Standard Life, one of the largest institutional investors in Eircom, will not vote in favour of a key motion at today's annual meeting in protest over the bonuses paid to senior executives. The Edinburgh-based institution said yesterday it could not vote to adopt the firm's annual report and accounts because of the nature of the €2.2 million (£1.73 million) paid to chief executive Mr Alfie Kane and finance director Mr Malcolm Fallen as bonuses.
Mr Des Doran, investment director with Standard Life, said the firm would have voted against the adoption of the accounts had Eircom not agreed to change the way it pays bonuses. Standard Life objected to the ex-gratia portion of the payout to Mr Kane and Mr Fallen in respect of the two years to March 2000. The ex-gratia payments could not be explained in terms of agreed bonus schemes or other aspects of the two men's contracts.
The payments, described as significant, were entirely at the discretion of the board, chaired by Mr Ray MacSharry.
Although companies were entitled to make bonus payments in this way Standard Life opposed them in principle, said Mr Doran.
"We have sought and secured assurances from the board that there will be no ex-gratia payments made in the future. Having received these assurances, we have decided to abstain in the case of Resolution One which relates to the adoption of the reports and accounts," said the company.
Standard Life also said yesterday that it would support the controversial share option scheme being voted on today. Under the scheme, Mr Kane could be granted shares worth more than £1 million at the current low share price of €2.64 rather than the €3.90 flotation price at which most shareholders bought in. "In our view it conforms to industry standards," said the institution.
Standard Life believes it is in the best interests of Eircom shareholders and its policyholders to vote in favour of the share options scheme and all the remaining resolutions "to support the board of directors in its pursuit of shareholder value".
