Select Committee on Finance and General Affairs díospóireacht -
Wednesday, 3 May 1995

SECTION 9.

Mr. J. Higgins

I move amendment No. 15:

In page 14, lines 3 to 8, to delete subsection (8) and substitute the following:

"(8) In the interests of the common good, and to promote the protection of investors and the maintenance of proper standards of conduct and practice, the requirements of subsection (7) of this section shall not be satisfied unless—

(a) the Bank is satisfied that the Board of a stock exchange includes a number of persons, independent of the operation or management of that stock exchange and independent of its member firms, for the purpose of facilitating the promotion of the protection of investors and the maintenance of proper standards of conduct and practice;

(b) the chairperson of the Board of the stock exchange is a person independent of the operation or management of that stock exchange and independent of its member firms; and

(c) the rules or memorandum of association of articles of association of the stock exchange provide either or both of the following, namely that—

(i) the board of that stock exchange can consider disciplinary matters involving, and complaints against, member firms, whether at the request of the member firm concerned or of the management of the stock exchange or of the complainant of otherwise,

(ii) if the rules provide that such disciplinary matters or complaints can be considered by a number of members of the Board, the rules provide that in such cases the Board members shall include at least one member of the Board who is independent of the management and operation of that stock exchange and independent of its member firms.".

Chairman

Members indicated at the outset that this was the amendment they were really interested in. As I understand it, among other things the Minister is suggesting that the chairperson of Board of the stock exchange must not be a stockbroker whereas the view of the Committee seems to be that the Minister should have the option where, from time to time, he feels it necessary to require that it should not be stockbroker.

Mr. J. Higgins

The amendment, above all else deals with the transparency of the Stock Exchange operations and on Second Stage there was emphasis on this. Having gone through it, there seemed to be unanimity that transparency was of the essence in terms of the success of the exchange itself and that a good launch was crucial. I agree with the views of the Deputies that the Stock Exchange must be seen to operate in an open, transparent and above board way. Accordingly, this amendment provides that for a Stock Exchange to get Central Bank approval, its chairperson must be independent of the operation and the management of the exchange and its member firms.

An amendment along these lines was suggested by Deputies Rabbitte and Yates — then in Opposition — on Second Stage, but this amendment goes even further by providing that the rules of the exchange must provide either that the board of the exchange can consider disciplinary matters and complaints against member firms, in which case the independent board members will, of course, be involved in the board's consideration, or that if, for instance, a board sub-committee can consider them, then at least one independent member must be on the sub-committee or the rules can provide for both situations. In any event, a board member will always be involved in such consideration.

These two provisions are aimed at meeting the views expressed on the Second Stage debate that more openness and transparency are required in running the Stock Exchange. That is the reason I commend this amendment to the committee.

Chairman

It would be odd if the Bar Council was not chaired by a lawyer or the Medical Council by a doctor, but here you are excluding the one profession that knows the most about the Stock Exchange and stockbrokers. It seems you are forcing your own hand, Minister. Rather than saying that it should always be the case, it would be wiser if the Minister had this option from time to time. This would mean that you could use your discretion on every occasion if you wished, but it also means that you would not be forced to carry this out.

Mr. J. Higgins

On self-regulation by professionals — doctors, lawyers etc.— the key point to remember here is that one is talking about a very small group with a limited membership of ten people. It is vitally important, especially from the point of view of investor confidence, that the person presiding in such circumstances is above any direct contact with the exchange. From the point of view of the launch, the aura that will surround it and the integrity of the exchange, it is crucially important that the person presiding over its affairs is independent.

On the competence of the person, it is not suggested that the person assuming this role would have no financial experience. It is obvious that they would have to be highly competent in terms of knowing the minutiae and detail of the operations of financial matters, stockbroking etc., but at the same time they would not have any direct involvement. It goes to the essence of what we are aiming for, which is in making a whole new beginning for the Irish Stock Exchange in new circumstances, but above all else, complying with the modern trend of having independent chairmen, particularly when cruical decisions are being made and crucial transactions are being carried out, such as those on the floor of the stock exchange.

