Welcome to The Director's Dilemma May 2022
Each month this newsletter looks at a real-life scenario that happened to a board, perhaps to a board like yours, and considers a range of responses. The scenarios are de-identified to protect the individuals concerned. This month we look at what to do when you detect fraud, even if it doesn’t involve money, and people want to turn a blind eye.
Of course, these scenarios are general, I work with boards and directors as a confidential mentor to help them build great companies and maximise their impact. If you would like personalised service, please call me.
To read this email in a web browser, go to www.mclellan.com.au/newsletter.html and click on 'read the latest issue'. I hope you will enjoy the latest dilemma:
Ryan chairs the remuneration committee of a large private business. The Chair is the son of the founder and has been in the role for almost twenty years. The management team are professional and family involvement, apart from the board chair, is minimal.
The CFO recently announced a desire to retire and the CEO was authorised by the board to search for a replacement. The replacement was speedily found and appointed. The new CFO’s CV was circulated to the remuneration committee with details of his salary and incentives package. Ryan was surprised the CEO had found such a highly qualified and skilled individual in such a short time.
The new CFO has settled in quickly and seems to be doing a good job.
Ryan asked if reference checking had been completed and was told that it hadn’t because the candidate was so stellar an offer was made while he was still available. Remuneration committee policy is that all members of the senior leadership team have their references checked and undergo a police check upon appointment unless they are internal promotions. The CEO engaged a consultant to perform the checks.
The results were shocking. The new CFO does not have all the qualifications he claimed and was Finance Controller at his previous company, not CFO as both his CV and LinkedIn profile state. The CEO asked the board chair if they could keep the CFO as he is popular with the team and has made good improvements to processes. The chair agreed. Ryan is not sure this is a good idea.
What should Ryan do?