First, I should like to make a few general observations about the current controversies, then focus specifically and, of necessity, briefly on aspects of the semi-State bodies.
In every democracy the electorate must have confidence in the organs of the State, in their elected representatives, in the courts and in the administration of justice. If that confidence is eroded people lose faith in democracy and can quickly become apathetic or cynical, which we must always be vigilant to prevent.
There is no doubt that recent events have occurred in both the public and private sectors which give us reason to worry about standards in Irish business. In relation to the semi-State bodies it is the specific responsibility of Government, and the relevant Ministers, to act swiftly and decisively to allay such worries. They have done so in establishing the various investigations and inquiries. The inquiries now under way must ensure that any illegalities or malpractices will be uncovered, disclosed and dealt with decisively and fairly. Where wrong-doing occurs it has to be uprooted and tackled on the spot. That is the only way trust and confidence in the financial and business field can be restored. It does seem that sufficient things have happened in the recent past to increase our concern and determination to put things right. However, we must not get caught up, wittingly or unwittingly, in the process of character assassination. It is particularly incumbent on public representatives to [887] back up whatever they say and not say things merely for political gain.
Turning to the semi-State bodies, I want to comment on the composition of boards and on the issue of control and regulation. I commend the Minister for Finance on setting up the study under the Secretary of his Department on the principles governing the relationship between the Departments of State and State bodies. That is especially timely at present. Likewise, I commend the promptness with which the Minister for Tourism, Transport and Communications responded to the troubling disclosures in bodies under his control.
While acknowledging and indeed condemning the recent scandals it must be said that the great majority of State-sponsored bodies have done a very good job in recent years in very difficult trading conditions nationally and internationally. It should be remembered that these bodies are among the most significant employers in the country, employing almost 100,000 people. Most of them are employed in commercial State-sponsored bodies and have made a vital contribution to the life of our economy over the years. From my contact with these boards, as a member of the Joint Committee on Commercial State-sponsored Bodies for several years, I have the greatest confidence in the great majority of the management and workers in those enterprises. I emphasise that we should not tarnish either the State bodies or their employees because of the improprieties committed by a few people in them.
The scandals are harmful; there is no getting away from that. They damage the very fabric of our society and, in particular, affect our commercial credibility in the international marketplace. However, for the time being, in all fairness, we must await the outcome of the various investigations that are under way. The normal practice, based on many years experience of successive Governments as regards the relations between commercial State-sponsored bodies and the relevant Ministers, is that the Government appoint boards of directors who are [888] given a considerable measure of freedom in the management of the relevant companies. The level of independence enjoyed by these companies, of course, has to be consistent with legislation and considered appropriate to the task to be undertaken. In practice this means that commercial semi-State bodies would not normally need to consult with or obtain the approval of Government Departments for individual commercial decisions unless there were major strategic implications or specific Exchequer requirements. Therefore, Government Departments should not, except in very exceptional circumstances, be involved in any day-to-day decisions of semi-State companies.
Turning to the directors of these semi-State boards, there is a clear obligation on any relevant Minister, and the Government, to ensure that qualified and experienced boards of directors are appointed. The boards of commercial State-sponsored bodies operate in varying degrees in the open market. Obviously, to compete effectively, the boards of such companies must be allowed freedom, within policy guidelines, to manage their companies. However, the crucial issue is to have people appointed to boards with the appropriate qualifications and experience. Normally, executive directors have these characteristics and fulfil those requirements.
I specifically want to address the question of the non-executive director, whom I suggest must have the same qualifications and experience if such people are to make the necessary and relevant contribution to board deliberations. Therefore, there is a real need to review the quality of appointments in relation to non-executive directors of State enterprises. Properly qualified non-executive directors can greatly assist a company. They can also provide an element of control on behalf of the shareholder, in this case, the Irish public and taxpayer, over a company's management. If we are to have effective boards of directors these appointments should be based on the qualifications and experience of the individuals concerned.