Mr. M. McDowell

I object to this provision because I do not believe that any of the claims made by the Minister for it stand up to close examination. I do not know of any other body which has had an independent chairman forced upon it. The Law Society is not told that it cannot have a solicitor as its president, the Bar Council is not told that it cannot have a barrister as its president and the Medical Council is not told that it must have a non-doctor as its president. Virtually any other profession that I can think of has never been required to have this kind of arrangement. I accept that there is a difference in the case of the Irish Stock Exchange and that there may be a lesser number of people involved there than in other exchanges. However, the real reason I object to this proposal is that I am convinced it is political theatrics and not soundly based in what should be the best interests of the profession.

I do not know what group of people the Minister has in mind as having an intimate knowledge of the Stock Exchange but are not involved in it. Maybe it refers to a journalist, a member of the Central Bank — I am against that — or to some kind of satellite of the Irish financial world who is not a member of the Stock Exchange; I do not know with whom we are dealing. If it refers to retired businessmen of the coterie that one often sees referred to as statutory token independent people who are put on boards, I do not know whether they would have sufficient expertise to know how the exchange works. If it is a retired stockbroker, the query again arises as to whether that person is any more independent than a practising member of the profession. Who is one likely to get who will have the expertise and not a member of the profession? Members of the profession are most capable of judging themselves and up-to-date with developments within their own profession.

I also object to this provision on another ground; the time and commitment that somebody who is not a member of a profession will be able to give to such a position. Will the position be remunerated? If one wants somebody of sufficient quality to act as a chairman of a Stock Exchange, have a hands on approach and have all the buzzword attributes we are talking about here, a significant cost will be imposed on the Irish Stock Exchange in that it will have to pay a salary of up to £50,000 to somebody to act as chairman of the exchange. That is incorrect and an imposition on a small group of people in that they will have to pay somebody a sufficient salary to involve themselves in the affairs of the exchange.

I also think — this is the crucial point — that independent chairmen are not worth a damn. They are slaves of the people and the secretariat who surround them. They are not independent, they are usually drones who are brought in to do ——

Mr. Cullen

Are you feeling uncomfortable, Chairman?

Mr. M. McDowell

If it was a requirement that, in the interests of transparency and openness, no TD should be chairman of this committee but that Mr. Brennan or somebody from the press gallery should do it, it would make a farce of our proceedings. If we are willing to elect one of our own to chair this committee, how can we lecture a profession about the need to impose somebody else on it?

An independent chairman will not be seen as independent. A profession will regard such a person as an imposition from outside — therefore unwelcome on that account — somebody who is not a full time player on the field and not au fait with the realities of the profession’s existence. Alternatively, if that person becomes a full time chairman of the Stock Exchange, he will have to be paid a salary which imposes an unnecessary liability on the profession.

All the arguments the Minister trotted out do not impress me, certainly not on the questions of openness and transparency. If I was made chairman of the Stock Exchange tomorrow, I would not be any more or less capable than its present president of fulfilling that role. It would be an uphill struggle for an independent chairman to stamp his authority on the profession and would be a difficulty imposed on a profession to require that its main regulatory body is chaired by somebody who is not a member of that profession. I object to it in principle, I can see no reason for it and the very fact that some Members of this House may have proposed it showed how little they knew about the Stock Exchange — I am glad Deputy McCreevy had left before the gods of openness, transparency and accountability were mentioned here again. This kind of political window dressing is no substitute for proper legislation.

It would be fine if there was a system where the chairman of the Stock Exchange would stand aside if he was in some way involved in the breach of discipline to be investigated. Any body would require that in the interests of natural justice. It is, however, a collective slur on stockbrokers to say that they of all the professions should be singled out by the Legislature for a new regime, that is, that their professional body should be chaired by an outsider in the interests of openness, transparency and accountability. This precedent is unfortunate and unwarranted.

