ADR Toolkit Volume1

7/29/2019 ADR Toolkit Volume1

1/93

Volume 1 : Rationale

to o l k i t 4

Reolvg CororeGoverce Due


2/93

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Module 1: wat A Cpat Gnanc dspts? 1.1


3/93

MODULE 1 Wha Ar Corora Govrnanc Diss? VOLUME 1 1

module 1What aRE CORpORatE GOVERnanCE DispUtEs?

disputes aectingcoRpoRate authoRity

Corporate governance is the system by which companies

are directed and controlled.1 It involves the balance o

powers among three key corporate constituencies: the

board o directors, which is charged with monitoring,

overseeing, and guiding the company; the shareholders,

who invest their unds in the companys shares and,

thereore, have the right to elect and possibly dismiss

directors; and, the companys management, whom the

board hires to run the company on a day-to-day basis.

By law, boards have the ultimate responsibility or

the companys aairs, hiring and giving direction to

management and representing shareholders interests.

Thus, the board sits at the center o the companys

governance structure.

INTERACTION AMONG THE MAIN

GOVERNING BODIES OF A COMPANY

ACT

ASAGENT

SFOR

REPRESEN

T&R

EPORT

TO

The elected board is the companys principal

governing body. The board appoints management, led

by the CEO, but it retains ultimate responsibility or

protecting the companys integrity and its shareholders

investment.

In addition to the board, shareholders, and management,

a corporation has many other constituencies, or

stakeholders, who are important to the companys

operation. These stakeholders may include employees,

suppliers, creditors, nancial institutions, communities,

and even publicly regulated agencies.

d crr gvr d

Corporate governance disputes involve corporate

authority and its exercise. Governance disputes involve

the boards powers and actions, or its ailure or reusal

to act. These conficts may arise between the board and

its shareholders, or between directors and executive

management. They may also involve issues among the

directors themselves and between the board and other

stakeholders. A governance dispute implicates the

board in one way or another as a party, or as an active

participant, and requires the directors concurrence to

resolve the confict.

Corporate governance disputes emerge in many dierent

ways. Common disputes include:

Disagreements between the companys shareholders

and the company or its board. A shareholder or a

group o shareholders claims that their rights as

shareholders have been violated or that their shares

value has declined.

Disputes between the board and the CEO and/

or senior management. The board hires the CEO

and empowers him or her to manage the company.

The board may question the CEOs perormance or

otherwise be dissatised with her or him. The CEO

SOURCE: Adapted rom IFC Pakistan Corporate Governance Project 2007.


4/93

VOLUME 1 Wha Ar Corora Govrnanc Diss? MODULE 12

types o disputes occuRRed

RELatED-paRty tRansaCtiOns 61%

inVEstMEnt DECisiOns 55%

RiGhts O MinORity shaREhOLDERs 52%

ManaGEMEnt pERORManCE 52%

MERGER anD aCqUisitiOns DECisiOns 45%

nOMinatiOn/appOintMEntO DiRECtORs anD OiCERs

42%

DiViDEnD DECisiOns 36%

inanCiaL REstRUCtURinG

anD tURnaROUnDs24%

REMUnERatiOn O DiRECtORs

anD OiCERs21%

OthER (BUsinEss stRatEGy,

COnLiCts O aGEnCy)12%

appROVaL O annUaL aCCOUnts

anD inanCiaL statEMEnts0%

e x A m p l e

c crr gvr d

Br

O Jue 18, 2008, e Brzl iue o

Corore Goverce (iBGC) orgzed

dcuo orum o corore goverce d

lerve due reoluo.

or-x rc cog o lwer,

com drecor, reolder, coul,

cdemc, d wo jourl were gve

ueore bou e ure o corore

goverce due. te ueore led

10 e o due d rovded ce or

comme. prc were ed o mr e

our mo reuel occurrg due bed

o er dvdul exerece.

here re e reul:

comment

sce 2008, iBGC ued ueore

ome o rg rogrm, d ever me,

rc eleced reled-r rco

e m cue or goverce due.

SOURCE: IBCG.

may be concerned about the boards decision-making

process. Both situations can create a poisoned

atmosphere in which the companys productivity

and value could be impaired.

Disputes among board directors. These may includethe chairman, the CEO, and all other executive and

non-executive directors.

