- By Region
A non-executive director of Independent News & Media has taken a legal challenge against a €1.87m compensation payment made to Gavin O’Reilly, the company’s former chief executive who stood down from the role last week.
Paul Connolly, one of two directors on the board of INM who represents the company’s biggest shareholder Denis O’Brien, alleged the payment authorised by the INM board was unlawful and made with “indecent haste”.
He alleged the payment was in breach of the Companies Act in Ireland because it was approved by the board without first being put to shareholders at a general meeting of the company. Mr Connolly and one other INM director, Lucy Gaffney, who also represents Mr O’Brien on the board, voted against the payment, which was approved by the board and paid out by the company on the same day, April 19.
Court documents seen by the Financial Times showed Mr Connolly alleged that €1.87m was an “extremely large sum” given, he says, that Mr O’Reilly had no executable contract of employment. The documents say the severance payment was to be paid to compromise claims that Mr O’Reilly could bring against the defendant in the event he were to be dismissed. But Mr Connolly alleges there is “serious doubt” Mr O’Reilly could avail himself of the protection of Ireland’s unfair dismissals act as he resides in London and 70 per cent of his salary was not paid to him personally but to a company registered in Jersey.
In a statement on Wednesday INM said the company and the board had received legal advice that the compromise agreement and payment to Mr O’Reilly did not require shareholder approval. “The company regrets that Mr Connolly, a director, has initiated this action. The company will vigorously defend these proceedings,” it said.
The court action suggests the bitter boardroom battles that have blighted INM in recent years are set to continue despite the resignation of Mr O’Reilly, which brought an end to his family’s 40-year control of Ireland’s biggest media company.
Mr O’Brien, Ireland’s richest man and INM’s largest shareholder, had been pushing to oust Mr O’Reilly for more than two years, arguing that he presided over a period of destruction in the company’s share value.
There has been a longstanding rivalry between Mr O’Brien, who made his fortune by winning Ireland’s second mobile phone licence in the mid-1990s, and the O’Reilly family, which still owns 13.3 per cent of INM.
Major changes are expected in coming months at INM with Mr O’Brien expected to try to exert more control over the company. On Wednesday Bengt Braun, INM director, said he would step down as a director because of the allocation of new duties to him. He is the vice-chairman and former chief executive of Bonnier, a Scandinavian media group, in his native Sweden.
INM holds a board meeting on Friday and it is possible other directors will announce their intention not to seek re-election, according to people with knowledge of the company.