Author: Anthony

Time for a coup in Fine Gael?

One of the greatest mysteries of Irish political life is how Enda Kenny is still leader of Fine Gael.

His performance in poll after poll is pathetic and the reason is obvious, he’s a nice man but a completely ineffective politician. The last thing Ireland needs at this time is a ‘nice man’, what’s needed is a courageous, visionary, kick-assing son of a bitch with one focus – the best interests of the Irish people.

It’s an important issue because the leader of Fine Gael is likely to be the next Taoiseach. Richard Bruton’s name has got a lot of mention but unfortunately he’s also a nice man. Asked recently if he thought Brian Lenihan should resign Bruton meekly replied in the negative. No, Richard is a good accountant but he’s lacks the political killer touch.

Lucinda Creighton is a constant and capable party representative but is far too conservative in her views to be an effective leader at this time. James Reilly is also high profile and certainly very passionate in his views but he needs to come clean about the disgraceful deal he negotiated for his fellow doctors some years ago. All he has to do is admit it was dishonest and that would be the end of it.

I think Leo Varadkar is about the best man for the job as leader of Fine Gael and ultimately the country. He’s articulate, passionate and not afraid to step on delicate toes. Ok, he has had a tendency to put his foot in it from time to time but I’m sure with experience and good advice that could be sorted. Time for a coup in Fine Gael methinks.

Imagine…

The most notable aspect of this media interview of Minister for Justice and Law Reform, Dermot Ahern is how friendly much of the Irish media have become with politicians (Gavin’s Blog). It was first name terms all around with lots of banter and laughter with not a hard question or a trace of anger in sight.

Imagine if there was a journalist there who was aware that the Minister is a member of the most corrupt political party in the country, a political party whose toleration of corruption within its ranks and among its friends in the business world has caused immense damage to the people of Ireland and brought the country to the brink of ruin.

Imagine if there was a journalist there who was aware that this Minister believes the corrupt Haughey is an innocent man and who repeatedly stated that he believed every excuse the chancer Bertie Ahern spouted under oath at the tribunal, no matter how unbelievable and ridiculous.

Imagine if there was a journalist there who was aware that the Minister’s statement that ‘people who eat in fancy restaurants could end up eating porridge’ is as unbelievable as the equally empty rhetoric of former Minister for Justice Michael McDowell when he said that such people would end up hanging up their Armani jackets on the back of a Mountjoy prison cell.

Imagine if we had a media that really got stuck into politicians and uncompromisingly forced them to account for every word of drivel that spouted from their mouths.

Confusions and bafflement at the school for Corporate Governance

Niamh Brennan, Professor of Management at UCD is a very confused woman. Here’s what she had to say on RTE recently (1st report, 2nd item) regarding the Anglo Irish fraud.

“I’m terribly disappointed that the company did not have the high standards that I thought it had.”

“The accounting standards are very explicit, transactions should not be entered into for the purpose of disguising the truth. What has happened here is a case of deception on the part of Anglo Irish Bank.”

“It is fraudulent financial reporting, I’ll repeat it again because I feel so strongly about it; that is why I’m so baffled, why the Financial Regulator could possibly say there was nothing illegal about the Fitzpatrick loans, I cannot accept that.”

Professor Brennan is baffled because like so many so called experts she still labours under the illusion that Ireland is a normal democratic country. She still believes that politicians, Government officials and regulatory agencies all work for the good of the country, she still believes that the State is intent on prosecuting the corrupt rather than facilitating them, despite overwhelming evidence to the contrary.

Here’s an article she wrote on 3rd June 2004. (My emphasis with comments in brackets).

Shame of our low standards in high places

I am one of the few people that think Enron is a great thing to have happened. That is because around the time of Enron, I established the Institute of Directors Centre for Corporate Governance at UCD. This is a joint venture with the Institute of Directors. Business has been booming ever since.

Happily (for me, but not for the thousands of investors that have lost millions) corporate scandals continue to fill newspapers. This reminds company directors that being a director nowadays carries very onerous responsibilities and risks. Directors need to get training – to make sure they don’t appear in the national newspapers wearing handcuffs, or worse still join George Redmond in jail.

(As corporate governance is a joke in Ireland any director who actually paid for such a course is a fool).

A fairly predictable consequence of corporate scandals, is a call on politicians to do something to sort out the mess. This usually results in even more regulations and laws. This is what happened as a result of the DIRT scandal.

(And the call in response to the current scandals is for even more regulation, anything bar actual prosecutiions).

We now have a new Accounting and Auditing Act which makes even more demands on directors. However, we now also have a very fine regulatory environment in Ireland. In fact, so good are these new regulations, that (shortly after the Enron scandal) Brian Walsh, chief executive of the Institute of Chartered Accountants, described them as a very fine example of public policy development. He said that Ireland would be a leader in the field in corporate governance.

(Remember, this was written in 2004).

Many commentators are complaining about this legislation – that excessive regulation stunts entrepreneurial activity and takes people away from doing business. But I believe the converse is the case. Strong regulation is good for Irish business. It will attract quality investors from abroad.