Disputes between the board and employees

representatives. In such countries as Germany

or Slovenia, where employees have a voice on the

companys supervisory board, the diering concerns

and views o labor and management can play out in

the boardroom and, sometimes, spill into the media.

Disputes between the board and communities and/or

social activists. Other constituencies disagreements

with the company may become matters in which the

board itsel becomes involved. Questions regarding

social policies, the environment, and sustainability

become governance issues when these issues are

directed at the company through either the proxy

voting process or a demand or board action.

dr crr gvr d

To better understand what corporate governance

disputes are, it is helpul to distinguish them rom

other types o disputes that may involve a company. For

example, a dispute over a contract, a labor claim, or a

commercial matter involves the company as an entity but

does not pertain to its governance. These disputes are

typically part o doing business, and it is generally up to

management to resolve them. As part o its oversight and

monitoring unctions, the board is typically inormed

about signicant litigation that may aect the companys

reputation, operations, and nances. In addition, it is

appropriate or the board to assure itsel that the company

has dispute resolution policies and mechanisms available

to mitigate disruptions and limit expenses resulting

rom these disputes. But routine business or commercial

matters are handled by management; the board does not

take direct action in resolving them.

tO LEaRn MORE aBOUt thE BOaRDs ROLE in

aDOptinG CORpORatE DispUtE REsOLUtiOnpOLiCiEs, sEE VOLUME 2 MODULE 1.


5/93


crr gvr d

Corore goverce due volve corore uor d exerce.

pre o corore goverce due m clude e com reolder, bord member,

d eor execuve. Oer eolder wo cllege e com goverce, ec, or reg

m lo be volved.

Corore goverce due cll reure e bord eo, regrdle o weer e bordor dvdul drecor re drec r o e due.

or crr d

Corore goverce due der rom oer due com m ce. here re ome

comro:

cr re rom e coduc o bue. te volve uc exerl eolder cle, coumer, d uler. tu, e reree wde ecrum o ue. i ll o ee,

omeg goe wrog, le oe r vew, durg e orml coure o bue. te

due m be over umber o ue rce, ul, corc erm, d me, or exmle.

Eell, commercl due volve roblem wc oe or more re clm bue

rco ve goe wr. te bord role m volve eurg rore due reoluo

rocedure re lce, bu ee e o due wll cll be dled b mgeme.

c omeme be vewed ube o commercl due. however, ee

due volve ud reured or cl veme or bue oero. te m volve uc

mer rg d oblgo uder deb cg, colleco o ud re clmed, or oer

mer delg w e deb oro o e com cl rucure.

sr . M due re rom e ublc rdg o ecure, uc oc or bod.i ee due, oe r clm, or exmle, rule bee voled, e le, urce,

or excge o ecure. secure due m volve e re wo cle ee rco,

uc oc excge or broerge. some ecure due were reolder rg m ve

bee voled m lo be goverce due.

lbr . t cegor volve corovere bewee cororo d emloee, ormog com emloee. Emlome or lbor due c cll volve dgreeme over

wge, bee, or coe o wor ue. Due bewee emloee d uervor re oer

exmle. Emlome due lo c revolve roud worg codo, uc e mer,

our o ervce, d uecl or rore rcce (e.g., emlome o cldre, dcrmo,

d rme). here, g, e bord role m volve eurg rore olce d

rocedure re lce, levg mgeme o dle e due.

Rr . Goverme moe regulo d rerco o come d eroero. Come or er execuve oe dgree w e regulor gec erreo o

ow regulo or w e lco o oe regulo o e com. tee due volve

e com d relev regulor gece.

G l O S S A R Y


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As a general rule, close scrutiny should be given to

the parties identity and the nature o the dispute to

distinguish corporate governance disputes rom other

corporate disputes. For example, a dispute may arise

between the board and management over a contract or

services or goods that was awarded in violation o the

companys policy on related-party transactions. This

would be regarded as a corporate governance dispute. In

contrast, i a dispute erupts between management and a

supplier over the terms o the aorementioned contract,

it would typically be a commercial dispute.


7/93


change, too, including its shareholders, management,

and directors. What began as a small amily business, or

as a dot com start-up, may eventually become a large

company whose shares trade on a stock exchange.

The enormous variety o corporations, coupled withdierent legal or cultural norms, can result in many

situations in which governance disputes may erupt.