Mr. Cullen

I have always believed that legislation based on exclusion, as this section is, is wrong. I do not believe the argument the Minister made stands up. He was contradictory in that he went to great lengths to say that a chairman would need the best expertise, knowledge, etc., to do the job required, but on the other hand he said that out of a board of ten, six will be excluded from the right to hold that position. I do not see the logic of this other than, as has been previously stated, that it is in keeping with this political agenda to show that we support transparency. If transparency goes too far, one weakens the structure which one is trying to put in place. I do not accept that there is a need for the chairman of the Stock Exchange to be one of the independent members on the board.

The reason this has been promoted is because of the historic nature of disciplinary or any proceedings which the Stock Exchange had in the past. We must remember that it was under the auspices of the UK Stock Exchange and was not in direct control of what action might or might not have been taken. That promoted the need for this so-called transparency. However, the position has moved on in that the Irish Stock Exchange will now be the master of its own destiny. In that regard, the rules and regulations we are setting down today are different. The authority vested in the members of the board will also be different and, therefore, the requirement for a chairman to be independent is not necessary.

I do not accept the argument about a financial strain on board members and about remuneration paid. It is somewhat spurious and is neither here nor there. We are trying to get best practice, which should not be formulated in legislation on the basis of excluding those who have the greatest knowledge. All other organisations, which are too numerous to mention, have chairmen who are competent and practice in that particular profession. In this instance, it is extraordinary that we should exclude those directly involved in this business.

There may be an opportunity for a compromise in that the Minister said he wanted to start the Stock Exchange under this new legislation on a firm basis which would be seen to be open and generous. Would it be possible for the first chairman to be independent in order to meet that requirement, but not to exclude all other board members who are not independent from becoming chairmen? That might meet the objectives which the Department desires. I do not know whether that would satisfy members of the board. There is concern that members of particular firms are excluded by legislation from taking up the role of chairman of the Stock Exchange.

As an opening position, perhaps it would be possible for the first chairman to be independent but thereafter allow members of the board to decide. I am sure that over the years one would find that chairmen would be independent and not from the stockbroking firms involved. Best practice demands that the decision be left to the practitioners and not to legislation from which difficulties will arise. I would like to hear the Minister's response to that suggestion. I believe his advice is wrong, that this is unnecessary and has been done for historical reasons which are no longer relevant given the context of the Bill and the future of the Stock Exchange.

Mr. Connor

I am at odds with the two previous Members, not because I am on this side of the House. In recent years Irish business has been rocked by scandals, including insider dealing, etc. This House has spent months dealing with scandals in business. I support the principle of an independent chairman. Deputy McDowell asked what would happen if there was an independent chairman of the Law Society of Ireland. I wish there was an independent chairman. Given my dealings and those of other Members of this House with that particular body, we would be delighted if there was greater transparency and more independence in dealing with complaints about a member of that profession. I do not believe people, even Members of this House, get open or fair treatment when making complaints to such bodies. This is an enlightened move in the right direction which Members on the Opposition benches called for in principle in previous incarnations. One only has to remember the Greencore and other scandals which we debated in this House.

I do not say this because I am on this side of the House. I believe on principle that it is a move in the right direction. The public will invest or entrust its money in the Stock Exchange and will want independence because when something goes wrong the Central Bank, the overall regulatory body, may not be able to see everything, although, as somebody said, it will be on the grand-stand with a pair of binoculars. I would have greater confidence in the Stock Exchange if there was an independent chairman.

The argument about where we will find a competent person is nonsense. There are plenty of competent people who are capable of becoming chairman of the Stock Exchange and they do not need to be stockbrokers.

Mr. Cullen

I never suggested that.

Mr. M. McDowell

Who are they going to be?

Mr. Connor

One can be sure that if an advertisement is placed, hundreds of competent people will come forward, which is how it ought to be. I am delighted the Minister is doing this.

Dr. O’Hanlon

Who will appoint this board and the chairman? Will the chairman need to be approved by the Minister? No member of the board should be excluded from being chairman if they are competent. I do not understand the rationale for excluding members of the Stock Exchange, given their experience. I do not see why any member of a self-regulatory body should not be chairman. There are 70 sections in the Bill and there are adequate controls to ensure the Stock Exchange functions properly.

