Welcome to the September 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 concerns the special circumstances surrounding a board of an entrepreneurial company which is still heavily influenced by its founder but contemplating a major change.
Consider: What would you advise a friend to do under these circumstances?
Zander has joined the board of a privately owned company that is growing rapidly and has plans to list within the next year or two. He is excited by the prospect of the IPO and determined to do a good job as a director, even though he has no prior board experience.
He is finding the role unexpectedly difficult as the CEO, who is also the founding entrepreneur and chairman, is very independent and views the board as a nice think tank - but not as an authority over him. On a few occasions the board has met without seeing up to date financial reports because the CEO was, by his own admission, “too busy building the business to worry about administration”. Whilst the business does appear to be going well Zander is worried that he is not discharging his duty.
Zander had a coffee with the CEO to discuss his concerns. At that meeting the CEO let slip that he had set up a board because the company had reached a growth threshold where a board was required rather than because he felt any need for guidance or control. At the latest meeting it became apparent that the capital structure of the company was changing and that new investors were being invited to take up shares. The board had not approved a prospectus or information memorandum or any valuation of the company. The meeting became quite disorderly as the two professional non-executives expressed their concerns and the CEO refused to divulge information because it was ‘his company’ and he didn’t think they should know how much he got from the sale.
Directors’ fees were due for payment a week after the meeting but have not been paid. The CEO is not returning calls or replying to emails and Zander is wondering what he should do.
How would you advise him to proceed?