Low standards in corporate life turn off quality investors, and attract the kind of investors the country would be better off without. The problem with more regulations is that the good guys kill themselves to continue to observe and apply our laws to the highest possible standards, at a considerable cost to their business, both in time and money.

Meanwhile, the bad guys continued to do as before, and approach any new regulations in their usual tickboxing, ritualistic way. Within their inner sanctums, behind boardroom closed doors, they continue to feed their personal greed by cutting corners, and in some cases by outright corruption.

(And we are still waiting, since the foundation of the State, for the first prosecution).

Ireland continues to suffer from the consequences of very low standards in public and corporate life, as featured in the all-too-many tribunals currently in progress. As a result, we are at the wrong end of worldwide corruption indices. This is not good for business, and won’t help us attract top class investors to Ireland.

(But it did attract a large cabal of chancers to the ‘Wild West’ IFSC centre).

In spite of the whingeing from some quarters, while our new regulations are onerous, they are ones which I believe will stand the test of time and which will even become a source of pride to us.

(No wonder the Professor is baffled).

The problem with corporate governance is us – us human beings – and our tendency (on occasion) towards dysfunctional behaviour. Each one of us has to take personal responsibility for our behaviour, for its affect on public and corporate life, and for the messages we send out about the kind of society in which we want to live. I believe that as a society, we are ambivalent about high standards of behaviour in public and corporate life.

(We are indeed ambivalent but that does not excuse the State facilitating white collar crime).

For example, after revelations of questionable (to put it mildly!) dealings in relation to his taxation and other financial affairs, not only did the voters of Tipperary North in the 1997 general election elect Michael Lowry, they put him at the top of the poll. All those voters made a clear personal statement about their attitude to standards in Ireland.

(Agreed, Irish people are politically ignorant with a complete inability to make the connection between voting for a corrupt politician and the inevitable consequences that will follow).

Thus, while we roar and shout when a new corporate scandal breaks, many of us have questions to answer about our own personal day-to-day behaviour and the way in which it influences standards in Ireland, both corporate and otherwise. No laws or regulations can prevent greedy, self-serving behaviour by company directors.

(Wrong. If a company director sees a colleague going to jail he/she will think twice before engaging in corrupt practices. The witnessing of law enforcement is a strong disencentive to wrong doing. The problem in corrupt Ireland is that, for white collar criminals, there is no law enforcement so, in effect, they can do as they wish – and they do).

Add to this, that greedy, self-serving people seek each other out. The old Irish phrase “Aithnionn ciarog ciarog eile” (one “beetle” or maybe “cockroach” recognises another) captures this aspect of corporate life beautifully.

(Ah yes, Haughey/Ahern come to mind).

So on top of good rules and regulations, there has to be a real meaningful engagement, and a commitment to good practice, from each individual human being around the boardroom table. These additional regulations are scary – especially the requirement on directors to sign a statement saying they have complied with company, taxation and other relevant legal regulations.

But, don’t panic, help is at hand!

For all you down-trodden, over-burdened directors, the Institute of Directors Centre for Corporate Governance at UCD (www.corporategovernance.ie) is there to ease your pain. We offer short half-day courses on governance, in house customised courses for individual company boards, and in September 2004 we are introducing a one-year, part-time Diploma in Corporate Governance.

(I would love to see a student list for these courses. I’ll bet Sean Fitzpatrick isn’t one of them.

Professor Niamh Brennan, is Michael MacCormac Professor of Management, UCD Academic Director Institute of Directors Centre for Corporate Governance at University College Dublin

Copy to:
The baffled Professor

The grassroots

“Some comments from Fianna Fail delegates at their Ard Fheis (1st report, 1st item). Best to actually listen to the item for full appreciation.

“These opinion polls are telling us such a one, sure who do they interview, they must be interviewing Blueshirts the whole time.”

“Not since De Valera’s hay day was it as good or as exciting. They say things is not going well, what is wrong with them, there’s nobody in a bad position only in a person losing his job, ya have cribs from farming communities and all them. Their lifestyles didn’t change since this time last year nor pensioner’s didn’t change. How do you call that going back?”

“Brian Cowen is the man for it, he’s the only man for it and anybody else who thinks they can do a better job they’re just raving lunatics.”

Progressive Democrats and light touch regulation

Writing in the Irish Times on Jan 2006 Séamus Mulconroy Progressive Democrats’ director of policy had the following to say about light touch regulation (My emphasis).

IFSC needs light regulation.

If Ireland abandons softer regulation, we will have one of the most stringent financial sector regulatory environments in the world, writes Séamus Mulconroy.

The IFSC has been one of the outstanding success stories of modern Ireland, a public-private partnership that worked, the brain child of entrepreneur Dermot Desmond, backed by the then taoiseach Charlie Haughey.

It transformed an area of disused docklands into a major international financial services. Half of the world’s top 50 banks have Dublin operations. According to the IDA, up to 16,000 professionals work directly in the international financial services sector, and a similar number are employed in support sectors such as legal and accountancy services.