I agree with the Minister and the addition in the new section where independent members will be involved in any investigation. That is usual in any self-regulatory professional body, which I accept. It is wrong that for all time a member of the Stock Exchange should be excluded from being chairman. I ask the Minister to look at this again before Report Stage.

Mr. Creed

I do not purport to be an expert on the Stock Exchange, but it has not been established as a regulatory body for the stockbroking profession. It is an instrument of economic policy and, therefore, analogies with the Medical Council or the Bar Council are not relevant. It is important that investors, who are its life blood, can maintain confidence in the Stock Exchange. An independent chairman is important for potential investors because he would be at arm's length from the profession and able to regulate dealings with the Stock Exchange in an impartial manner.

Mr. M. McDowell

I do not agree with Deputy Creed that this has nothing to do with the regulation of a profession because subsection (8) (c) (i) specifically states that the board or the exchange can consider disciplinary matters involving member firms. We must also be aware that we are adding this to a Bill which already has, as drafted and introduced by Deputy McCreevy, gone far enough without including such exaggerated posturing.

Section 9 (7) already provides that:

A proposed stock exchange shall not be granted approval under this section unless its memorandum of association, articles of association or its rules provide that the Board of Directors of that stock exchange is broadly based and is so composed so as to secure a balance between the interests of the different member firms and users of the stock exchange services, and the public interest.

Subsection (8), which we are now proposing to delete, states:

The requirements of subsection (7) of this section shall not be satisfied unless the Board of a stock exchange includes a sufficient number of persons, independent of the operation or management of that stock exchange and independent of its member firms, so as to promote the protection of investors and the maintenance of proper standards of conduct and practice.

We are now saying this is not enough and that the person who presides over meetings must be independent. That is tokenism of the worst kind.

I appreciate that Members are bending over backwards to avoid scandals, but it is an insult to say to a group of people that a stockbroker can never be chairman of the Stock Exchange. This unnecessary constraint has been included in a paternalistic way by Big Brother, the Legislature, as if it will have a serious effect. I would support it if it made a substantial difference, but it will not. An independent chairman is usually isolated from the profession and more easily manipulated by it if he is presiding over a profession which does not want him and resents the fact that it is not capable of choosing a chairman. It would be better to produce a cohesive stock exchange which works well and to abandon this effort that members of the board must have a particular status. We should return to what Deputy McCreevy originally introduced, a balanced, fair and common sense approach to this issue. I prefer the original subsection (8) to the present subsection (8).

Chairman

I welcome the idea of an independent chairman where that is deemed necessary in the public interest and to protect investors. The problem with the Minister's amendment is that even if the Minister or the Central Bank said that the public interest required someone with stockbroking expertise, he could not appoint that person. I understand the Minister wanting to tie the hands of the Stock Exchange, but he must not tie our hands. This should be changed from "must be" to "it must be if the Minister so says". It would be better in the public interest if the Minister used his discretion rather than making it compulsory for him to do so.

Mr. M. McDowell

Deputy O'Hanlon asked who vetted the appointments of members to the board. Subsection (11) requires that the Central Bank can veto any appointee to the board of the Stock Exchange on the grounds that they failed a test of probity or confidence. If one passes the test of probity or confidence to get on the board, it is an unnecessary slur on the integrity of stockbrokers to then say that they are second class citizens on the board and that they cannot preside over it.

Mr. J. Higgins

I reject an insinuation or suggestion that we are posturing or that this is a form of tokenism. As Deputies Creed and Connor said, this goes to the core of the Stock Exchange. How the Stock Exchange works will be based on how it is perceived by investors, people whose livelihoods and savings are at stake because we are talking about big money. It is crucial to build into the legislation every possible guarantee an safeguard.

