The forthcoming Eircom annual general meeting and the controversy over generous bonuses and share options for its chief executive and finance director may seem to signal a brave new world of small shareholder democracy in Ireland. It is not. It is more a leftover from the late 20th century than a portent of early 21st century investing in Ireland. There is not terribly much to argue about the central controversy over the price at which share options should be granted to Eircom management. The price should be set out now.

Second, it cannot be right in present circumstances, the only ones that matter, that options are granted at a price less than the still recent floatation price of €3.90. One can theorise forever about the structure of incentive schemes for management, but there is an essential political point here for Eircom's management and board to do with the confidence of shareholders. That confidence is not helped by management getting shares much more cheaply than the still relatively new shareholders paid at the initial public offering.

Practice in other companies is informative, but it clearly cannot be allowed dominate the demands of the particular situation at Eircom. To follow industry practice is not any board's mandate.

That said, it is a reality in a sellers' market that senior executives generally have to be paid very well. Again, one can theorise or prove from empirical studies, as reported this week, that chief executives are quite unlikely to leave their positions because of the absence of large share incentive packages, but which board is going to take a risk on this theory and sanction only the lowest remuneration conditions for its chief executive?

And, just to mention it, there is no obligation on directors to buy shares in a company. It doesn't signal anything in particular. Non-executive directors, as a friend said, are not there to be cheerleaders for the share price.

The Eircom controversy has to be seen in the context of wider developments. The idea of an Irish-quoted plc as a main investment for hundreds of thousands of Irish small shareholders will be an aberration when the reality of euro-zone investing hits retail investors, as it has hit institutional investors.

Donegal investors do not feel confined to investing in Donegal companies, and would be badly advised to do so. Since we are in the euro-zone economy, it is actually imperative for investments to be spread among the best opportunities across the whole euro zone. Irish fund managers are reducing their weighting in Irish equities by selling or by attrition (not replenishing stock and channelling new funds into non-Irish asset classes). They have reduced the proportion of the money they manage on behalf of clients in Irish equities from over 30 per cent to the low 20s, and may end up around 15 per cent. They may go lower than that in some cases.

The new £5 billion State pension fund may not invest as much as 15 per cent in Irish equities. The more informed small shareholders become, the more they will see this and the less they will be concentrated, to their detriment, among a few big local companies, still less among minor local companies.

So, there will be less scope for, or interest in, large numbers of the Irish public getting together to express outrage at one particular local company. The small investors may also decide that there is more advantage in achieving diversification through mutual funds managed by institutions, rather than stock-picking their way through hundreds of European and international companies. The pricing of mutual funds and pooled investments should fall to meet the higher demand, particularly since the market is open to international investment houses through the cheaper Internet channels. Shareholder democracy is likely to be effected through institutions, rather than by direct action by Irish investors.

Similarly, as those few Irish-quoted stocks that remain quoted become more internationally held, the potential power of local, populist, campaigns among Irish small shareholders will be lessened. Already 50 per cent or more of AIB and Smurfit are internationally owned, mostly by institutional investors. All this is likely to be underscored by the emergence of one main euro-zone stock exchange or an integrated exchange network.

This scenario makes some assumptions that investing in the euro zone will follow developments in the United States. It may take longer because of language and lack of integration, but it is the direction in which things are moving. It is to international institutions, stock markets and regulators that we should look to see the real developments in relation to corporate governance and acceptable executive remuneration practices. It is only very briefly now about Irish small investors, the Irish Association of Investment Managers, the Irish management of Eircom and the Irish notables on its board. We are small participants in the euro zone and in the wider global capital markets. The future is very international.

Oliver O'Connor is editor of the monthly publication, Finance. E-mail ooconnor@indigo.ie