Wednesday, 16 February 2005
Dáil Eireann Debate
Mr. Durkan: I thank the Ceann Comhairle for the opportunity to raise this issue. This issue began just a few weeks ago with a simple boardroom dispute which has now escalated. I do not want to get into the details of the dispute, but its escalation will have serious consequences for the ESB, its consumers, both industrial and domestic, and the economy. What may have seemed like a simple disagreement initially has taken on far more serious proportions and is in danger of expanding into unofficial, or perhaps official, industrial action which will have serious consequences throughout the country.
I also raise this issue for another reason. There have been a number of “accidents”, for want of a better description, in State companies in recent times where what seemed a simple issue initially turned into a major issue later. In one or two cases the issue caused both sides to go to the brink of industrial action. In the case of Aer Lingus it led to even more serious consequences.
I am concerned that what is happening with the ESB, small as it may have been initially, has the propensity to escalate into a larger and wider issue with significant consequences for the ESB. This is a particularly sensitive time because of deregulation. I urge the responsible Minister to take immediate steps to ensure that whatever difficulties that have arisen are made known to all parties concerned. The difficulties must be resolved and the ESB must discharge its responsibilities to the public and to the domestic and industrial consumer with due regard to the need to protect the economy.
Minister of State at the Department of Foreign Affairs (Mr. C. Lenihan): I am addressing this issue on behalf of my colleague the Minister for Communications, Marine and Natural Resources, Deputy Noel Dempsey.
The Minister has asked me to make two specific points at the outset. First, he does not have primary responsibility within the Government for industrial relations issues. Second, the situation currently pertaining at board level in the ESB is an internal matter for the board. I should also preface the remainder of this speech by saying that the Minister is in receipt of legal correspondence in this matter and I must take cognisance of that in what can be said here tonight.
The current boardroom issue has added another dimension to the already complex industrial relations environment in the ESB. The Minister understands that unofficial industrial action has been threatened by ESB shop stewards in the business unit network distribution with effect from Friday, 18 February. It is understood that formal notification of such action has not been served on the ESB in accordance with normal industrial relations procedures.
This is clearly in breach of the spirit of partnership and the commitments regarding industrial peace entered into by all parties under the Sustaining Progress agreement. If the country or any customer was to be left without electricity because of a procedural disagreement at board level it is fair to say that such a development would not be welcomed by the public or the Government.
The Minister understands that the boardroom situation has arisen over the procedure for chairing the meetings of the board in the absence of the chairman. During the course of the last board meeting in January, it appears the chairman had to absent himself for a part of the meeting. A board member, other than the deputy chairman, was selected by the board to chair the meeting during the chairman’s absence. The Minister understands the board relied on the regulations of the board in reaching this arrangement and account was also taken of corporate governance independence criteria.
The July 2003 combined code on corporate governance sets out the principles of good governance and a code of best practice. Companies listed on the Stock Exchange are required to report on compliance with all the provisions of the code. While ESB is not explicitly bound by the code, the company supports its principles and provisions and endeavours to adhere to best practice in the area of corporate governance while continuing to comply with its other accountability obligations to the Minister and Government. This is clearly stated in the company’s 2003 annual report. The ESB intends to make a further report on its compliance with the combined code in its annual report for 2004, which will be due for publication later this year.
The combined code provides that a chairman should meet independence criteria. Criteria cited as compromising independence are if the chairman has been an employee of the company within the last five years, if the person is a member of the company’s pension scheme and if the person has served on the board for more than nine years from the date of his or her first election to it. In light of this, the deputy chairman does not meet these criteria given his long service in the employment of ESB and his membership on the board for over 20 years. The independence of the chairman is critical if the board is to function properly. The Minister understands that the chairman took full account of the criteria from the combined code in reaching his recommendation as to who should act in his place in his absence.
The Minister also understands that the chairman was of the view that the recent newsletter issued by the deputy chairman may have compromised the deputy chairman’s independence in the chair. The deputy chairman had expounded his views in public on matters which had not yet been discussed by the board.
Some media sources reported that the deputy chairman was “removed” or “dismissed” from his position. This would appear to put a particular negative angle on the procedural arrangements followed by the board when selecting an acting chairman during the January meeting. The current deputy chairman was appointed to that position by the Minister’s predecessor. The Minister has not rescinded that appointment and so the usage of such terminology as “removed” or “dismissed” is not accurate. There would appear to be a clear and urgent case for the parties concerned to focus on a solution to avoid any unnecessary disruption to power supplies.
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