Deputy Cullen said I contradicted myself when I said we wanted the best because we were rejected the best by saying we would not appoint a member of the Stock Exchange as chairperson. One does not have to be a member of the board of the Stock Exchange or a stockbroker to be the best. Hundreds of people are competent and independent and many of these would be suitable chairpersons of the Stock Exchange.

There is no historical or political agenda here, but the image and perception of the Stock Exchange is at stake. We now talk about image and perception versus substance. Image and perception are important in terms of how investors view the operation of the Stock Exchange and it is important to appoint someone who will not only be independent, but seen to be independent. I take the point about the possibility of appointing an independent chairman to launch the Stock Exchange. However, the direction in which the management of companies is going is different from that of the legal and medical professions. These are large professions which have tentacles throughout the country and which do their best to rotate their managers in crucial executive positions. We are talking about a group of ten people. The point at issue here is the image and launch of the Stock Exchange.

Deputy McDowell said you cannot get someone better fitted to do the job than a stockbroker. However, bankers, accountants, auditors and people with professional expertise could do the job more than adequately. We do not need someone with hands on experience as a full-time chairman; we need someone to preside over it. They do not have to be exposed to all the details of the Stock Exchange. It needs someone who is independent, seen to be independent and who has the intelligence, knowledge and probity to do the job.

Deputy O'Hanlon asked who chooses the chairman. The Stock Exchange does from its independent members and also chooses them. However, the Central Bank has a veto. The Stock Exchange looks at a list of people who are deemed to be outside the Stock Exchange, not part of it, and who know how it functions. It chooses those independent members and the Central Bank then decides if they are independent. That is the only veto that the Central Bank has. From within the independent members comes the chairperson, so the Stock Exchange itself picks the independent members and the chairperson.

Mr. M. McDowell

Must the independent chairman be remunerated?

Mr. J. Higgins

No. It is a matter for the Exchange themselves to decide on the remuneration.

Mr. M. McDowell

Is an unpaid outsider performing this function as an independent watchdog?

Mr. J. Higgins

Not necessarily, but the decision as to whether or not these people will be remunerated is for the Exchange. What we are talking about is the competence and independence of people. I cannot understand what more people want. We are actually giving the Exchange the right to pick the independent members from which the independent chair itself will be picked.

Mr. M. McDowell

So we trust them to select somebody independent but we do not trust them to be independent themselves?

Mr. J. Higgins

I think the balance is right. In relation to the allegation about chairpersons being drones, liabilities, people who are pulled in——

Mr. M. McDowell

If they are unpaid part-timers they frequently are.

Mr. Connor

That is a slur on them.

Mr. M. McDowell

That is why I am glad that the current chairman gets a salary.

Chairman

Neither unpaid nor part-time.

Mr. J. Higgins

There is no requirement that they be unpaid.

Mr. M. McDowell

No, but they might well end up being unpaid to keep them in their box.

Mr. J. Higgins

So be it, but that is a matter for the Exchange itself.

Mr. Connor

They can be bought.

Chairman

They could be bought by a salary, for instance.

Mr. M. McDowell

That is the other way of looking at it.

Mr. J. Higgins

In relation to the allegation that this is an exception, 80 per cent of the quoted companies on the Stock Exchange have independent chairs outside and above the chief executives of such companies.

Mr. M. McDowell

But they can be shareholders in the company.

Mr. Cullen

Nearly all of them are.

Mr. J. Higgins

They are not executives and have no executive functions.

Mr. M. McDowell

No.

Mr. J. Higgins

I do not know where the pressure is coming from for this, but with my hand on my heart I can say that we have not had a single representation from anybody — we know that the Exchange have their own views — that this is not a good move. The reverse has been the case. We have received quite a degree of support, endorsement and commendation of the view that it is absolutely essential that we appoint an independent chair.

Mr. Cullen

It will be a sad day if the core value of legislation is about image and perception.

Mr. J. Higgins

I put it in context.

