INM set to reject complaintsof rebel shareholder O'Brien

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The Independent Online

Senior executives at Independent News & Media, the media group that ownsThe Independent newspaper, will today dismiss calls from a rebel shareholder for a major shake-up of its board structure. Sir Anthony O'Reilly, the chief executive of INM, will tell the company's annual generalmeeting in London that a study by one of the world's most respected experts on corporate governance has rejected criticisms levelled by Denis O'Brien, the Irish businessman.

Mr O'Brien, who has spent the past two years building a stake in INM of a fraction more than 25 per cent, has repeatedly criticised the company's strategy. Last month, he called for INM's 20-strong board to be halved in size, and claimed that too many directors had close links to Sir Anthony, who is the company's largest shareholder.

The claims follow a long-standing campaign by Mr O'Brien for a restructuring of INM. In particular, he has argued that The Independent and The Independent on Sunday, which are loss-making titles, should be sold off, and called for the company to invest more heavily in new media.

Mr O'Brien was last night publishing a new review of INM's corporate governance standards compiled by the Davis Group, a consultancy which undertook a similar study on behalf of the tycoon last year.

However, an independent report, commissioned by INM, and published last week, dismissed Mr O'Brien's accusations. The study is written by Professor Jay Lorsch of Harvard Business School, who serves as chairman of the Global Corporate Governance Initiative and faculty chairman of the Executive Education Corporate Governance Series.

Professor Lorsch's report concluded that INM's board structure was in compliance with the Combined Code on Corporate Governance, the rulebook that covers British and Irish companies, and that the company had provided explanations of its policies where necessary.

It also said that while its board was bigger than those of other Irish companies, INM's global structure meant there was a need for six executive directors, and that a larger-than-usual number of non-executives had therefore been appointed to offer balance. The report said there was no evidence to suggest any compromise of integrity among the independent directors.

"The acid test of a board's success is the results that the company is providing to shareholders," Professor Lorsch said. "By any measure, INM's board and management have achieved extraordinary results for shareholders over the years."

Professor Lorsch's report is also critical of the Davis Group's previous assessment of INM's corporate governance standards. While Professor Lorsch stopped short of one shareholder's verdict on the report – who described it at last year's agm as "18 pages of shite" – he criticised its "sloppy and shallow methodology".

Mr O'Brien, who could not be reached for comment last night, is likely to argue that Professor Lorsch's report is undermined by the fact that it was commissioned by INM.

However, independent media analysts backed the company's strategy. "The current management are doing a pretty good job," said Paul Gooden, a media analyst at ABN Amro. "The margins across the portfolio and the growth across the portfolio are very good in the context of the wider media sector."

Mr Gooden said many investors believed that calls by Mr O'Brien for the sale of INM's Independent titles were misguided. "He has highlighted the losses of the London papers, but the issue is something of a red herring," he said. "The cost base of many of the company's international operations goes through London and the UK losses are in any case useful to offset against the company's tax bill."

The row over INM's corporate governance standards also reflectsthe bitterness betweenMr O'Brien and the company, which earlier this year branded him a "dissident shareholder".

INM has argued thatMr O'Brien feels personal animosity towards the company because of news stories carried in its Irish newspapers about the Moriarty tribunal, an independent investigation set up to examine allegations of corruption relating to the award of a mobile phone network licence to the tycoon's telecoms company in the Nineties.