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Departmental Agencies

Dáil Éireann Debate, Wednesday - 26 May 2010

Wednesday, 26 May 2010

Questions (17)

Michael Creed

Question:

29 Deputy Michael Creed asked the Minister for Agriculture; Fisheries and Food his views on the corporate governance issues which need to be resolved at the National Stud arising from recent information in the public domain regarding expenses paid and legal settlements agreed and contracts awarded without proper tendering; and if he will make a statement on the matter. [22297/10]

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Oral answers (18 contributions)

The Irish National Stud Company Limited, INS, is a commercial State body established in 1946 and is a company registered under the Companies Act. It does not receive grant aid from the State. The INS is operating in a competitive international environment and the international bloodstock industry has not been immune from the consequences of the global economic downturn in recent years.

The board of the INS is responsible for the operations and management of the company. Appointments to the board are made by the Minister for Agriculture, Fisheries and Food following consultation with the Minister for Finance. Recently, I appointed two new directors to the board of the INS, and a further four appointments will be made as vacancies arise in the coming weeks.

The Government has established a system of corporate governance to ensure State agencies are directed and managed in such a way that they serve the interests of the State. A code of practice for the governance of State bodies was issued in 2001, and an updated version of the code was issued in 2009. The revised code is evidence of the Government's recognition of the need to adapt to a changing environment, setting out an enhanced system of corporate governance for State agencies for the future. Prior to 2009, State bodies were obliged to adhere to the requirements of the earlier code, published in 2001, and it was this earlier version of the code that was in place when the events to which the Deputy refers took place.

Back in 2001 my predecessor, the Minister for Agriculture, Food and Rural Development, former Deputy Joe Walsh, wrote to the chairman of the INS drawing attention to the introduction of the code and its mandatory nature across all State bodies. In addition to frequent departmental correspondence, I also wrote to the chairman of the INS in November 2008 and again in October 2009 about the board's responsibilities with regard to corporate governance.

My Department monitors the compliance of the INS with the terms of the code of practice, ensuring that the annual report and audited annual accounts are submitted in a timely manner and, following presentation to Government, are laid before the Houses of the Oireachtas. It is important to distinguish between the role of the board in meeting the requirements of the code and those of the Department in monitoring compliance with the terms of the code. It is not the responsibility of the Department to have in place a parallel system of management to that of the board. Since the introduction of the 2001 code, my Department has received assurances on an annual basis from the chairman of the INS that the company is compliant with the code.

Like the Deputy, I was most concerned when I learned from press reports in September 2009 of certain financial matters affecting the company which had the potential to damage the reputation of the company. I immediately sought and received a full report from the chairman of the INS on the matters raised. The chairman confirmed to me that she was satisfied that the expenses to which the Deputy refers were approved and adjudged to be necessary for the conduct of the business of the company; that international travel is an integral part of the CEO's functions; that no first-class travel had been incurred by the former CEO; and that the board has since revised its travel policy with a view to achieving greater efficiencies.

Additional information not given on the floor of the House

Excessive and unnecessary expenditure is not acceptable in any Department or State agency, and I have consistently emphasised, both within my own Department and to the agencies under my Department's aegis, the need to reduce administrative costs, not least in the area of travel, and to achieve the greatest possible efficiencies.

The INS chairman has assured me that the company has complied and will continue to comply with the code of practice for the governance of State bodies. I have also had discussions with the chairman and representatives of the company, and emphasised the continuing need for the company to ensure it fully complies with all corporate governance requirements. The chairman and the newly appointed CEO have assured me this will continue to be done. I have also sought a report on the financial position of the company, and the chairman has indicated that this will be provided shortly.

I welcome the acceptance by the INS of the invitation from the Oireachtas Joint Committee on Agriculture, Fisheries and Food to appear before the committee next month. I am sure the representatives will be happy to address the concerns of the committee and deal with the various issues that have been in the public domain recently.

In his reply the Minister indicated that he had written to the board in October 2008 and November 2009 reminding it of its functions and appropriate corporate governance. What was the trigger for that correspondence? Did he follow up on it? When did he first become aware, personally, that there were issues with corporate governance at the INS?