Mr. Cullen

That is not to say that that is not a component part of what we are trying to achieve, but the Minister has portrayed it as an absolute core value. It is the only argument he has put forward for having an independent chairman. He is talking about four independent members but as a result of what he has done, there will no longer be four independent members. There will be a chairman and three independent members. The basis on which the four independent members are to be chosen will be different because one will be selected on the basis of chairmanship.

In so doing they can do two things. First, they can pick somebody who is malleable and easily turned towards the very thing — a lack of independence — that we are trying to remove from the equation. In my view they are open to do that, and in terms of the voting power on the board it will cross peoples' minds to look for somebody like that. Second, they can pick somebody who will be totally at loggerheads with them as things might evolve, and that will not be good for the workings of the Stock Exchange. We are changing the criteria of the four independents.

Regarding a chairman and deputy chairman, we could provide that one or other should be independent and would be allowed from the members of the various companies themselves. Nobody has suggested that there are not competent people out there. To say that that is what is being suggested is not true.

We are concerned that the Minister is specifically excluding people who are deemed to be competent, having been vetted by the Central Bank on the criteria laid down to be suitable members of the board. In this legislation he is impugning their integrity by suggesting that they are not good and competent enough to be chairman of the Stock Exchange. I think that is wrong. Nobody can predict what events will unfold or what issues will arise in future. We have learned salutory lessons from various issues over the last few years. At this point in the completion of the legislation and the beginning of this new era for the Stock Exchange, it is a retrograde step to exclude permanently the ability of board members to appoint whom they want as chairman from the ten members. It is poor legislation which contributes nothing to the running of the Stock Exchange.

Some people have suggested that investors will be twice as happy with an independent chairman but I would question that. There are mixed views on both sides but it would be questionable to suggest that all investors suddenly want an independent chairman who would be appointed for all sorts of reasons which would not be part of the agenda as proposed here.

I suggest that the Minister is wrong and that this provision is unnecessary. If the Minister is so concerned with image and perception he should take on board what I have suggested. He should ensure an independent chairman but allow some freedom beyond that point, either for himself or for the board, for any one of ten to become chairman of the Stock Exchange. That is good practice and it will be foolish if the Minister does not do that.

Mr. M. McDowell

There is nothing in the Bill to prevent the chairman being remunerated but there is nothing requiring him to be remunerated either. If we insist that a profession must have an independent outsider as chairperson there will be resentment because the Stock Exchange, whose views are well known to the Minister, do not want this imposed on them. They will select somebody from outside. I believe they will act in good faith and select somebody whom they think is competent, but there will be a tendency not to select somebody who might create trouble for them.

If a non-remunerated person is fulfilling the function of chairman, what happens if there is a two or three week crisis in the Stock Exchange, as happened in the case of Greencore? Is somebody to abandon their other work? Is it to be a retired person with no other work who moves into Anglesea Steet and spends weeks on end listening to a disciplinary hearing? Who does the Minister think would have the time to spend attending disciplinary hearings if they are not paid for it, listening to a succession of jobbers coming in and and saying what did or did not happen in respect of a particular transaction, or evaluating whether there was a breach of the code? What kind of individual has the time to do that for no money at all? If we are not necessarily talking about a remunerated position we may find that an unremunerated person of great competence and probity, who lives in a world detached from the affairs of the Stock Exchange, is supposed to be the watchdog, but a watchdog that is living down the road is very questionable.

Deputy Connor said he found it difficult to get satisfaction from the law society and would welcome an independent chairman. However, if the Law Society could choose an independent outsider to preside over its council meetings the difficulties would not diminish. This is because there would be a person at the very top who was not even a solicitor and who would be more at the mercy of the people he is supposed to keep an eye on than anybody else. Does the Deputy seriously think that if the Law Society could select any independent chairman he would find that complaints against them would suddenly evaporate? Of course they would not.

Mr. Connor

I would expect you to protect the code.

Mr. M. McDowell

I am talking about practicalities. If the Deputy seriously thinks that the Law Society would become more responsive to people's complaints because they themselves could select somebody from the vast array of potential choices to be their independent president, he is codding himself.

Mr. McCormack

It depends on the person.

