Dear reader,

Welcome to the November 2018 edition of The Director's Dilemma. I write these dilemmas based on my twenty years' experience consulting to boards and helping them to avoid becoming front page news, banned or fined. The reputation damage and career impacts of a board gone awry can be severe.

My 'joy in work' is to help boards and directors avoid becoming the next disaster and instead become the next great success. I do this by diagnosing board processes and procedures to identify latent problems, and guiding clients to address threats before they eventuate.

To read this email in a browser, go to www.mclellan.com.au/newsletter.html and click on 'read the latest issue'.

This month our case study protagonist faces a dilemma caused by an unusual response to an unhelpful policy. I hope you enjoy thinking about the governance and strategic implications of the latest dilemma:

Finneas chairs a medium-sized listed company board. He has been with the company through a very successful CEO transition and is enjoying the challenge of helping the new CEO to hone his leadership of the company.

The CEO has proved a good choice and the staff are settled and productive. Recently the government announced a new policy that will most likely increase the cost of doing business and decrease export competitiveness.

The CEO is rightly concerned. He has already made some personal statements opposing the policy - calling it 'Stupid and short-sighted industrial vandalism' - on his Facebook page. Fortunately, the CEO keeps his Facebook account mainly for friends and family so Finneas felt the comments hadn't attracted much attention.

At his most recent meeting with the CEO, Finneas heard that a journalist had seen the comments and called the CEO asking if he would be prepared to participate in an interview. The CEO is excited at the opportunity to stimulate public debate about the issue. Finneas is more concerned that the CEO will cause people to think poorly of himself, as a harsh critic, and of the company. There are a couple of days before the scheduled interview.

How should Finneas proceed?

The first step must be to formally advise the CEO not to make any further comments on matters referring to the business on any Social Media, including Facebook.

The next step is to ensure that all existing comments are removed from the current Facebook pages.

It is quite likely that the CEO will respond that he writes as a Private Individual on Facebook. Unless he has a prominent disclaimer and an announcement to that effect, then that distinction does not apply.

The next step is to cancel the TV interview. There is nothing that can take place in the interview that will further the success of the business.

The idea that it will open up the debate, whilst a noble intention, will normally cause more harm than good to the CEO and the Company. This is because a lot of modern-day journalism seems to be dedicated to creating drama, controversy and using hearsay, which is what sells TV programs. There are many other avenues to take on changes to government policy, such as the ACID, AIG, Chamber of Commerce etc., but a TV interview is not one of them, particularly as the CEO is already 'fired' up.

To avoid demotivating the CEO, Finneas can show the CEO, copies of aggressive interviews where the interviewer has a specific agenda to attack, discredit or create drama with the interviewee.

And in conclusion, Finneas (in conjunction with the CEO) needs to issue a memo to all staff that the only person allowed to talk to the press is the Chairman

Roger Bourne is Founder and Principal of Auctor Management. He is based in Melbourne, Australia.

Finneas needs to caution his CEO; the company is listed and any statements about changes to expected revenue or competitiveness must go through the stock exchange announcement system. Diligence and accuracy are key.

The impact of the CEO's statements may be less than the disastrous consequences of Elon Musk's tweet about taking Tesla private, but they will still be felt, and the company should plan a responsible announcement strategy. The CEO should model the changes to future cashflows expected to arise from the new policy and speak with precision about outcomes for the company in particular and national exports in general. A CEO must have a sound basis for making any statements about the future earnings or performance of the company.

Finneas should then check his company's policy on social media. Does it allow political comments to be made on a site where the employee's job title is also displayed? Does it caution staff that Facebook comments may be considered a company matter? Can Finneas demonstrate that staff have received a copy and confirmed that they accept the restrictions it places upon them?

The CEO may only 'friend' people he knows well but Facebook is not a private communication. That is how the journalist found him. What are the potential impacts to the company if investors or customers read the statements? How will the CEO manage those impacts? Is the risk of public opposition to government policy worth the benefits that may be achieved if debate leads to changes? Is the interview the next logical step in a strategic process or is there a better course?

It is time to realise that 'social' is 'strategic'!

Julie Garland McLellan is a non-executive director and board consultant based in Sydney, Australia.

From my international experience in corporate and government sectors, recovering reputational loss is challenging with consequences reaching far beyond possible financial loss. Reputation needs to be proactively managed.

Assuming the journalist is commissioned to do a prime time investigative TV report:

• Key concerns are reputational risk and impact upon stakeholder management (i.e. Shareholders, Government, Customers).
• Risk and Audit Committee to review current strategy and protocols (including Crisis Management, Media Relations Capability, Training, External Media Monitoring Service) proposing risk mitigation strategies.
• Media liaison diplomatically assigned to the media trained Chair or executive in the interim.
• Directive sent to staff regarding media relations requesting all media queries to be directed to appointed spokesperson with a concise script to be used covering all communication platforms.
• Chair to request CEO to submit report assessing opportunity to build proactive government relations and advocacy strategy (eg  via an established business association/chamber already canvassing a broader base of relevant stakeholders potentially adversely affected by new policy).

Finneas needs to firstly ascertain journalist's credentials, who else has been approached, media angle, new policy facts, other stakeholders involved to scope action required.

Then talk quietly with the CEO raising concerns about improper social media communications and possible ramifications to the organisation. The CEO needs to understand and acknowledge the potential public, political and visible fall out of scheduled interview since it is apparent the journalist has already got an 'agenda' centered on the CEO's contentions comments.

