Predictably, cries of nepotism will be levelled at Waterford Wedgwood following the appointment of Mr Tony O'Reilly Jnr, (33), to the post of deputy chief executive at Wedgwood, the group's ceramics division. With his father, Dr Tony O'Reilly, as the active group chairman, and holding 27 per cent of the group equity with associates, that is inevitable. That view could be reinforced by the statement from Waterford Wedgwood: "the board of Waterford Wedgwood plc is pleased to announce the appointment of Tony O'Reilly Junior as deputy chief executive of Wedgwood, with effect from 1 January 2001. In his new role, he will report to Wedgwood chief executive Brian Patterson".
Normally such appointments would be made by the group's president and chief operations officer, Mr Redmond O'Donoghue, but it was obviously a board appointment. Asked to comment on the appointment, Mr O'Donoghue said "he's got a lot of achievements behind him. I very much welcome this. I think he's the right age and a can-do attitude," and his appointment would help the company generate increased business among younger people.
Mr O'Reilly has been chief executive of mining company Arcon, which is developing the Galmoy lead and zinc mine in Co Kilkenny; it is 44 per cent controlled by his father (some reports suggest that this stake may now be sold). He will retain his links with Arcon, as he takes over its chairmanship. Another son of Dr O'Reilly, Mr Gavin O'Reilly, is managing director of Independent Newspapers (Ireland).
Other family-controlled, publicly-quoted companies also have strong family representations. The largest saturation is in the Jefferson Smurfit Group. It has four family members on the board: Dr Michael Smurfit, chairman and chief executive officer, Dr Alan Smurfit, joint deputy chairman, Dr Dermot Smurfit, joint deputy chairman, and Mr Tony Smurfit, chief executive, Smurfit Europe. Mr Michael Smurfit Jnr works with the group in the UK.
Mr Tony O'Reilly Jnr generated a keen knowledge of mining at Arcon. He has proved to be an effective CEO, bringing the company into production in an industry which is at the mercy of cyclical metal prices. And taking up the post at Wedgwood should not prove strange to him, as he has been on the board of Waterford Wedgwood since 1998, and according to a company statement last week "he is a member of the group task force which has advised the Rosenthal business (the German porcelain subsidiary) over the last two years, and which, among other achievements, prompted the recent acquisition of the Hutschenreuther brand".
Waterford Wedgwood has been very successful under the trio management team. They have been a vibrant combination: Mr O'Donoghue was in charge of crystal, Mr Paterson was at the helm of Wedgwood, while Mr Richard Barnes crunched the numbers as financial director. Without a chief executive, it was an unusual structure, but major decisions were referred to the chairman, who has played a pivotal role. The structure worked well. Now it has been changed, with Mr O'Donoghue elevated to the post of president and chief operations officer. Announcing the appointment, Dr O'Reilly said the appointment "will enable us to continue our record of consistent growth.
He brings unparalleled leadership, management and marketing skills, which will be invaluable as we build upon our enviable position as one of the world's leading luxury lifestyle companies." The growth of the group has been curtailed by the performance of the ceramics division, which includes Wedgwood and Rosenthal. Its return on sales fell to a mere 3.8 per cent last year from 6.1 per cent in 1998 and 9.2 per cent in 1997. However, it has now turned the corner, and should make an increasing contribution to the group.
Mr O'Reilly's appointment comes at a time when the auguries are more promising. After being chief executive of a public company, it is hard to see him remaining as number two of one of the group's divisions for too long; the appointment has all the appearance of a grooming for the top slot at Waterford Wedgwood.
There is, of course, nothing wrong in appointing family members to key posts provided they fit their roles effectively. Indeed, such appointments are usually accompanied by a sense of loyalty which is too often missing in today's clamour for financial betterment. And if they have a positive contribution to make, they should not, of course, be excluded from such appointments because of these perceptions.
But such appointments leave the companies open to charges of running family fiefdoms. The appointees can prove these cynics wrong by performing better than their competitors.