Those involved in governance issues directors, senior

management, investors, and other stakeholders

should be cognizant o the kinds o disputes that can

arise as the companys business, ownership base, and

capital structure evolve.

s c

In a small company owned by a single person, that

person can ll all three core unctions required to runa business providing capital, leading/managing

the business, and working to produce goods and/or

services. That scenario becomes more complicated i

the companys ounders include several people who,

along with running the business, must manage their

relationships with one another. In other words, even in

a small, closely held company, disputes can arise within

the small group that owns and controls the business.

As the company grows, di erent people or institutions

assume these roles. Capital may come rom people orinstitutions that invest unds in exchange or equity

ownership. It may also come rom lenders banks and

other nancial institutions.

Regardless o unding sources, shareholders elect

the boards directors. The directors, in turn, hire the

companys executive management, which is responsible

or hiring labor and running the business. As the

business expands, the composition o shareholders can

easily become more diverse, oten changing regularly

sometimes daily through trading on an exchange,sales between individuals, and inheritance.

Management can change rapidly, too, as the business

evolves. The ounders who held executive positions may

no longer work directly in the business. Their shares

may become diluted when the company issues more

shares to raise capital. As a result, they may no longer

disputes aecting all typeso companies

One can better understand the nature o corporate

governance disputes and how these disputes can aect

all types o companies by reviewing some basics abouta corporations organization. Corporate structures vary

widely, but every corporate enterprise involves at least

three core requirements: capital, labor, and leadership.

Leadership is urther divided between those who

participate in the companys governance (directors) and

those who are directly involved in supervising employees

and producing goods and services (managers). The

relationships and interactions involving these three

business elements can be a ertile ground or disputes.

Theoretically, a corporation has perpetual lie. Thismeans that the corporation continues operating even

when those who ounded it, or work in it, are no

longer involved. During its existence, the corporation

will evolve, and many aspects o its governance will

q u O t e

cf r

Conicts within amily frms have a special

character. In most cases, what is involved is not

merely a dierence o opinion about business

policy but issues within the amily and its history.

The way in which conicts are addressed in the

amily also has an impact on amily frm conicts.

I there is little dialogue and consultation within

the amily, that will generally also be the case

within the amily frm.

Joze lieVens

paRtnER, EUBELiUs LaW iRM

MEMBER O thE ORUMs pRiVatE sECtOR

aDVisORy GROUp

SOURCE: Joze Lievens. Collaborative Conict Resolution

the Harvard Approach Applied to Family Business. 2002

working paper provided by the author to the GCGF.


8/93


e x A m p l e

r d

i: R ir

Drub hrcd amb ouded Relce

idure 1966 o mor oleer r d

exor ce. i 1977, e oo e com ublc,

d urover ored o $10 bllo erl b 2002

e bue exded o erocemcl,

exle, crude ol d g roduco, d oleer

d olmer roduc. Relce idure becme

oe o id mo owerul o-e oldg

come.

We Drub ded Jul 2002, e amb

ml w corol o 46.76 erce o e

com. ye e ouder le o ucceo l

o deerme e com leder. he le o

wll, eer, meg e bue d o be red

w wo o, wo mrred er, d we.

neer e moer or e wo er exreed

ere mgg e bue.

Drub wo o Mue amb, wo

ered M.B.a. rom sord Uver, d

al amb, grdue o e Wro scool

ormll oo e grou re er er er

de. Rvlr or corol bewee e wo ucl

emerged, reulg ee ml eud

rced med eo d worred veor.

O Jul 27, 2004, e eud w broug o ed

we Relce drecor roved rool

o gve Mue amb ower o overrule al

amb deco.

te core o e d erece, owever, d o be

Mue amb w o e lrger corol

o Relce idure d ubdre, e New

York Times reored. te ure bewee e

broer, rel, exed beod e corol o

e Relce grou. Mue amb d o be

u over al rece luge o olc d omo Member o prlme.

O november 16, e r lled o e ublc

re. Mue amb old jourl Mumb

ere were ower ue de Relce.

te ew romed e bgge dro 3.4-

erce decle Relce re ree

mo o november 19, e d e comme

were wdel crculed ewer.

