Directors Dilemma: Unreported Knowledge
Winsome is a director of a large listed company. She has a strong track record in M&A advisory work and is now embarking on a non-executive career. She is finding the ‘hands off’ aspects of the role quite challenging as she is instinctively and by training a detail-focused manager. She has been mentoring one of the young analysts at the company and recently helped him by reviewing a report that he was asked to prepare for the board.
The report concerned an acquisition that had been thoroughly analyzed and was a compelling proposition due to a strong strategic fit and an advantageous price. The only negatives were:
1- The long-standing employees would have very high redundancy and retirement costs.
2- One of the international operations that use agents and shows a historical tendency for large ‘round-number’ sums to be paid to these agents before tenders are awarded. This operation is only 3% of revenue and 2% of profit but the analyst is concerned that the forecast growth of the operation may not eventuate if the payments cease. He is aware that the board has a ‘zero tolerance’ policy for bribes and facilitation payments.
Winsome is concerned because the report covered these issues and called for the board to discuss and decide on a course of action. She has now received her ‘official’ version of the report in her board papers and all references to the suspicious payments have been edited out. Her mentee, when questioned, informed her that the CEO insisted on the edits as it was a small issue with a small part of the target company and the board was only to focus on the big picture.
Winsome is worried that if she says anything she will get her mentee into trouble but also that if she doesn’t say something the board could approve an acquisition that would later cause embarrassment and possibly worse. What should she do?
Many readers of this blog will be familiar with my newsletter The Director’s Dilemma. This newsletter features a real-life case study with expert responses containing advice for the protagonist. Many readers of this blog are practicing experts and have valuable advice to offer so, again, we are posting an unpublished case study and inviting YOU to respond.
If you would like to publish your advice on this topic in a global company directors’ newsletter please respond to the dilemma above with approximately 250 words of advice for Winsome. Back issues of the newsletter are available at http://www.mclellan.com.au/newsletter.html where you can check out the format and quality.
The newsletters will be compiled into a book. If your advice relates to a legal jurisdiction, the readers will be sophisticated enough to extract the underlying principles and seek detailed legal advice in their own jurisdiction. The first volume of newsletters is published and available at http://www.amazon.com/Dilemmas-Practical-Studies-Company-Directors/dp/1449921965/ref=sr_1_1?ie=UTF8&qid=1321912637&sr=8-1
What would you advise?
Julie Garland-McLellan has been internationally acclaimed as a leading expert on board governance. See her website atwww.mclellan.com.auor visit her author page athttp://www.amazon.com/Julie-Garland-McLellan/e/B003A3KPUO