Board acceptance of report won't get rid of problems

ANALYSIS:SHAREHOLDERS WILL doubtless hope the unanimous board acceptance of the McKenna report will signal an end to the matter.

The damaging boardroom schism and the drip-feed of allegations regarding the company’s standards of corporate governance has proven an unwelcome distraction.

However, the company’s problems are unlikely to disappear in the short term.

The statement issued before markets opened yesterday is notable more for what it doesn’t say than what it does, and the company was not in a position last night to elaborate. With the issue of transparency central to the corporate governance investigation, that is somewhat ironic.

The company said the board was unanimous in its approval of the McKenna report. That means the directors who made the original allegations – charges not supported by the report – are satisfied with the outcome. At the same time they have asked to resign from the board. All in all, it leaves as many questions unanswered as dealt with.

The company is also to consider adopting US best practice policy on conflicts. Apart from the concern – given its volatile market history – that it wasn’t already doing so, how precisely does such a policy differ from Elan’s current practice on managing conflicts?

Shareholders don’t know and the company was not in a position to say – last night in any case.

The decision to consider voluntarily complying with US domestic reporting requirements – presumably more onerous and certainly more expensive – will also raise the prospect of the company eventually relocating its corporate headquarters to the US.

In the year since activist investors Schuler and Bryson joined the board, the company’s share price has fallen by more than a third, despite a decent financial performance and the prospect of a return to profitability on the back of the multiple sclerosis drug Tysabri.

Now, the two men are effectively gone – although it is unclear whether they will use their regained freedom to attack the company from the outside. Chairman Kyran McLaughlin has previously announced his intention to step aside as early as next month. And chief executive Kelly Martin has also disclosed that his time at the company is coming to a close.

Meanwhile, another activist Ib Sonderby has taken up sniping duties on the board, proposing a slate of new directors. However, we don’t know from Elan’s statement yesterday if and when the company intends filling the newly empty boardroom seats.