O november 25, x o 14 drecor o Relce

Eerg u wou gvg reo. Relce

Eerg re ell 6 erce, er bgge dro

x mo.

i December, al ueoed e com deco

o coder re-bubc rogrm, g e

w eer ormed or couled o e ue,

ccordg o e Times o India. t ublc duedded o e voll o re rce or Relce

idure, wc lgged erormce bed

oe o e com comeor.

i Jue 2005, e amb broer greed o

l e $20-bllo bue d, ereb, ed

er ower eud. Mue reed corol o

reg, ol, g exloro, d cemcl, wle

al oo celloe, ower, d cl ervce.

te ew cued re Relce o record

level. te rec wr ll over, oe veor

d. im ure e oc wll ru u. i ove or

e reolder d e oc mre e del bee ed.

te clm w broe ebrur 2006, we al

dued e erm o g ul greeme w

Mue, ccug Mue d grou o cg

rbrr, o-rre d ur mer.

te due eded o e cour id.

addol eo urced M 2008 we

al com, Relce Commuco Ld., w

buou l w e Mtn Grou, sou arc

lrge moble oe ewor oeror. Mue

clmed e d r rg o reul o urce

corollg e Relce Commuco Ld.

i Jur 2009, e Bomb hg Cour emorrl

led b o e le o url g, llowg

Mue o e g reerve.


9/93


comment

t uo llure e roblem re were

ere o cler ucceo l, d ow ml

due, grouded emoo d derece

bue ouloo, c uderme ublcl rded

com. a reored (arl 27, 2005) b e

International Herald Tribune, te broer eud

Relce udercore ow reolder ere

c uer we ml member co reolve

udmel roblem. te log-rug due

bewee e broer demore ow rorced

cofc c coue o emerge over ew ue

drw rom e eo o erler ole.

te ureolved due eced re rce.

SOURCE: Saritha Rai, A Family Rit Roils the Market in India,

new yor tme, November 23, 2004. Available at: http://query.

nytimes.com/gst/ullpage.html?res=9B0CE7D7163EF930A157

52C1A9629C8B63. Abhay Singh and Ravil Shirodkar, Indians

Await Peace at Reliance.ierol herld trbue, April 27,

2005. Available at: http://www.iht.com/articles/2005/04/26/

bloomberg/sxreliance.php. Ravil Shirodkar, Reliance Shares Hit

Record on Accord,ierol herld trbue. June 21, 2005.

Available at: http://www.iht.com/articles/2005/06/20/bloomberg/

sxreliance.php.Face-o : Ambani Brothers Trade Fresh Barbs,

tme o id. February 5, 2006. Available at: http://timesofndia.

indiatimes.com/articleshow/msid-1401519,prtpage-1.cms.Assoc iated Press , Indias Ambani Brothers Feud over Rel iance

Communications Talks with South Aricas MTN. ierol

herld trbue, June 17, 2008. Available at: http://www.iht.com/

articles/ap/2008/06/17/business/AS-FIN-India-Reliance-MTN.php.

Archana Chaudhar y, Indian Court L its Ban on Reliances Gas

Field Sales,Bloomberg, January 30, 2009. Available at: http://

www.bloomberg.com/apps/news?pid=20601091&sid=a13q.

Oi0MQ9Y&reer=india.

own a controlling share o the stock, losing their ability

to determine which directors are elected.

With expansion comes the need, typically, to hire more

people and to dierentiate job responsibilities, including

a separation o management rom employees. While theemployees may own stock, they typically do not own

enough shares to control a board election.

In summary, as the business grows, the separation

widens between ownership and governance, on the one

hand, and between ownership and the management o

the business, on the other. The increasing complexity

and dierentiation o unctions can easily trigger

disagreements and disputes.

J Vr cA joint venture represents a strategic alliance between

investors with complementary strengths. Invariably, the

parties ownership and control rights to a joint venture

company are subject matter or corporate governance

disputes. Disputes can erupt at the board over the

strategic direction or the joint venture company. For

example, a local joint ventures expansion into another

market can threaten or bring more competition to one

o its co-venturers that has a presence in that market,

thereby leading to a split board. In situations where no

single co-venturer has a simple majority on the board,such disputes, unless resolved properly, can sometimes

lead to deadlocks.

r

Family-owned and -operated businesses are very common.

The amily itsel provides a dened social structure, which

can translate into a successul organization or a business.