[889] Membership of a State board is, and should be, for many a form of practical patriotism. However, the directors' fees for such board membership generally are derisory, ridiculously low. Indeed, I suggest there is an urgent need to review these fees to bring them even slightly closer to directors' fees obtaining in the private sector. This remuneration argument applies to full-time executives as well as non-executive directors. There are many examples of senior, full-time executives in the semi-State sector whose remuneration - where it follows the recommendations of the Gleeson Commission - does not realistically compare wih the going rate in the private sector. Furthermore, we cannot reasonably expect senior and experienced businessmen to take on the onerous duties, if they are to play a full role, of the non-executive director especially since the enactment of the Companies Act, 1990, places considerable controls on their behaviour and performance. We cannot realistically expect people of this stature to give sufficient time to the State body concerned if they continue to receive the nominal payments made to non-executive directors at present.
We must not be naive. By and large these are very substantial commercial enterprises, big businesses. We must have men and women appointed to boards with wide experience of the tough and practical side of business. We must trust these people to do the right thing. In a country as small as ours there is an absolute need to be frank, forthcoming and open as conflicts of interest must be resolved almost on a daily basis. However, if any wilful wrong-doing occurs in a State company then action must be taken after calm and realistic examination. There should be no preemptive public hangings. However strongly we may feel about a matter we must examine it fairly and equitably.
There have been calls for a code of ethics for board members and guidelines on proper conduct. As somebody involved in business education for many years, I fully support the inclusion of courses on ethics - they are there already - [890] in the course of business education. As experience has shown many of those who go through the educational system will progress to board membership. Such codes of ethics, desirable as they are, do not entirely tackle the issue of morality. The bottom line in relation to morality will stand or fall on individual honesty. Therefore, we can have codes and guidelines but, at the end of the day, we are back to the integrity of individuals on such boards and elsewhere. The crucial thing is to have people serving on boards, to put is simply, who can distinguish between right and wrong and be of high probity and wide experience.
There is the further vexed question of whether additional legislation and/or regulation is desirable in the case of semi-State bodies. In posing this question we must be mindful that controls are already in place. Commercial State-sponsored bodies are subject to the provisions of the Companies Act, 1963, and the recently enacted Companies, Act, 1990, with some exceptions. These Acts, in particular the Companies Act, 1990, have very stringent provisions for controlling and regulating the activities of companies and, in particular, their directors. Specifically, there are stringent requirements on directors to declare their interests in transactions, including property transactions. It should be said that the transactions which are currently the subject of investigations occurred prior to the enactment of the 1990 Act.
The balance which has to be struck between protecting the interests of the State shareholders, the public, while at the same time providing legislative changes and/or intervention that will allow a strong commercial State sector to develop is a key question and it requires careful focus and attention to get the balance right. There is and must be - and this is practical patriotism - a very close working relationship between business and politics in the common interest of the development of economic activity which will benefit people in terms of jobs, etc. It is a fact that in Ireland Government and Government bodies are commercially and socially involved in an [891] enormous range of activities that touch on all our lives. One of the more recent examples of this contact, this joint approach between Government and business, was the leading by the Minister for Foreign Affairs of a trade delegation to the Baltic countries to develop trade with this country, which in turn should lead to jobs we so badly need.
In terms of the review of legislation, I am aware that the Minister for Finance's group is already deliberating. I want to make a few suggestions in this regard. There could be a requirement on boards of directors to demand and to ascertain, in so far as possible, the beneficial ownership of the vendor or purchaser of an asset to or from the company. The second point is that the requirement on directors to provide details of any beneficial interest in contracts, including in particular the acquisition or sale of property or shares in another company, could be extended to the requirement that the directors make a declaration, whether it be positive or negative.
I welcome the current review of guidelines on public procurement, which will identify whether any improvements need to be put in place so that any further guidelines established do not inhibit the efficiency and cost effectiveness of commercial operations. We must certainly improve the guidelines in relation to public procurement but not in a way that would stultify commercial operations.
Against the background of policy guidelines laid down by relevant Government Departments, the boards of these companies must be allowed to manage their businesses without undue interference. The directors of semi-State companies must be properly qualified and realistically remunerated. The Companies Act, 1990, significantly enhances the regulatory environment and in particular the controls over directors. This applies to many of our commercial semi-State companies. Further consideration could be given, however, to providing legislation and/or guidelines, particularly in relation to disclosure of directors' [892] interests, of parties in sales or acquisitions, and penalties for non-disclosure. Any malpractices which are uncovered or disclosed following investigations must be followed by appropriate and decisive Government action. We in the Oireachtas must do all we can to support in a positive way the development and management of the commercial State sector so that it is in a position to compete in the open market and create the jobs we so badly need.


