Board member remuneration and the clarity of a report were subjects that focused the anger of shareholders

AT ONE51’s annual general meeting on Wednesday, one farmer shareholder succinctly summed up the feelings of most shareholders when he said the company wasn’t merely a “gravy train” for executive pay, it was more like the “Orient Express”.

It drew laughter from the crowd and momentarily broke the tension in the room.

The earnings of its top executives in recent years are no laughing matter for shareholders, who have seen the share price fall from €5 in 2007 to about 90 cent now while losses of almost €350 million were recorded.

It was David Coyle, an accountant and shareholder, who acted in an advisory capacity to the company for a period last year, who energised the meeting.

Non-executive chairman Denis Buckley, who holds the same role with Kerry Group, one of One51’s biggest investors, called for questions around the company’s 2010 financial statements.

Leaping up, Coyle marched towards the podium on the stage and read out a statement that was highly critical of the board and raised a number of key questions.

He said the directors’ remuneration report was, in his opinion, “incomplete, inaccurate, is misleading and obscures the truth behind the incomprehensible and groundless system of awards provided to executives over the past two years”.

He outlined how Philip Lynch, who was sacked as chief executive in July, had earned more than €6 million from 2009 to 2011.

“To put this nonsense in perspective, Philip’s pay in one year exceeds the earnings of the average employee in One51 over a lifetime,” Coyle said. He was also critical of the operation of the Chandela patent scheme, which related to a lid on paint tins, and was kept secret from certain board members.

According to Coyle, Alan Lynch, Paul Dixon and Hans Droog were paid just under €1 million from the Chandela scheme in 2010. These were tax-free payments.

“A substantial part of the company’s tax incentive was actually applied to enrich certain, not all, executive directors secretly,” he added.

He also questioned why the 2009 remuneration of Droog, a current board member and a former managing director of ClearCircle, One51’s environmental services business, was not disclosed.

“Why did KPMG miss the omission?” he asked.

Coyle called for Droog to tender his resignation.

“In my opinion, the remuneration committee was all too willing to feed the irresponsible greed of some executive directors and facilitated this avarice by withholding information from their colleagues on the board and by not insisting that statutory disclosures be made of director interests in shares in subsidiaries, and service contracts.”

Shareholders were told from the top table that Lynch hadn’t yet accepted the Chandela award to him but had “loaned” it back to the company. It seems like an odd arrangement.

Interim chief executive Alan Walsh confirmed that the Chandela scheme has been closed. Its operation is currently the subject of an investigation by the Revenue Commissioners.

Walsh said he was happy that the scheme was “legitimate” and would pass muster with the tax authorities.

At last year’s agm, Walsh described himself as the “architect” of the scheme.

However, in reply to one shareholder, he confirmed that any potential liability that might arise from the Revenue’s investigation would have to be borne by the company.

This brought murmurings of discontent from the floor.

Former Bank of Ireland chief executive Mike Soden also took to the stage to argue that stronger corporate “governance was a must”.

He praised the board for sacking Lynch. “It unfortunately took what felt like an eternity. Autocratic leaders are often the most difficult to depose,” he said.

Soden questioned the note in the 2010 annual report that said the company now meets best practice in governance terms. This followed a review by Grant Thornton.

Soden wondered aloud if “we are being misled by the annual report or are we innocently confused by the delivery of the findings. Something has been lost in translation.”

Soden also called on the agri co-operatives to “look favourably” at a programme to buy out shareholders with 50,000 shares or less to “ease the financial problems” of hundreds of shareholders.

It remains to be seen if this will happen.

One change that didn’t take place was the election of Wexford farmer Peter Byrne to the board.

He stood on a platform of representing small investors and delivering change.

Byrne polled well, securing 41 per cent of the vote when those votes that were withheld were excluded.

But this wasn’t enough to win him a seat on the board. By contrast, Eithne Fitzgerald, Michael Long, David Martin and Guy Hallifax were re-elected.

There was also much talk from the top table of various board committees being “refreshed”. One shareholder quipped that it was “more like recycled”.

Shareholder anger almost overshadowed the lengthy presentation given by Walsh on a new two-year strategy to reverse the fortunes of the company.

In essence, One51 is likely to focus its future energies on ClearCircle.

He signalled that it would, over time, exit other investments in a bid to pay down its €156 million debt and restore value to the share price.

Walsh didn’t say which assets would be sold but these divestments could include Irish Pride Bakeries; its 12.3 per cent holding in Irish Continental Group, which is highly liquid; its half-share in Greenore Port; or its 23.9 per cent stake in NTR, another private investment group with its own issues.

In the meantime, One51 continues to find the going tough. Its operating profit will decline again this year.

It made a net loss of €104 million last year, mostly from a large writedown in the value of NTR.

Gerry Killen, who led the campaign for change last year, also made a speech at the agm. “It is my hope – and I believe the hope of all of us in the room – that the process of change continues swiftly and that we are here this time next year with shareholder value on the increase, a strategy and business model which is delivering, and all legacy issues and non-performing aspects of One51 confined to the past,” he said.

Time will tell.