However, amilies are not simply groups o people who

band together to conduct a business. They are bound

to one another through emotional, social, economic,

and legal relationships, which have the added overlay o

cultural imperatives. Hence, governance disputes may

result rom amilial clashes and vice versa. The actors that

make amily relationships strong and lasting can translate

into a healthy governance structure. By the same token,

actors that result in rancor or mistrust in the amily can

produce dysunctional governance.


10/93


However, as one generation succeeds the next, ties

among amily members tend to weaken. For example,

the ounders authority over his children may be stronger

than the relationships among the siblings who inherit

the business. The next generation o the amily may

involve cousins, whose own ties may be substantiallyweaker than those o parent-child or sibling-sibling.

Share ownership can become more ragmented over

generations as each amily member divides his or her

shares among his or her children. Cousins do not

respond to the authority o a patriarch or matriarch as

their children would do. The jealousies that stem rom

sibling rivalries can translate into deeply emotional

disputes over the course o the business.

For example, as one generation retires or dies, the next

generation must assume their predecessors roles. This

oten triggers many issues. Do all amily members wish

to work in the business? Are all amily members equally

qualied, and do all amily members work equally hard?

How will succession be determined by line o descent,age, gender, or non-amilial criteria? Will rivalries

and jealousies among amily members play out in the

governance o the business? These and other related

issues can orm the basis or bitter disputes i there is no

process or resolution.

In a amily-owned business, disputes initially would

have been settled by the authority o the ounder.

e x A m p l e

r d

Br

We e com ouder ded, w le oeg pdor Box. he d develoed mre-

ledg, world-cl com, d le w roeol mgeme rucure d reolder

greeme, wc cluded rbro clue. t led, owever, o reve cofc mog e

er. te ouder wo o oo egged erce judcl ble, wc led or more ree

er. Oe broer bg eder, woe o ror o corol e com d ce lv

lele. te oer lrge c reerve, reue o egoe, d vor djudco. te ol eo ec oer roug er lwer. te bord co o x o-execuve drecor, wo were relvel

ucceul eldg e com rom e cofc eec bu dd eurl. te bord meeg

becme gg re were lwer e mo o e reg. te judcr bee eecve becue

judge oe reer solomoc Juce o blce e volved re ere ed o mg

deco o el e com. te lmo-rued broer eveull ecled e cofc b eeg el

rom we g, wo roved ed o be g o dre becue o d meod.

proec woreed or e reolder d e com. te e go ger d e com beg

uerg e due exded o volve oer eolder d rced med eo.

comment

te lc o ucceo lg commo ource o mjor due ml rm worldwde. ml

bue member oe del e roce o ucceo lg or everl reo re oe

fueced b e culurl coex. i ome ce, leder d dcul o le go. i oer, ucceodcuo re ooed becue o e er deco could cree cofc d rovoe crcm.

i ome culure, urermore dcul or ucomorble o dcu leder rereme or de. ye

wou roer ucceo lg, rm re le vulerble er er leder rereme or de. t

c led o ber d embrrg due c rm e com reuo d erormce.

SOURCE: Leonardo Viegas, Director, IBGC; Member, Forums Private Sector Advisory Group


11/93


Independent or non-executive directors are oten

appointed to the board o amily rms with the

expectation that they will help resolve disputes among

amily board members. Yet, the appointed directors

are not always prepared or that role and can nd it

disconcerting and challenging to handle those disputesand remain neutral as the dispute(s) unold(s).

tO REViEW thE skiLLs REqUiRED ORCORpORatE GOVERnanCE DispUtE REsOLUtiOn,

sEE VOLUME 3 MODULE 1.

s-o c

For some companies, the government o the country

in which the business is located may be a signicant

shareholder. In such situations, disputes can go beyond

business issues and involve politics or public policy. Incountries where public policy shits rom government

ownership and industry control to privatization, the

change in governance structure, the composition o

the controlling group, and the companys perceived

objectives can all become ertile ground or disputes.

l c

But what happens when the small, closely held business

amily-owned or otherwise prospers and grows? As

the number o shareholders expands, only a ew o them

will sit on the board and participate in the companysgovernance. It is likely that no single individual or amily

member will own a controlling share o the companys

stock. Capital requirements, or the lure o greater wealth

or shareholders, may result in the company going

public. The company and/or its shareholders may sell

shares to the public to raise capital. Since the companys

shares will trade on public exchanges, the composition

o the shareholders may change daily.

