating companies will be similar to that taken in the ESB, then I will take his word for that. As far as I am concerned that would be a clear indication of Government policy and it would be up to the workers' representatives to take that up with the Minister in another forum.

The Minister has clarified a number of issues but he should go a step further and clarify that that is his intention and the way he intends moving. The Minister said that nothing in the legislation rules out doing that, in the same way as there is nothing specific in the legislation about the establishment of various companies within Aer Lingus. I recognise the way that was set up was by passing a minor Bill to allow the ESB to develop like Aer Lingus, with extra companies. Will the Minister's general approach to this be to fill the boards of the operating companies in much the same manner as in the ESB? A response to that question would take me off the hook.

I was interested in the Minister's statement that the group board would be taking the key strategic decisions on issues like borrowings and acquisitions, although I do not know how far that goes. The Bill does not, nor can it, indicate the level of authority the group board would have over the board of an operating company. However, I take it that the group board, through the Minister or with his permission, decides in effect what the board structure of the operating companies is going to be and that gives them the ultimate authority. In other words, if they do not like what they are doing they can shift them and that is good enough authority in any man's language. Not the Minister, myself nor anyone else would like to see a board being appointed that would not be clear about the philosophy of the group board. Therefore, there is much to be said for ensuring the operating companies have a large representation from the group board. Even in terms of good commercial practice that would be very important.

I accept that key strategic decisions are to be made by the group board, which contains worker representatives, and implemented by the operating boards. Although during the last year such decisions have been the focus of attention in relation to Aer Lingus's problems, in the day to day working of a company it is more basic decisions, such as those concerning work practices, which create most difficulties. It is in everybody's interests that the views of employees influence such decisions. It is good industrial relations practice, as well as being good for the company, that no unforeseen difficulties emerge between the board and employees. For this reason workers should be represented on the operating boards.

I wish to make three points. First, it is important that the group boards and the boards of the operating companies share a common philosophy. The operating boards should reflect the views of the group board and many of their members should also be members of the group board. Secondly, in the interests of good industrial relations and to avoid flash fires, it is important that the views of workers are central to decisions made by the operating boards. Therefore, workers should be represented on them. Thirdly, can the Minister state for the record that it is his view that the method of appointing members to the operating boards should be similar to that of the ESB board, that they should have worker directors?

The Minister and the workers have argued across a table but that is now behind us and he knows they have shown great flexibility and have as great a commitment as he has to making the company work. No two interests are more dependent on the success of the new structure than the Government and the workers. If the Minister moved forward in this direction, he would be showing confidence in the workers. Not providing specifically in legislation for the appointment of worker representatives would enable the Minister, if such appointments were not successful, subsequently to say he tried this approach, it did not work and he will not continue it. Given that the Minister is responsible for the provision of £175 million to Aer Lingus and that the workers, as well as the taxpayer, have made a substantial commitment to, and investment in, the company, can he go that extra mile with them and say there should be worker representation on the boards?

I am giving broad assurances to the House. The Senator is asking me to apply a specific model, that of the ESB. There is no set model. I do not accept we must follow the example of CIE, where the board had to contain a certain number of worker directors. This would not be a good idea in principle. Senator O'Toole asked me to accept the model closest to my heart, that of the ESB. I can give examples of models which would be suggested by people with opposite arguments.

The most important point made by Senator O'Toole is that the major issue is what happens on the ground between workers and management as the recovery strategy is implemented. I hope this strategy is successful and the company overcomes its problems. This is the important issue at the end of the day. The Worker Participation (State Enterprises) Acts, 1977 to 91, require boards to have elected worker directors. What happens on a daily basis in terms of communications, information, good productivity and good relationships is far more important, but far less visual, than worker directors. Participation at these levels by workers is a far more important contribution to worker participation than anything else. Companies which have worker directors as well as ordinary directors, chairmen and chief executives have experienced serious difficulties. The number and type of directors does not ensure problems will be dealt with any more quickly. I am not ideological, one way or the other, on this issue. The important matters for workers are effective management and good relationships at ground level.

The Worker Participation (State Enterprises) Acts deal with participation at board level. There clearly needs to be flexibility in relation to sub-board level. The best interests of Aer Lingus will be considered when the composition of the operating boards is decided. I give the assurance, as a believer in real partnership, and in case anyone feels the situation will be otherwise, that employee interests will be represented on these boards. I am being asked to adopt specific models. There are different models from which to choose. I will use my judgment as to which is the best way forward, given the personnel being proposed. To remove any ambiguity, there will be a substantial overlap between the group and operating boards. We do not want subsidiary companies to depart from the strategic direction laid down by the group board.

The group board is the key one. Subsidiary companies are being established for the purposes of cost transparency from an accounting point of view, overall restructuring and more effective management. We have had analysis after analysis. We have made decisions which must be implemented. We must put structures in place which will not hinder the efficient making and implementation of decisions. We will do this based on a partnership approach. I cannot accept the amendment as it offers me a specific model which is not in line with any other available one. I will make decisions in the best interests of Aer Lingus. I have made decisions all year in its best interests, regardless of the interests within the company and the emphases from their own perspectives of people within it.

As the Minister representing the shareholder which is providing £175 million, I will make the decisions but will have flexibility in the matter. I will ensure effective board representation at all levels, which will be based on partnership. I am giving general assurances that participative structures will be put in place but am not prepared to accept specific models as outlined by Senator O'Toole or Members of the other House. What happens on the ground is as important, if not more important, to workers than representation at board level. The decisions I will make in relation to the appointment of members to the operating boards will reflect the partnership approach I have adopted and, will not be divisive but cohesive. The strategy is now agreed, the building blocks are in place, the equity has been approved and the cost reduction programme has been agreed. There is a judicious asset disposal programme to proceed with and I, in my capacity as the shareholders' representative, must retain the flexibility to decide the composition in the final analysis, given the assurances which I am now giving to the House.