Cancel the interview and replace with informed, judicious media release.

Siobhan Sutherland Rogers is Company Secretary and Interim CEO at The Australian Institute of Training and Development.

She is based in Sydney, Australia.

Book review - Dilemmas Dilemmas II - More Practical Case Studies for Company Directors by Julie Garland Mclellan

If you are wondering what to get a director for Christmas this book will solve your problem!

Test your knowledge and practical skill against some of the best brains in boardrooms from all around the world with this collection of intriguing case studies based on real life events. Enjoy the suggested responses and develop your own. Use the case studies to train your board or mastermind group. Read it on the train, in the plane or while relaxing in your time off. Each short case study has enough issues to keep your mind engaged and your skills building for many months to come.

Available on Amazon.com or Amazon.com.au in hard copy or kindle edition.

 

Julie's news - In October

I was delighted to present a dilemma for the CPA Australia Directors Discussion Group. We looked at a succession planning family business situation that is relatively common and trickily difficult to resolve. As always it was a pleasure to discover just how creative accountants can be and how expertly the group was able to identify the key elements and develop strategies to resolve the issues.

Another highlight was the Clubs NSW Conference masterclass on Managing Conflicts of Interest in the Boardroom. We used real-life case studies to bring the concepts to life and both I and the participants had a wonderful time working out how to identify, record and manage the many conflict that arise in real boardrooms.

Then it was off to Melbourne with my NFP Director hat on to attend the Filex Immersive as a representative of the Fitness Australia Board. It is always great to see the value that professional peak bodies can add to their industries; this event was a great demonstration of the expertise and professionalism of the FA team and their colleagues from Filex. Thanks also to the Fitness Show for helping host the event.

Finally I had a trip to the Sultanate of Oman for another two day master class on boards and board secretariats that add value. It is many years since I was last in Muscat and the progress was immense. Progress in corporate governance has also been immense and the current code of corporate governance is a pragmatic and powerful principles-based code that will, if followed, lead to improved outcomes. It was great to have an opportunity to discuss the application of the Oman Code of Corporate Governance (which requires initial and ongoing training for directors of listed companies) and how to apply its provisions within an environment of global good board practice.

A trip to Canberra on board business and a few days of rest and recreation riding horses in Melbourne completed the month. Now I am looking forward to the work that November will bring.

I am always keen to work more and will be delighted to hear from you if you would like to arrange a board strategy workshop, education session, or board performance review.

Call me on the number below or reply to this email for a discussion of how I can help your board.

Inspirational quote for November - This month I decided to feature two quotes:

The second quote was just too topical to resist, given recent events at Tesla and the (selected years ago) focus of this month's case study:

"A chairman and CEO of a public company has important responsibilities to shareholders. Those responsibilities include the need to be scrupulous and careful about the truth and accuracy of statements made to the investing public, whether those statements are made in traditional forms such as a press release or an earnings call or through less formal methods such as Twitter or other social media." Stephanie Avakian, co-director of the SEC's division of enforcement.

A note on names - A note on names - A few readers have asked me where I find the names for the protagonists in each case study; I 'borrow' them from people I meet or things that I read. Finneas is derived from the Hebrew pinchas, meaning "the mouth of a snake" or "mouth of brass". It may also be derived from the Egyptian penechase meaning "dark". Our protagonist will have to balance the CEO's need for authenticity and self-expression with the prudent and strategic stewardship of his board and company.

This newsletter - If you have any ideas for improving the newsletter please let me know. If you are reading a forwarded copy please visit my website and sign up for your own subscription.

Suggestions for dilemmas - Thank you to all the readers who have suggested dilemmas. They are greatly appreciated. I will answer them all eventually. I could not write this newsletter without your help and without the generous help of all the experts who respond each month to the case studies.

Be a contributor - if you would like to attempt a response to the dilemmas for publication you will be most welcome. Simply reply to this email and let me know.

Let's connect - I use LinkedIn to share information about boards and directorship with my friends and acquaintances. If you use LinkedIn and we are not yet connected I will welcome a connection from you. You can find me at linkedin.com/in/juliegarlandmclellan.

Let me help you - If you would like me to speak to or train your board, staff, audience and/or group please contact me at julie@mclellan.com.au.

Farewell until the next issue (due 1 December 2018). I look forward to greeting you again then. In the interim I hope you will enjoy health, happiness and hard work.

Enjoy governing your corporations; we are privileged to do what we do!

Best regards,

Julie

 

Photo Credits:
Personal images in this newsletter are provided courtesy of the contributors, course attendees and conference participants. Main Photo courtesy of Shutterstock.com

Disclaimer:
The opinions expressed above are general in nature and are designed to help you to develop your judgement as a director. They are not a definitive legal ruling and do not constitute legal advice. Names and some circumstances in the case study have been changed to ensure anonymity. Contributors to this newsletter comment in the context of their own jurisdiction; readers should check their local laws and regulations as they may be very different.

Privacy:
I am privileged to have your contact details and keep them as safely as possible. I will alert you if they are ever accessed by any unauthorised person (the technical staff at ayuda help with publishing and issuing the Director's Dilemma and have access so they can send the newsletters to you). I do not sell your details to anyone; they are kept only for the intended purpose - sending you this newsletter and helping to build the judgement of company directors by providing a safe way to consider potential responses to real life events.