Nor is employment confined to the IFSC, and many IFSC firms have sizable operations across the Republic, including State Street in Kilkenny, GMAC in Mullingar, MBNA Carrick-on-Shannon, Cigna Galway to name but a few.

While the new buildings along the north shore of the river Liffey are impressive, the sheer scale of the operations managed from the IFSC is even more impressive.

The net asset values of domiciled investment funds amounted to €498 billion, while cross-Border life assurance premiums amount to €5.6 billion. The tax revenue to the Exchequer has been equally impressive – in 2002 alone, IFSC companies paid €700 million in corporation tax.

In the early days the value proposition for the IFSC was simple: low corporation tax, a light touch regulatory regime – as little red tape as possible – and an English speaking workforce located in the EU. It was a value proposition that appealed to the international financial services community as attested to by the rapid growth of the IFSC. Just remember that the IFSC was still only a concept in 1986.

However, we live in a constantly changing world and as so many investment products stipulate, past performance is no guarantee of future performance. The IFSC faces many challenges, new competitors are emerging both from within and outside the EU eager to replicate our achievements and frankly to steal our lunch.

The IFSC must adapt to the challenges of the future. The Future Of The Services Sector In Ireland, a consultants’ report prepared recently for the IDA, highlighted some of the opportunities which exist. Just as in the past, having the right regulatory regime will be crucial if we are to seize these opportunities. Recent high-profile scandals in the reinsurance industry in the US and Australia have focused attention on the regulatory regime under which the IFSC operates.

Both Justin O’Brien, director of corporate governance at Queen’s University, Belfast and Liam O’Reilly, chief executive, the Irish Financial Services Regulatory Authority, have both recently written in this newspaper on the issues involved. I do not propose to examine the specifics of the case quoted, but rather to look at the issue of regulation in more general terms.

At the first hint of any scandal, governments and regulators are always called on to act. The cry goes up immediately that something must be done – whether or not that something makes sense or not is another question.

Despite what media commentators always argue, not every scandal requires a government or a regulatory response. Neither government nor indeed regulators should strive to create a risk-free world or a risk-free business environment.

To quote Tony Blair:

“Instead of the ‘something must be done’ cry that goes up every time there is a problem or a ‘scandal’, we make it clear we will reflect first and regulate only after reflection.”

Business is constantly changing and change carries with it new risks. If we seek to pre-empt every risk through regulation, we will simply add to the cost of doing business and drive businesses to other locations.
The essence of business is that investors take risks to gain returns; business without risk would be like the sea without salt.

Charlie McCreevy encapsulated the challenge for regulators in a recent speech:

“My appeal to you is when regulating, to give due weight to the need to strike the right balance between prudential and investor protection considerations and the need for competitiveness and innovation in financial services. “Don’t try to protect everyone from every possible accident. Concentrate on the big things that really matter, and leave industry with the space to breathe and investors with the freedom to learn from their mistakes.”

He also forcefully made the point that those mis-sellers and wrongdoers who break the rules must be punished severely.

In an increasingly competitive world, I fear that if Ireland and the IFSC abandon their commitment to light-touch regulation, the result may be that we have one of the most stringent regulatory environments in the world and very few companies left to regulate.

Light-touch regulation does not mean a free for all or the condoning of illegal or immoral practices; it does mean as Charlie McCreevy says striking the right balance between protecting the public and the integrity of the market and stifling business with burdensome regulation and unsustainable costs.

As the Progressive Democrats have found to their benefit, advice from Charlie McCreevy is always worth listening to.

Séamus Mulconroy is the Progressive Democrats’ director of policy.

© The Irish Times. 20th Jan 2006

Honest Irish banks

We are constantly told by politicians that Irish banks have no exposure to the sub-prime virus. In other words we are being asked to believe that Irish banks are the only banks in the world that recognised the very well concealed virus and, unlike all other bankers, had the integrity to resist getting involved in such a dodgy enterprise.

All is well, no decisions required

It’s touching to witness the childish hope demonstrated by Marc Coleman in today’s Sunday Independent. Writing about the visit last week of EU Commissioner for Enterprise and Competitiveness, Guenther Verheugen and European Central Bank President, Jean Claude Trichet, Coleman gushed:

“Both were listened by an eager, if not scared, audience that was hungry for inspiration. That audience wasn’t disappointed. And neither was I. I discovered that in this time of crisis Ireland does, thank God, still have friends on the European stage.”

Coleman has completely missed the point. These men were in Ireland on a public relations exercise to convince the world that the situation in Ireland is not as critical as it actually is. They were also here to encourage Irish authorities to make decisions, get off their collective butts and deal with the crisis. The last thing the EU wants is for one of its members to go the way of Iceland.

But Coleman and the Government are much more comfortable in the land of denial. Trichet and Verheugen told them that Red tape for small businesses is going to be cut and the European car industry is to receive encouragement.

Well, that’s it, all is well, the crisis is over. No decisions required.