I do not question the Minister's good intentions or commitment and I accept that he does not have an ideological problem with this matter. I know his views well enough to know that is the case.

However, I listened closely to what he said and I am sure he will correct me if I misunderstood him. He said he has given a broad and general assurance which he has backed up with the inclusion of the new subsection in section 9(3). He said I over-emphasised the question of the board of CIE and that my amendment is too tight and does not give the Minister flexibility. He made a good argument for flexibility and it is an argument which would certainly work with a supportive Minister. I have to say that people in the company, whether they agree with him at times, would have to accept that he is committed to turning the company around.

The Minister is saying he wants flexibility and is giving a broad and general assurance of worker participation but he refuses to be tied down to a set model. However, he does not have an ideological problem with what I am proposing. He used two phrases. He said that he would ensure that there was an overlap between the group board and the operating board. That is a clear statement. He also said it should reflect the partnership approach which has been his approach to the operation of the company.

I want the Minister to confirm that those two parameters would mean that worker directors from the group board would also be part of that overlap onto the boards of the operating companies. That would then reflect the partnership approach and the overlap and would not tie the Minister down to any set model or create any ideological difficulties for anybody. Is that a fair representation and interpretation of what the Minister is saying?

I am satisfied with the Minister's broad assurance because he is talking about a continuing monitoring interest in the development after this fresh start in Aer Lingus and that partnership and participation will be a part of the ethos and practice. I agree fully with the Minister that whatever about structures in legislated form, the primary responsibility for good industrial relations and day to day relationships in Aer Lingus rests with management. A management which is open, honest and consistent is vital in contemporary conditions. This is a prerequisite, irrespective of whether we have any elaborate legislation implementing the systems which we have in other bodies.

I agree that no one model is relevant to all organisations. For example, long before Aer Rianta was subject to the worker participation Acts, it was active in working out sub-board arrangements on a variety of matters. Legislation is not really necessary to make progress in this matter, although it is valuable. The Minister has made it clear that he will take a continuing interest in ensuring that the partnership concept is followed through and monitored. What Senator O'Toole has in mind may evolve in due course but it does not need to be introduced at this stage. However, management needs to take primary responsibility for relationships in the workplace on an ongoing basis. The knowledge, skills and attitudes of management are the key to this partnership.

As I was listening to Senator O'Toole, I was trying to think of some way in which we could organise our own peace declaration to bring finality to the matter. However, I want to assure Senator O'Toole that we are working from one paper, which is the Minister's.

But the Minister knows how another announcement can be made the following day.

Having said that, I admired his argumentative skills in seeking to distil — as a man from Kerry, he would know a great deal about the poitín makers there at this time of year — the essence of this issue and, perhaps, make me say something I did not want to say or to be tied to forever more, or more importantly, to which some subsequent Minister might be tied forever more.

I have outlined the position as far as I can. In fact, when the Senator goes over the record where I talk about overlap and partnership, there is even greater flexibility than stating that just worker directors could possibly be on subsidiary boards. The reason we have the words "representative of employee interests" is that it has been intimated to me from various sources that some flexibility in that area might be helpful in certain circumstances. It does not say that it will be any more helpful than the present arrangements, but it may be.

The broad parameters of what I am saying, both in terms of representation of employee interest and the type of board we will have, will be reflected in the arrangements. We want to get the show on the road and make sure that we do not set up structures which will inhibit quick, decisive decision making by management which, as Senator Hillery said, must be open, honest and consistent with workers who have participated so much in this process. In my capacity as the shareholders' representative, I will ensure that will be the case. By virtue of the powers given to me under the Act, I will also ensure that it will be reflected at board level.

There has been a consistent approach by this partnership Government and myself from the first day in terms of an open, honest appraisal of the situation, what needed to be done and acknowledging people's difficulties. However, we had to take these decisions or we would have quickly been whistling past the graveyard and Aer Lingus would have gone off the corporate map.

We know what we want to do. This is an important restructuring of the company. It is a far more logical streamlined approach with substantial overlap from the strategic board which is the key board. More importantly, at sub-board management and worker levels there will be far more participative arrangements. This will ensure that everyone knows exactly what is going on and that we are driving forward with a successful, viable company. For that reason, I must insist on retaining that flexibility and say to the Senator, in relation to this amendment, that it is better to have tried and failed than not to have tried at all.

An Leas-Chathaoirleach

Is amendment No. 1 being pressed?

I just want to state——

An Leas-Chathaoirleach

We have discussed it for quite a while.

I have not repeated myself and as soon as I do the Leas-Chathaoirleach is to stop me. We have moved on in every exchange so far. I do not intend pressing this amendment so the Senators can relax and go home.

That is not the point.

I am not going to press the amendment to a vote because, first, I recognise what the Minister is saying and second, I do not want to have it on the record of the House that this proposal was rejected. A substantial overlap between the group board and the boards of the operating companies must in effect mean the involvement to some degree of the worker directors on the boards of the operating companies. I just ask if this is also the Minister's understanding. It does not tie the Minister beyond that but it does leave the door open. If people change their minds that is fine. This does not go one step beyond what the Minister has said except to clarify for workers, who have given as much as any of us in this area, this understanding of the Minister's position.

Nothing in the Bill precludes that from happening. As I said, the flexibility is even greater because representative employee interest allows for an even wider choice of candidate for membership of boards at that level.

Amendment, by leave, withdrawn.
Section 9 agreed to.
Sections 10 to 19, inclusive, agreed to.
Title agreed to.
Bill reported without amendment, received for final consideration and passed.