Denis O'Brien's questioning of corporate governance at the newspaper group is a challenge to Sir Anthony O'Reilly and a sign of an impending power struggle, writes Arthur Beesley, Senior Business Correspondent

Denis O'Brien's questioning of corporate governance at Independent News & Media (IN&M) is an abrupt challenge to Sir Anthony O'Reilly's grip on an organisation he has dominated for more than 30 years.

The confrontation pits a pugnacious pretender against a battle-hardened chieftain of the old school, whose creation of an international force in IN&M stands as one of his finest achievements.

Sir Anthony says he is a "veteran of the wars" in the US with dissident investors. Now he faces a super-wealthy opponent from the home place with designs on the family heirlooms.

Skirmishing this week centred on the standards of corporate governance in IN&M. Questioned in withering terms by O'Brien and defended by IN&M in equally strong terms, the issue burst into the open when it emerged that O'Brien had tabled 42 questions of IN&M in letters to directors.

IN&M says it has answered each question in full. O'Brien disputes that. Either way, the exchange of claim and counter-claim appears more and more like a prelude to an all-out battle for control of the organisation.

O'Brien's seven letters to IN&M deal with general governance issues, pensions, corporate and social responsibility and, most sensitive of all, Sir Anthony's remuneration and expenses.

IN&M said in response that it was "at a loss as to the provenance and nature" of such questions and was fully satisfied that all requisite and relevant information was fully and appropriately disclosed in its accounts.

But O'Brien said the letters raised "serious matters" of corporate governance. He contends that IN&M's board works more like that of a wholly owned family firm than a publicly listed company in which Sir Anthony has only a 26.4 per cent stake. IN&M says that simply isn't true.

O'Brien asked what Sir Anthony's remuneration was and said "this should include salary, bonuses, share options, pensions, insurance, transport, expenses, entertainment, ie any and all payments under whatever heading, made to him or on his behalf".

IN&M said all details in respect of share options were in its annual report. It said the remuneration of all directors was in the report and added that benefits-in-kind were noted in the report. "As per this disclosure, the chief executive received no benefits in kind in 2006."

O'Brien also asked: "Can you confirm whether IN&M or any of its subsidiary or associated companies pays any staff or other costs expenses or allowances in respect of private residences owned or occupied by the chief executive, in particular at Fitzwilliam Square, Dublin; Castlemartin, Co Kildare; Lyford Cay, Bahamas; and any other private residence owned by the chief executive?"

IN&M said again that Sir Anthony received no benefits in kind in 2006. "Where IN&M uses the private residence of any executive for a company function, the costs relating to that function or event, having been appropriately approved, are paid for by the company."

O'Brien was unimpressed with such answers. "The expenses for which details have been sought are not included in the annual report."

O'Brien also asked for the operating costs of any aircraft owned or leased by IN&M. "Confirm whether directors of IN&M use the plane for private use. If so, on what basis (ie rate-per-hour) do they reimburse IN&M?"

IN&M said its board deemed it appropriate and of commercial benefit to lease a Gulfstream IV plane for use by executives for their duties.

"For security reasons, the group insists that the group chief executive flies on this aircraft at all times. The annual running cost of this aircraft is fully consistent with the operation of an aircraft of this type . . . On occasions where the aircraft is used by any executive for non-IN&M business-related purposes, a commercial rate is applied and paid to the group."

O'Brien believes this and earlier responses were less than complete, a contention disputed by IN&M. "The letters requested full disclosure on a range of matters including expenses paid to the chief executive for entertainment at his various residences, the use of a private jet and other expenses."

In another letter, O'Brien asked for details on IN&M's charitable donations in the last five years and asked to be informed of donations IN&M "has made" to buildings named after Sir Anthony or his parents in University College Dublin, Queen's University Belfast, Trinity College Dublin and Dublin City University.

IN&M said it had not made donations to O'Reilly Hall in UCD, O'Reilly Institute in TCD, and John and Aileen O'Reilly Library in DCU. However, it has promised to give £1 million annually to Queen's from 2007 until 2010.

The group's spokesman said the donations to Queen's were to fund the O'Reilly Library. Sir Anthony has personally given more than €50 million to various universities and institutes, the spokesman added.

"Average donations across the group in five countries, over the past five years, was approximately €700,000 per annum. Over the past few years, the only donations of a relatively significant value made by the group were to the Wexford Opera Festival and the Queen's University Belfast," said IN&M to O'Brien.

"In both cases, the group received significant publicity for the donations and the donations reflected INM's commitment to its investment and operations in these areas."

O'Brien said the totality of the IN&M responses "were devoid of detail as any examination of the correspondence would reveal". Responding to that, IN&M said the annual meeting offered a unique opportunity for O'Brien or his representatives to seek clarification on any of the answers provided.

IN&M chief operating officer Gavin O'Reilly speculated yesterday that the letters were designed to damage IN&M, impugn its directors and drive the share price down so O'Brien could bid for the group. O'Brien's spokesman said no more than that his IN&M investment was strategic and in line with his previous investments.

Now that O'Brien has challenged Sir Anthony in such a fashion, few believe that his accumulation of shares will stop at 8.35 per cent. The battle is on.