One of three Jefferson Smurfit non-executive directors appointed by the board to give an impartial assessment of a takeover offer backed by management fails to meet the guidelines set by Ireland's corporate governance watchdog.
The Dublin-based paper and packaging company has been approached by Madison Dearborn Partners, a Chicago-based private equity fund.
Howard Kilroy is one of a three-member "independent committee" announced on Friday "in accordance with best practice, and to ensure compliance with" Irish and UK takeover panel rules.
The company said the move was necessary, as Madison's offer is conditional on the "continued participation of Jefferson Smurfit's management under any new ownership".
Michael Smurfit, son of the company's founder, is chairman and chief executive, and owns 7 per cent of the equity. Three other Smurfit family members are on the board.
Martin Rafferty, the senior non-executive director, will head the committee. He had a similar role when Smurfit negotiated to buy from the company a 2.5 acre site on the Kildare Hotel and Country Club, where he is now building a French-style chateau.
However, it is the appointment of Kilroy that raises questions. The 66-year businessman is not only a "recent former executive" but is also "in receipt of consultancy fees". Both facts should have disqualified him if the voluntary criteria set by the Irish Association of Investment Managers in its 2001 corporate governance report for the independence of non-executive directors were followed.
Kilroy, who joined Jefferson Smurfit in 1973, was president and chief operating officer in 1995, when he stepped down to become a non-executive director.
According to the 2001 accounts, he received a €127,000 consultancy fee from the company, in addition to the €40,000 as a non-executive director of Jefferson Smurfit, and a further €51,000 as non-executive with Smurfit Stone Corporation, the company's 29-per-cent-owned US associate.The company declined to spell out what Kilroy's consultancy payment was for beyond "what it says in the annual report", where the fees are described as "unrelated to duties as director of the company". It also declined to confirm reports that the fees related to advisory work on the John Jefferson Foundation in Monaco, a charity set up by the Smurfit family.
Relatively few Irish business people are willing to be non-executive directors, which results in considerable personnel cross-over in the main Dublin-listed companies.