I will let the Deputy have some interplay on this, as there are a number of questions mounting up.

It was in the context of ensuring the best possible value for money in State expenditure that I wrote to all bodies under the aegis of my Department in October 2008 and November 2009. The INS does not receive any grant aid from the Department.

The first time I became aware of the expenses issues was on 18 September 2009, when I wrote to the chairman of the INS asking for a full account of the expenditure items that had been reported in The Irish Times that day. The article highlighted travel expenses incurred by the then CEO. I sought a full report on the matters raised in the article, and I received a reply shortly afterwards from the chairman.

Did the Department's representative on the board ever raise these issues with the Minister? Notwithstanding the recent appointments of two fine and able people, does the Minister not accept that the cloud hanging over the remainder of the board of the INS requires that the board now tender its resignation? In order to safeguard the interests of this valuable industry, which has a global reach and is one of the few areas in which we distinguish ourselves internationally, and to protect all the associated employment, a new board is required. We need to move on from this. There are issues with regard to expenditure and so on which will need to be teased out, and I understand the INS is to appear before the Oireachtas Joint Committee on Agriculture, Fisheries and Food. In order to start with a clean slate, and excluding the two most recent appointments, is it not now time, given the magnitude of the failure of corporate governance, for a new board to be appointed?

I do not accept the Deputy's contention. The chairman of the Irish National Stud has assured me that the company has in the past and will continue in the future to comply with the code of practice for the governance of State bodies. I emphasised the continuing need for the company to ensure it fully complies with all corporate governance requirements. The chairman and the newly appointed chief executive officer have assured me this will continue to be done. I have also sought a report on the financial position of the company and the chairman has indicated it will be provided shortly. Both the chief executive officer and the chief financial officer were appointed relatively recently. That work was done outside the house by an accounting firm. Recently, on foot of a suggestion I made in view of the new 2009 corporate governance criterion that the audit committee should include a person from outside the board, an eminent external person has been appointed to that position.

Deputy Creed rightly made the point that the Irish National Stud is a body of international repute. It is a small player with a huge international reputation and is a vital component of our important bloodstock industry. It attracts up to 150,000 visitors to Kildare each year and is a useful training school for young people entering the equine industry. We are fortunate to have as chairman a person who is a breeder of international repute whose family also has a notable stud in Normandy. The chairman has trained horses that are well known internationally and have had great success.

The board comprises people of specialist expertise in different areas of the bloodstock and equine industry as well as those with specialist expertise in the financial area. As the Deputy acknowledged, the two newest appointees are a person who has done extremely valuable work in the Irish dairy industry and a person who is a renowned trainer. In the coming weeks, before the end of June, I will be making four new appointments which will include those with expertise in the bloodstock industry and persons with expertise in finance and law.

To clarify, I am not casting aspersions on any individual board member. Rather, I am pointing to a collective failure of corporate governance that has serious implications for the industry and its reputation. That is the context in which I am calling for the appointment of a new board.

We have run out of time for this question.

This is a long-running issue, encompassing more than just the recent FÁS-like expenses regime or the industrial relations issue in regard to accusations of harassment and bullying. A Garda inquiry took place some years ago in respect of the disappearance of cattle from the stud, an investigation which I understand ran into the ground and had no successful conclusion.

I ask the Deputy to conclude.

All has not been well for some time.

The Deputy cannot simply ignore the Chair. I must call the next question.

What direct accountability has the board to the Minister and what communication does he have with his nominees?

The Minister may give a very brief reply.

It is the duty of the board to manage, lead and direct the day-to-day operations of the company. Industrial relations and human resources issues are a matter for the board. I understand some of those issues are before the courts and I will not elaborate on them here. The linkage between any Department and the boards under its remit is through their chairman. It is the chairman of the Irish National Stud who makes contact with me.

Is there not a departmental nominee?

No. A director of a company——

I have given double the allotted time to this matter. We must move on to the next question.

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