Welcome to the October 2014 edition of The Director’s Dilemma.
Greetings from beautiful Brazil! I am here at the inaugural Sao Paulo Women on Boards conference speaking on ‘common dilemmas facing women directors’.
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Companies in the government sector have particular constraints around the selection, recruitment and removal of directors. Frequently the process is highly sensitive with the potential for great embarrassment if anything goes awry. This month our real life case study considers what to do when a usually private and confidential process gets tipped into the public domain.
Consider: If Leon were your friend, how would you advise him?
Leon chairs a state owned enterprise that oversees commercial delivery of essential services and construction of major infrastructure projects. Recently the Minister appointed two new directors to his board to replace directors whose tenure had ended. Leon helped specify skills needed by the board.
The new directors were adequate, if not outstanding, and following their induction made a good contribution to the board and company. The board has settled well and is working effectively.
Now a national newspaper has published an article with evidence that neither of the two new directors applied through the official process or featured on the department’s shortlist of candidates presented to the Minister. A leak has occurred. An unsuccessful applicant, who was on the original shortlist and would have been a superb director and potential successor for Leon, is quoted saying this is “a disappointing but not unexpected snub”.
The article queries the validity of recent board decisions as the enabling legislation talks about ‘duly appointed board members’ making decisions at ‘properly constituted board meetings’. Leon is reasonably sure that decisions made and contracts awarded are legitimate. However there has been opposition to one project and a vociferous minority may seize this as an excuse to reopen, delay or derail that project.
The two board members have both called Leon and apologised for the situation which they say is not of their making as they were not aware of the formal process and simply agreed to serve when asked. They have offered to resign if that would help. Leon has no power to dismiss or replace them but could accept their resignations.
The remaining directors have indicated that they will support Leon in whatever course of action he feels appropriate. Leon wants to have a full strength board but is unsure of the rightness of retaining the two newer members under the circumstances or the speed with which the Minister might appoint replacements.
What should he do?