Welcome to the July 2013 edition of The Director’s Dilemma. To read this email in your browser, go to www.mclellan.com.au/newsletter.html and click on ‘read the current issue’.
This month our real life case study focuses on the delicate issues of non-executive director relationships with staff and the handling of knowledge that arises from these as well as the issues around setting appropriate sensitivities for information to be included in board papers.
Consider: Which response would you choose and why?
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 analysed and was a compelling proposition due to a strong strategic fit and an advantageous price. The only negatives were:
1. The long standing employees who would have very high redundancy and retirement costs.
2. One of the international operations which uses 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?