There are a number of legal
obligations as set out in the Companies act, which anyone can go and look up,
but what I want to address is what I consider the director’s core
responsibility, namely the one to the Company’s shareholders.
Most would be directors go around
campaigning on a particular mandate, get elected to the Company (presumably on
such a mandate), but then we never hear from them again, why is this?
Some classic examples in recent years
is the Meat Industry Excellence candidates elected to the Silver Fern Farms
(“SFF”) and Alliance Meat companies: publicly
at least you have essentially heard nothing from them and moreover as we have
seen with SFF they have actually gone against the very mandate they were
elected on. Now there may be good
reasons for this as one of the biggest problems with being on the outside and
professing how things should change is that you are not privy to all the
information and facts the entity has and moreover there may be good reasons why
the mandate upon which you campaigned cannot be implemented, perhaps they were simply
stupid ideas!!!!
My problem, in both instances
above, is the failure of directors to advise their shareholders why their ideas
can’t be implemented, or why things are different to what they thought. It’s simple communication. If we are kept fully informed of what is
going on we are more likely to accept the situation, albeit that we are unhappy
with it. Commercial sensitivity is often
cited as the reason for saying nothing which is just a smokescreen for not
fulfilling this core role to the shareholder, in my experience, in general you
can still be kept informed without disclosing the detail that may jeopardise a
company’s operations.
The SFF meetings last year re the
proposed Joint Venture (“JV”) were another example of how directors forgot
about the core responsibility to the shareholder, those meetings were sales pitches
for the joint venture to go ahead, not information dissemination to
shareholders so they could be fully informed before voting. At the meeting I attended, we were advised
us of the positives of the JV, but what of the negatives and lets face it there
are fair few negatives: 60/40 split cooperative always in control, but 50 50
split potential to lose control just one example. Moreover an SFF banker explaining why they
were in favour of the JV as opposed to making money by lending to SFF as it was
sold at the meeting, may have been helpful. A director is not a salesperson; a director
is a facilitator and disseminator of information both positive and negative to
the shareholders.
Finally, and speaking
generically, directors, councillors etc, need to continually remind themselves
that they must act in the best interests of all its shareholders (or
constituents etc) and if not all, then in the best interests of the majority. It is not a forum to promote what suits you
best, but unfortunately there are directors, with vested interests, who
endeavour to push through things that aren’t in the best interests of all or
the majority. It’s a simple basic tenet,
namely that all those you represent should be treated fairly, something that
should go without saying, but I think is sometimes forgotten.
