Willie Penrose (Longford-Westmeath, Labour)
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Question 27: To ask the Tánaiste and Minister for Enterprise, Trade and Employment when she will introduce the legislation promised (details supplied) to ban cross-directorships and to prevent chief executives from becoming chairmen of their companies; and if she will make a statement on the matter. [13646/09]

Mary Coughlan (Donegal South West, Fianna Fail)
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I assume the Deputy is referring to comments made by my colleague, the Minister for Finance, concerning the establishment of a new central banking commission, possible inappropriate cross-directorships and circumstances where the appointment of a chief executive as chairman may not be in accordance with best corporate governance practice.

The House will be aware that the Taoiseach recently announced that a new central banking commission will be established, which will incorporate the responsibilities of the Central Bank and the supervision and regulatory functions of the Financial Regulator. This will build on best international practice and it is intended that the banking commission will have the necessary powers to ensure the financial health, stability and supervision of the financial sector.

In the area of company law, which falls within my responsibility, the Deputy will be aware that the companies consolidation and reform Bill, which is currently being drafted by the Office of the Parliamentary Counsel, sets out the corporate governance duties of directors, company secretaries and auditors on a general basis for companies across all sectors. The Bill will implement the recommendations of the Company Law Review Group in that the fiduciary duties owed by directors to the company will be stated in the new companies' code.

At present, company law does not prohibit cross-directorships, whereby a person is a director of more than one company at the same time. Any consideration of a change in this position for the general cohort of companies operating in Ireland would need to take account of the contribution that non-executive directors make by imparting their mix of expertise and the cross-fertilisation of ideas from other areas of the business community.

On the issue of a chief executive becoming chairman of a company, at present there is no prohibition in the Companies Acts that would prevent that taking place in the case of companies generally. However, this issue is dealt with on a "comply or explain" basis in the combined code of corporate governance that applies to companies whose securities are listed and traded on the Stock Exchange.

The Government and I are committed to ensuring that our corporate governance regime for the financial sector and the corporate sector generally accord with best international practice. I will be working closely with the Minister for Finance to take account of the lessons which emerge from current inquiries arising from recent developments and we will address, as appropriate, any concerns in this area.

Additional information not given on the floor of the House.

Separately, the Deputy will be aware that, yesterday, I announced that the Government has approved my proposals to make immediate amendments to the Companies Acts to ensure that the annual accounts of companies that are licensed banks will disclose loans made to named directors, rather than the aggregate of such loans as applies at present. The amendments will also ensure that the maximum amount of each director's liability during the year is published, rather than just the outstanding balance at the end of the financial year.

The Deputy will also be aware that I asked the Director of Corporate Enforcement if, arising from his current investigations, there were any legislative amendments that he considered of immediate importance for the carrying out of his work. The amending Bill will, as a result, also include provisions requested by the Director of Corporate Enforcement: clarifying the right of access of his office to certain records of a company under investigation and to certain related third party records; reducing the evidential requirement on the Director of Corporate Enforcement so that he will not have to prove a director was wilfully in breach of the loans to directors provisions of company law; strengthening the provisions dealing with search warrants; and providing a mechanism for the courts to determine whether legal professional privilege attaches to some seized material. I hope to bring the Bill before the House at the earliest opportunity.

Finally, I can also confirm to the Deputy that I have granted the Director of Corporate Enforcement's request last week for additional staffing and that I have instructed my Department to put these resources in place as a matter of urgency. This will facilitate the carrying out of ongoing investigations and allow his office to continue to perform its other functions to the highest standard.

Willie Penrose (Longford-Westmeath, Labour)
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I thank the Tánaiste for her reply. I put it to her that for the ordinary person corporate governance and the cross-over of directorships must remind them of the old song "Lanigan's Ball" — "I stepped out and you stepped in again". That is about the height of it. One could meet a small cohort of people on nearly any board. When one individual resigned from a board, he also had to step down from positions in four other places. It is all right to talk about the cross-fertilisation of ideas.