Dr. O’Hanlon

The more I listen to the debate the more I think it is a cosmetic exercise. The Minister raised the point that investors would be happy to see an independent Stock Exchange chairman. This is not necessarily true, a substantial number of investors may feel the opposite and would be happy that a member of the Stock Exchange itself should be its chairman. Many major companies — the Minister referred to them — have executive chairmen and there is no lack of investor confidence in them because of this.

It appears that there will be ten members of the board, who will be vetted by the Central Bank. It is proposed we write into law that six of them can never aspire to be chairman, even though the most competent of the ten may well be one of this six. It is wrong to write into legislation the total exclusion of any one of the ten members from the post of chairman. I do not think the issue is whether the chairman should be an independent person or a member of the Stock Exchange. The issue is that there will be ten members, vetted by the Central Bank. These will be all competent in their own right because if they are not the Central Bank will not approve them. The most competent of the ten members should be the chairman. We should not write into the law that we will exclude a majority of those members from ever being chairman of the board. The Minister would do a disservice to future Ministers by inserting the legislation that we could not under any circumstance ever have a chairman who was a member of the Stock Exchange. I ask the Minister to leave some loophole or facility in the Bill whereby in future a chairman could be selected from the members of the Stock Exchange if this was thought to be apporpriate and in the best interests of investors.

Mr. Cullen

The Minister said he did not think the chairman had to be "hands on" and involved, an astonishing assertion as it nearly reduced the positon of chairman to an honorary and distant one. If that is his view, it totally negates the need for him to include this section in the Bill and if it is not, he is talking in two different directions at the same time.

There is a move from people with a very distant involvement in companies and organisations. It has been bad practice to have too much of a distant relationship. The Stock Exchange needs more of a "hands on" involvement and a chairman who would be more permanently involved in its organisation and operation, particularly in its early stages. I would have envisaged a chairman who would be remunerated, directly involved and answerable and competent for what he does and not somebody who runs the Stock Exchange while drinking tea in the Shelbourne Hotel, as if the exchange is some distant organ in which he does not have to have too much involvement.

We cannot have it both ways. We can have it one way or the other and on both counts we will lose, in the way the Minister put forward the argument. Nothing the Minister said makes me think it is necessary to permanently disenfranchise more than 60 per cent of the board members from holding the chairmanship of the Stock Exchange. This is ludicrious and the more we discuss it the more obvious it becomes. I suggest in the strongest possible terms that the Minister, to satisfy his image, perception and core value on this, should either appoint on independent chairman but leave options open to all members to be able to take this position in future or consider that the positions of deputy chairman and chairman should not be held by one particular side or the other but by an independent and a member of a Stock Exchange company.

Mr. M. McDowell

Having gone into the trenches on this issue, I suggest as a compromise that the Minister might think in terms of proposing that the chairman of the board of the Stock Exchange be an independent person unless the Minister otherwise consents.

Chairman

It could be worded "unless the Central Bank, with the approval of the Minister, otherwise consents from time to time."

Mr. M. McDowell

It should be allowed to withdraw its consent.

Mr. J. Higgins

I thank the Members and do not doubt the sincerity of their observations and comments. However, requiring an independent chairman is not a signal of no confidence in the exchange. On the contrary, it is a measure aimed at ensuring it will enjoy the highest degree of confidence among investors at home and abroad in the environment after the legislation is passed. The requirement of an independent chairman is not something I inherited. The Government and I fundamentally believe that this requirement will be of positive benefit to the exchange and to its member firms and that these firms will accept this. Deputy Cullen has tried to sketch the scenario of an adversarial relationship between the exchange and the independent members of the board. I do not see it like that.

Mr. Cullen

This may not necessarily be the position but it is possible.

Mr. J. Higgins

The Deputy mentioned the possibility that the board might get off to a bad start, that there might be bickering and resentment and this was reiterated by Deputy McDowell. It is in everybody's interest to embrace the spirit of what is proposed here. It must be understood that allowing for the fact that there will be an independent chairman, the members of the exchange will still have a majority on the board. The chairman will preside at meetings, which will be held on average once a month. He will not be involved, as Deputy McDowell suggested, in disciplinary proceedings. That is what I mean by "hands on". He will not attend sub-committee meetings. Disciplinary proceedings will be discussed by a sub-committee established by the board and there will be an independent member on it.

