Davy ‘good leaver’ questions linger after exits

Cantillon: Time Davy shareholders called extraordinary general meeting to get clarity

In most employment contracts for individuals lucky to have shares in a business, those that depart are automatically “good leavers” unless decided otherwise.

In Davy, however, the opposite is the case. The board of a holding company at the top of the group's corporate tree, Ailmount Investments, must decide that an exiting employee-shareholder is a good leaver within 12 months. Otherwise, they are a bad one, requiring that they sell their stock back to the firm at a discount (based off a formula tied to earnings over three years).

To be an Ailmount director you once had to also be a Davy employee. The most recent version of the company's rules, from 2015, has no such requirement, sources say. This would explain why David Smith, who left in 2016, remains on the board.

Regulatory breaches

Smith was one of five top Davy executives – known as the G5 – that were among 16 employees that sought to profit from buying junior bonds in Anglo Irish Bank in 2014 at a discount from a client, without the knowledge of the seller or Davy's own compliance officials. The Central Bank fined Davy €4.1 million two weeks ago for regulatory breaches in relation to the scandal.


Three of the other four Ailmount directors, Davy’s former chief executive Brian McKiernan, former deputy chairman Kyran McLaughlin and former head of bonds Barry Nangle, quit the firm amid the fallout. But they remain on the Ailmount board and hold the key to what’s a “good leaver”.

Benefiting from sale

The G5, which also includes former Davy chief executive Tony Garry, are estimated to own at least 33 per cent of the business.

The leaving status of the three that quit this month will determine the extent to which they will benefit from the planned sale of Davy. For now, Davy, the Central Bank (which must be in the know) and the G5 are staying mum.

Isn’t it time for other Davy shareholders, including current and former staffers, to call an extraordinary general meeting to get clarity? They’re a disparate bunch but a meeting can be called with 25 per cent shareholder backing.

Removing directors from Ailmount would be a bigger effort, requiring a special majority of 75 per cent.