Who does Dermot Mannion work for?

national | anti-capitalism | feature Wednesday March 22, 2006 12:16 by Vulture Capitalist

Dermot Mannion

As the lies about European restrictions on investment begin to unravel you don't have to be a socialist, to be concerned about the employees or even worried about transport links to feel that Aer Lingus should stay in state hands.

This is not a sentimental or political debate.

This is just a rip off.

Back in the days of the Dot Com boom I sat in a room and was told about my duties as an executive officer to the shareholders of the company. It was an American Venture Capitalist who reminded us of the primary purpose of what we were about – to maximise shareholder value. The management of the company were employees, but not of the company – rather of the shareholders. They were legally obliged to advise the shareholders how to maximise the value of their holding, what path would make the most money for them. US company law was littered with case law enforcing this responsibility but the principles are the same in all company law.

There are two standard ways shareholders maximise the value of their investment: dividends and capital appreciation. For the Internet companies at the turn of the century dividends were not part of the story – everything was about capital appreciation and the liquidity event that would ‘crystallise’ this increase in shareholder value. Sitting in the room holding the shares that I had been given instead of pay increases this sounded like a great system even if the $20 million price that was tossed around for our company sounded too much like the joke it was.

I thought about this this evening, watching the CEO of Aer Lingus telling me that the major shareholders policy was not to invest in the company and that the preferred route was that the company was sold off to other shareholders. Dermot Mannion told us a number of times about his background as CEO of the worlds third biggest Airline. As he said this I wondered if he had been as disloyal and disingenuous to the previous group of shareholders who employed him as he was to the current group of which I am one. He told me about the opportunities available to my company, of the returns on new investment that could be realised. Interestingly, he failed to mention the assets that I own a share of, the landing slots, equipment and brand shareholders capital has built up over the years.

I have a question for Dermot Mannion.

If Aer Lingus is a good investment, if money given to the management of Aer Lingus is going to see a return to the shareholders above that available elsewhere, why is he recommending that I sell my share?

I know Mr Mannion will be going out telling potential shareholders that if they give him money to use in Aer Lingus they will see a good return on their money. While my own experience of the duties that go with his position was limited, anybody can observe the type of investor briefings that the international capital markets demand of the CEO’s who work for them. If Mr Mannion gave the fund managers, investment capitalists and shareholder representatives the type of story he tried to give me this evening I believe his share price would quickly fall as a reflection of his incompetence.

Putting money into Aer Lingus is either a good idea or a bad idea. If it is good idea then Mr Mannion has a duty to inform his current employers that this is the best way for them to maximise the value of their current investment. The current majority shareholder has a large investment fund that it is constantly seeking opportunities for, established after it divested itself of other assets in the liquidity event that gained notoriety as the Telecom Eireann flotation. It is known that there may be wider strategic interests for the current majority shareholder in maintaining the current structure and even expanding on the operation of the company as per the plans that Mr Mannion is proposing to tout around the roadshows, boardrooms and conference calls of global capitalism. Regardless, the Irish government is in the market for good investment opportunities to maximise the value of the pension fund that it has chosen to stake on the world capital markets. Why does Mr Mannion not advise us to put this into Aer Lingus?

Perhaps the reason for this can be found in the room where the venture capitalist explained what my duties and responsibilities were. Very quickly I learned that while my interests were tied up in the company that I worked for, in the friends that I worked with, in the products and value that our labour had created the guys in the sharp suits weren’t bound by the rules of which they informed us. Like Mr Mannion, they would be rewarded by the ‘flip’, by engineering the liquidity event instead of maximising the value to the owners of the company. It is only when a company changes ownership that the vultures can swoop – whether they were the VC’s diluting everybody's shareholding, the asset strippers re-engineering value from the balance sheet, or the executives who cash in their newly liquid options.

Mr Mannion is employed to advise the shareholders of Aer Lingus how to maximise the value of their shareholding. Over the next few months he will be giving information about the company that we employ him to run to anybody with the money to buy it off us. At the same time, watch out for the smokescreen of ‘commercial sensitivity’ being used by the government to prevent us, the owners of the company, being told of the true market value of our asset. Watch out for the value of the company to be talked down, for those who propose that the Irish Government should invest in a profitable, strategic asset that the Irish people have always supported owning to be classed as unrealistic or divorced from the realities of modern capitalism. The employees will be told there is no other path than privatisation while we will be told that the employees are forcing privatisation as we are now told that Telecom Eircom was actually floated by the Communication Workers Union as some type of stock market play.

Perhaps the thing to watch most closely will be Mr Mannion so we can see for which brand of vulture he is actually working.

Because while we may pay him, he sure isn't working in our interests.