Mr. M. McDowell

This will only be if subsection (8) (c)(ii), as proposed in amendment No. 15, comes into operation. There is a choice between subsections (8) (c) (i) and (8) (c) (ii).

Mr. J. Higgins

There is a choice. In relation to the position of chairman, it must be realised that the chairman will preside. The perception that the chairman is detached and independent is crucial. Deputy Cullen said that there is a move away from independent chairmen but the move is towards independent chairmen.

Mr. Cullen

The Minister is misquoting me. I did not suggest that. I was talking about chairmen who have distant relationships with companies. The move is to get people more involved. People cannot run companies without being directly involved. I did not use the word "independent" in relation to this.

Mr. J. Higgins

Irrespective of the involvement of chairmen, the tendency is towards independent holders of these positions. Some 80 per cent of the companies quoted on the Stock Exchange have independent chairmen and this percentage is increasing. We are not disenfranchising these people.

Mr. Cullen

The Deputy is.

Mr. J. Higgins

They will still have a majority, select the independent members and select the chairman from the independent members. It is a recognition of the wisdom, prudence and discretion of the exchange that it is to be given the right to select from the independent members the person they believe to be best suited. When making their preliminary selection, surely they will be au fait with regard to the people who are competent and have the necessary probity to do the work.

Mr. Cullen

May I seek clarification on a point? Where does this originate? Is it the general practice of the boards of other stock exchanges to appoint exclusively independent chairmen?

Mr. J. Higgins

The Irish exchange must be put in the context of other exchanges. The Deputy talked about the New York Stock Exchange——

Mr. Cullen

I did not mention New York.

Mr. J. Higgins

The London Stock Exchange deals with 1,114 companies while the Irish Stock Exchange deals with ten. We must put ourselves in perspective.

Dr. O’Hanlon

What about smaller countries in the European Union?

Mr. J. Higgins

It is not the practice in other countries. However, a number of provisions in this Bill are not the normal practice. The Central Bank, for example, is not the regulating authority in other countries either. A number of provisions are different and distinctive but we should not necessarily follow the practice in other countries.

Mr. McCormack

The most important matter is that the general public, which does not have great knowledge of the Stock Exchange, should feel that this issue is being handled independently of the Stock Exchange. I see nothing wrong with that. It is similar to the rules in some GAA clubs where a member of the team cannot be the chairman of the club, maybe rightly so in some cases. The chairman must be detached from the activity of the club. In most cases, an ordinary member, not a playing member, is chairman of a club. Such clubs are run successfully so I see nothing wrong with what the Minister is trying to achieve.

Mr. M. McDowell

If this is pushed down the Stock Exchange's throat it should simply resort to the practice of calling one of its members the President of the Stock Exchange and putting him out in public while whoever presides at the meeting can be chairman. It would make no difference then. This is so much cosmetics it is ridiculous. Why does it not just carry on with a president and leave the Government satisfied with the idea that there is an independent chairman at meetings?

Chairman

We have had an extensive discussion on this section.

Mr. Cullen

It is important.

Chairman

I accept that it is an important discussion.

Mr. Cullen

It is like being elected a TD and then being told one cannot be a Minister: one can watch and sit at meetings but cannot direct them. It is ludicrous.

Chairman

That is the case in some countries.

Mr. McCormack

It happens.

Chairman

Can I put it to the committee that the amendment be made and that we ask the Minister to bear in mind what has been said and perhaps consider some refinement of the section on Report Stage?

Mr. M. McDowell

Is the Minister indicating such a willingness?

Mr. J. Higgins

I will look at it but I certainly cannot give a commitment.

Chairman

I accept that.

Amendment put and declared carried.

Section 9, as amended, agreed to.