A person whom I have not met in years, but who is from my town, is the managing director of Grant Thornton, Mr. Paul Raleigh. As its managing partner, he urged the Government to introduce new legislation to incorporate into law key provisions of the combined code of corporate governance and serious sanctions for non-compliance with the code. I think what he was saying is that one can complain but as long as one can explain, everything is all right. Does the Tánaiste agree that it is important in the context of regaining our international credibility, which is most important after the recent controversies?

Will the Tánaiste ensure that, first, chief executives do not go on to become chairmen and become combined executive chairmen? That happens a lot. Second, if I am on two or three boards of listed companies at the same time how can I, as an independent director, be effective in terms of the amount of time I am able to devote to each company? How can I dot the i's and cross the t's? How can one carry out one's fiduciary duty as a non-executive board member if one is looking after one's own business and sitting on three or four boards? Some of them are shaking hands with one another as they leave. Let us not talk about cross-fertilisation; it is the cross-directorships that are important. If a board wants particular expertise it would be better for it to buy it in. It has been said that corporate cronyism has reached a height in this country. Has the Tánaiste examined how the system operates in other countries, for example, the London Stock Exchange?

Mary Coughlan (Donegal South West, Fianna Fail)
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In the context of this discussion, I wish to identify the area about which the Deputy is inquiring. I assume the Deputy does not refer to small to medium-sized enterprises?

Willie Penrose (Longford-Westmeath, Labour)
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No.

Mary Coughlan (Donegal South West, Fianna Fail)
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Family businesses——

Willie Penrose (Longford-Westmeath, Labour)
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No, there is never any problem with them.

Mary Coughlan (Donegal South West, Fianna Fail)
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I am just trying to seek clarity. The second issue is the combined code of corporate governance for listed companies, plcs in the main.

Willie Penrose (Longford-Westmeath, Labour)
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That is what I am inquiring about.

Mary Coughlan (Donegal South West, Fianna Fail)
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That matter is being considered in the context of company law. It is important to be careful. The Minister for Finance is also considering this issue in the context of banking institutions. It is within those confines that I agree with the Deputy that we can progress this matter from a "comply and explain" basis into a legal framework.

Deputy Penrose is aware that I announced amendments to the Companies Acts yesterday arising from my concerns that the Director of Corporate Enforcement would have robust legislation available to him arising out of those issues. After my initial inquiries, he reverted to me and indicated that he needed some matters facilitated. That is what I announced yesterday. Equally, I asked whether he had the relevant resources to have that carried out and that this would be provided. We are ad idem on this issue in the differentiating of the companies to which the Deputy referred.

Willie Penrose (Longford-Westmeath, Labour)
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Will the Tánaiste take——

John O'Donoghue (Kerry South, Ceann Comhairle)
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The time is up.

Damien English (Meath West, Fine Gael)
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We have bundles of time.

Willie Penrose (Longford-Westmeath, Labour)
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Will the Tánaiste consider limiting the number of directorships of boards which people can hold?

John O'Donoghue (Kerry South, Ceann Comhairle)
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The time for the question has expired.

Willie Penrose (Longford-Westmeath, Labour)
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Was the Tánaiste surprised at the Stock Exchange's response to Mr. Raleigh's report? It said there appeared to be a disconnect between the findings of the report on corporate governance for Irish plcs and commentary contained in the study. Has the Tánaiste examined that? Basically, Grant Thornton was recommending that the Tánaiste introduce new legislation to incorporate those key provisions, in particular, relating to the roles of audit committees and directors. I found the comment of the Stock Exchange puzzling to say the least.

Mary Coughlan (Donegal South West, Fianna Fail)
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I would not care to comment on that because we have not come to finality on the issue yet. I am sure Deputy Penrose is aware that we are only a small country with a certain number of people available to participate on many of our boards. We should be cognisant of that point. The initial inquiry regarding the change from a code to a legislative framework is being carefully worked through between the Minister for Finance and I.