Keynote address by Minister Martin, at the IR Magazine Conference, 26 April 2006

Keynote address by Micheál Martin, T.D., Minister for Enterprise, Trade and Employment, at IR Magazine Conference 2006 Berkeley Court Hotel, Wednesday, 26 April 2006

I am very glad to have the opportunity to address this Conference, to commend the winning companies who have scored so highly on corporate governance, disclosure and transparency and to recommend Irish equities as a sound investment choice for both institutional and retail investors.

I don’t doubt that this audience knows the equities market better than I do but we can all be pleased that there continues to be significant upward earnings momentum in the Irish market. I note that twenty ISEQ members have now reported full year numbers for 2005 and of these companies fourteen reported Earnings Per Share figures ahead of expectations. I also note that earnings growth for the market as a whole in 2005 is now estimated at a very healthy 22%.

The Irish Stock Exchange reports continued strong growth in equity trading volumes for the first quarter of 2006 with an average no. of 4,006 transactions per day as compared to 3,171 in the first quarter of 2005, emphasising the underlying liquidity of the market and reflecting an increased level of investment in Irish equities by institutional and retail investors alike.

Even more striking is the fact that the Irish equity market continued to perform strongly against global markets with the outturn for the first quarter of 2006 outperforming global indices such as the FTSE 100, NASDAQ and the Dow Jones Industrial Average. The first quarter of 2006 has also seen further growth for investment funds with a total of 149 new funds and subfunds listing during this period. The Irish Stock Exchange continues as the number 1 location globally for the listing of investment funds.

The Investor Relations Awards strike me as an effective benchmark of quality corporate governance. The increased emphasis on disclosure and transparency in the reporting by companies to their investors is greatly to be welcomed. Not only does it mean that investors can take informed decisions. It has benefits both for effectiveness and efficiency. The rationale for the regulation of market activity is to produce behaviourally or ethically desirable outcomes. The law defines a suitable basis for the engagement by various market participants and is intended to deliver results which define acceptable relationships among the participants which are in the public interest. But regulation by a market mechanism such as transparency, where possible, is always more successful, in my view, than a ‘command and control’ approach.

Transparency and disclosure coupled with investor vigilance and activism are the key to efficient and prosperous equity markets and in turn produce markets which positively affect labour productivity and employment.

From the government’s perspective the watchword in our approach to regulating companies is proportionality. I accept that, typically, the pattern of introducing regulation in the past has followed a cycle where some problem is identified and a campaign led by particular interests or opinion makers presses for a regulatory solution. And, frankly, that is tempting for a Minister because regulation is an output we can produce.

But it may be that that kind of regulatory knee-jerk reaction – I have seen it described as SARS: Sudden Acute Regulatory Syndrome - which so often has shaped our reaction as an economy and society to particular market or regulatory failures is not, in fact, the best approach to take because it may have more to do with reacting to the degree of sensationalism around an issue than to the particular problem in question. That, classically, generates badly-targeted and disproportionate regulation. But it is a real risk that any democracy is exposed to. It is certainly an area where politicians can raise our game. For example, the stringent application of Regulatory Impact Analysis (RIA) to all regulatory proposals should help ensure that the ‘boom’ which has taken place over the last 20 years in the creation of dedicated regulators is over and that it will be possible to sift out bad from necessary regulatory proposals.

I am practising what I advocate about the need to bring a more measured approach to regulation which balances market needs, investor rights and the public interest. Last November I set up the Business Regulation Forum (BRF) as a standing dialogue between Government and business on regulatory reform. Its role is to advise on the changes necessary to ensure that existing or proposed regulations, impacting on business, meet the criteria of proportionality and effectiveness. I am convinced that this approach will give us not only better corporate governance but will result in

reduced costs and a more competitive businesses environment.

The goal of the BRF for the end of this year is to draw on the experience and expertise of its members and on evidence-based analysis to produce a first report with recommendations to achieve a measurable reduction in the regulatory compliance burden for businesses. I would urge this audience, if they believe that some aspects of the regulatory regime applying to them impose an unacceptable administrative burden, to make a submission accordingly to the Forum.

The BRF recommendations will build on the actions I have already taken to mitigate the Directors’ Compliance Statement and to repeal the Groceries’ Order which I would ask you to regard as a signal of good intent that where the evidence shows that restrictive practices, and outdated, inefficient or disproportionate regulations are adversely affecting the operation of the market or hindering our competitiveness the government will act. And we will take on vested interests where the evidence shows we should.

Last Summer I set up the Small Business Forum (SBF) to examine the current environment for conducting small business in Ireland. We now have some 250,000 small businesses in Ireland providing more than half of private sector employment – that’s almost 800,000 jobs, nearly double the level of a decade earlier and it is very important that we sustain the dynamic growth of small business. The SBF will publish its report shortly. I am confident that the report will provide us with a robust analysis of the issues facing small business. I expect that it will also provide us with a blueprint for a better environment for small business, including recommendations on the administrative burdens on small business. I will take those proposals forward with my colleagues in Government.

I see the participation and consultation of stakeholders as key to our continuing economic dynamism and to the realization of a more proportionate and balanced regulatory regime. The mechanisms we have established – the BRF, SBF, Company Law Review Group and Funds Clearing House Group are all in the business of identifying challenges and solving problems. They are a practical expression of the Government’s willingness to update and revise our policies and programmes on an on-going basis to cope with changing circumstances.

In conclusion, I would again like to express my appreciation to IR Magazine and PricewaterhouseCoopers for the organization of this conference and to be congratulated the winners who will be announced later today at being assessed by their peers as demonstrating the best standard of corporate governance.

ENDS

ETE1557