3.4 Dividend policy

3.4 Dividend policy

interests. To ensure that conflicts of interests do not arise, the Harbours (Amendment) 2009 Act prevents ports users from being appointed to port company boards. Furthermore, the previous practice of having local authority members directly appointed by right to the board of port companies was ended.

The Report of the Review Group on State Assets and Liabilities stated that, in respect of cash dividends from the commercial State bodies generally, financial returns were “low and reliability is patchy” (Review Group, 2011). The report also stated that the general financial performance of the ports had been disappointing since corporatisation, particularly in respect of the financial return to the State.

Under section 177 of the Local Government Act 2001, local authority members are obliged to withdraw from deliberations in which they may have any interest other than that of a public representative. In November 2008 for example, the three Dublin City councillors who then sat on the board of Dublin Port Company were forced to withdraw from a council discussion on the company’s planning application to reclaim and develop 21 hectares of foreshore. Given such potential conflict of interest, it is proposed to appoint local authority members to the board of commercial port companies only in exceptional circumstances.

As this review has shown, the commercial ports sector is very diverse, with companies of very differing capabilities and financial performance. It should also be acknowledged that the ports return a non-financial dividend to the State in the form of the wider socioeconomic benefits that they provide through trade facilitation, public amenity value, etc.

It is Government policy that profitable commercial State companies should pay a financial dividend to the State. The guideline figure is 30% of after-tax profits. Dublin Port Company has complied with this policy since 2007 and indeed has paid more than 30% in some years. In 2011 the Port of Cork announced its first ever dividend to the shareholder, and in 2012 Galway Harbour Company announced that it too would pay a dividend to the State for the first time.

To strengthen the relationship between the shareholder and the board members of the port companies, the Department of Transport, Tourism and Sport will develop procedures to ensure that individual company directors are aware of Government policy and any changes to it, during their term as board members. These procedures will be published by Q2 2013. Furthermore, each board member on their appointment will receive a letter of mandate from the Minister outlining matters additional to their fiduciary duties that they should have regard to during their term.

The Government expects all the port companies to have a clearly stated dividend policy. Depending on the financial circumstances of each company, the figure it adopts may be more or less than the 30% guideline. Dividend policy should take account of issues such as current and projected profitability, capital investment plans and pension funding. Each port company should submit its dividend policy to the Department of Transport, Tourism and Sport by Q2 2013.

In relation to chairpersons, all new and re-appointed chairpersons shall be required to appear before the relevant Oireachtas Committee before their appointment takes effect. The only exception to this shall be short temporary re-appointments. The system of board appointments will continue to be informed by developments at Government level and the current system may be refined further in the future.

Section 41(4)(b) of the Harbours Act 1996 provides a mechanism whereby the Minister, after consultation with the Minister for Finance, may direct individual port companies to pay a dividend. Where the Minister is not satisfied with the dividend policy adopted by a port company, consideration will be given to initiating this mechanism.

Finally, National Ports Policy places a strong emphasis on the retention of corporate memory on the boards of the commercial port companies. However, this should not impede a regular turnover of board members. Therefore, board appointments should ideally be staggered, with no more than three vacancies to any board arising within a calendar year.