The much-anticipated resolution to introduce a long-term incentive scheme for 400 executives was passed at yesterday's Eircom a.g.m. - thanks to the massive proxy vote cast by company chairman Mr Ray MacSharry.
The motion was put to the meeting after five hours of increasingly angry debate and was rejected resoundingly in an initial show of hands. Mr MacSharry then called a poll and using the 1.15 billion votes in favour of the scheme that he held, saw off the challenge from small shareholders, the trust that holds shares for employees and the Minister for Public Enterprise, Ms O'Rourke.
The proxies came from Comsource, the Dutch Swedish alliance that owns 35 per cent of the firm, and the 50 or so large institutions that own another 27 per cent.
Clearly, the large institutions, including AIB, Bank of Ireland, Friends First and Irish Life, had won concessions from the firm to guarantee their support. Mr MacSharry told shareholders that no shares would be awarded under the scheme until after the company published its interim results next November, a two-month delay.
He also said the managers eligible under the scheme would get "only the minimum of shares". He later clarified this as being less than 1 per cent of the company's share capital, even though the scheme allows for up to 5 per cent of the company's shares to be distributed.
The price at which the shares would be awarded would be the higher of the market price or €3, he said. This would put a minimum value of €66 million on shares awarded based on the 2.2 billion Eircom shares in issue.
But the Eircom employee ESOP Trustee, which owns 14.9 per cent of the company, expressed concern at the performance criteria for awarding shares. The executives will get shares only if Eircom earnings grow by 5 per cent a year more than inflation. Trustee chairman Mr Con Scanlon said it had consulted its own advisers, Davy Stock brokers and KPMG, which concluded that Eircom's earnings would fall should the company make the sort of investment needed to expand its business.
Mr Scanlon also said the trust had not received sufficient clarity from the board about the "mix of free shares and share options which the plan will contain".
Mr Dick Spring, the former Labour leader who represents the ESOP Trustee on the board of Eircom, did not cast the trust's vote on the remuneration scheme.
Instead, it was left to Mr Scanlon, who played down suggestions of a rift between Mr Spring and the trust. "There was never any discussion of Mr Spring voting the shares," said Mr Scanlon.
ESOP sources said the former Tanaiste, who owns no Eircom shares, had several other proxies from his Tralee constituents, which he cast.
Apart from the ESOP Trustee, no large shareholders would say how they voted but the size of the proxy Mr MacSharry held indicated that he had the support of most institutional shareholders. KPN, the Dutch national phone company, and Telia, its Swedish counterpart, which own 21 per cent and 14 per cent of the company respectively, made up the bulk of Mr MacSharry's proxies in favour of the motions. Only one of the institutions, which own another 27 per cent of the company, said it would not support the board. Standard Life, based in Edinburgh, said it would abstain from the adoption of the annual report and accounts. It objected to the nature of the €2.2 million in bonuses paid to Mr Alfie Kane, the chief executive, and Mr Malcolm Fallen, the finance director. It was concerned that a significant portion of the bonuses were ex-gratia and not linked to any specific performance targets being reached.
This motion was the first to be taken and was carried by a show of hands. But dissident shareholders, led by Senator Shane Ross, called for a poll of the voters present including their proxies. Mr MacSharry told the meeting he had 1.09 billion proxies in favour of the motion.
The next motion, to declare a final dividend of three cents per share was also carried by a show of hands, but put to a poll at the dissidents' request.
The next resolution, the reappointment of Mr Kane as a director, was defeated on the floor, and put to a poll by Mr MacSharry who had 1.13 billion proxies in favour of the reappointment.
The reappointment of three other directors - Mr Marten Pieters of KPN, Ms Annika Christiansson of Telia and Mr Paul Mackay, the Dublin accountant - were all voted down by the meeting and later put to a poll.
Technical motions to allow the company to issue and buy its own shares were all defeated by an increasingly hostile meeting.
By the time the controversial motion on the incentive scheme was taken it was a formality that it would also be voted down and would have to go to a poll.