Smurfit Kappa’s decision to postpone the retirement of chairman Irial Finan, who has already served beyond corporate governance norms, has been accepted by a leading investor advisory firm as the paper packaging giant proceeds with a plan to merge with US peer WestRock.
Institutional Shareholder Services (ISS), which advises large investors globally on how to vote at annual general meetings (agms), said in a report that Smurfit Kappa’s explanation for Mr Finan remaining at the helm “is acknowledged”. It recommends that shareholders support his re-election at the company’s upcoming agm on April 26th.
Mr Finan has been a director of Smurfit Kappa for the past 12 years. The UK Corporate Governance Code, recognised by Euronext Dublin as a standard for good governance, says non-executive directors should serve no longer than nine years.
Smurfit Kappa carried out a comprehensive review of the chairman’s tenure in 2021 as it reached the nine-year mark, concluding it was in the best interests of the company and shareholders that it be extended by up to three years to early 2025.
However, the cardboard box maker said in its latest annual report that it has postponed the succession process as “continuity of the chair position during this time of significant change for the company was critical”.
Smurfit Kappa announced last September that it plans to merge with WestRock to create the world’s biggest packaging group with $34 billion (€31.2 billion) of sales. The deal, effectively a takeover, is expected to be completed in early July, subject to approval by shareholders in both companies. Smurfit Kappa has yet to say when it will hold an extraordinary general meeting on the matter.
The deal was unveiled as the cardboard box industry was in the middle of a cyclical downturn, following unprecedented activity during the Covid pandemic when demand for physical goods – from giant TVs to patio furniture – spiked amid lockdowns. Smurfit Kappa’s full-year box sales volumes fell by 3.5 per cent last year, though it returned to growth in the fourth quarter.
Industry consolidation is gathering pace. US packaging giant International Paper (IP), which mounted an unwanted Smurfit Kappa bid in 2018 that was ultimately abandoned, is reportedly closing in on a £5.72 billion (€6.68 billion) formal offer this week for UK-based DS Smith.
[ Smurfit Kappa executives get €10m in share awards under bonus schemesOpens in new window ]
IP made an approach after another London-listed packaging group Mondi had agreed a £5.14 billion takeover of DS Smith. The door remains open for Mondi to improve its offer.
The tie-up agreement between Smurfit Kappa and WestRock sees the Irish company’s chief executive, Tony Smurfit, and chief financial officer, Ken Bowles, remain as the top two executives of combined group. It also envisages a delisting in Dublin as the enlarged group takes on a primary US listing.
Mr Smurfit’s total remuneration fell by 15 per cent last year to €4.72 million, while Mr Bowles’s declined 12 per cent to €2.69 million as the company’s earnings declined.
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