Shareholders oten are institutions such as pension

unds, insurance companies, oundations, venture capitalunds, private equity unds, mutual unds, and hedge

unds. A corporation may begin lie with capital rom an

institutional source, and that institution may be one o the

shareholders or, perhaps, a controlling shareholder.

Once a company goes public, the people who become

shareholders do so or their own nancial investment

e x A m p l e

s-o c d

Br: e.on Br

We e e o Bulgr owed oe-rd

o e regol ul com E.On Bulgr

bewee 2003 d 2005, e goverme

relo w e oreg ower grew

cregl red. i 2005, Bulgr

Ecoom Mer per Dmrov red

ueo bou e ower mgeme

dlg le o wo ower drbuor

Gor Orov d Vr o Germ

E.On. he lo ueoed e lc o dvded

drbuo ould ve occurred we

e le w comleed. te le w ll

dred le 2004 w arl 30, 2005dedle. i cocluded b dedle, e 2004

dvded would be drbued rooroll o

reolder bed o er eu oldg.

E.On Bulgr dd comlee e le erl

2004 bu dd o e dvded romed

uder e le greeme. hg rerucurg

co e wo er ror o e ul le

d boomg coruco cued demd or

elecrc o or. te com med

e dvded were o be lowed o ecer

veme o moderze e rmo grd,

couerg crge e dvded were

beg exred.

comment

i rll e-owed eerre or rll

rvzed come, due c el eru

bewee rve d ublc reolder over

e com or-erm regc gol. te

e reolder m ve ublc olc

execo re eer ror or

cocer or e com. Weer e-owed

or o, bord ould c e be ere o

e com d ll reolder. ye, e

rereeve c d dcul o gore

olcl d ocel reure m cofcw e com be ere.

SOURCE: Bulgaria: Raps Power Distributors or Dividend Non-

payment,Dev, August 9, 2007.


12/93


objectives. Emotional ties do not enter the picture or

shareholders, who may not have any direct relationship

with the companys board or management. Thus, the

companys ownership may gradually become divorced

rom control o its board and management. However,

should these shareholders become dissatised with thecompanys direction or perormance, they may seek to

infuence its governance.

The company may grow through mergers, acquisitions,

or global expansion. Its culture may change. These

developments, in turn, may bring in new directors and senior

managers who have no experience working together.

As the company grows and changes, the possibilities

or disputes increase exponentially. Tensions may

arise among the directors. Companies ounded by

e x A m p l e

crr sr d

u s - uae: s nrk v. l c

sou d lrge reolder, Legum Cl o Dub, re l o ddre everl due.

i Jue 18, 2008 eme, Legum Cl o Dub, wc d o old 25 erce o sou newor ic.,

red everl ue d d would wold voe or oe drecor dg or eleco o e bord

e Jue 20 ul meeg. i d e com oc rce w g er ve-er low d comled e ree drecor ueo ve reded over er o oor oerol erormce, e com

lc rrec d bord... ureove o reolder cocer.

two d ler, sou reoded w doed w Legum eme d eeded o ow more

bou Legum rucure. sou d bue ouce o ol-ecur elecommuco rrucure

e Ued se. i w ucler wo, v Legum, old sou oc.

a e ul meeg, reolder eleced e ree drecor cludg Crm d CEO h M. amed.

Legum weld voe. aerwrd, sou d w wllg o dcu mg Legum rereeve o e

bord, er revew o ero b e bord omg commee d ubjec o e wo de gg

dll ccord.

i md-M 2009, e com med Rcrd n. noeburg rede d ce execuve. he ucceeded

amed, wo coued crm.

comment

t cro-border corore goverce due llure cofcg vew over e com reg. Wle

e dom mor reolder ror o ee greer volveme d beer reur, oe bord

ror bee e reervo o ol ecur ere.

SOURCE: Robert Daniel Sonus in Talks to Address Legatums Concerns.MreWc, June 23, 2008. Available at: http://www.marketwatch.

com/story/sonus-networks-uae-investor-in-talks-to-resolve-dispute.

amilies may have directors, executives, or signicant

shareholders who are the ounders descendants. Or

some directors may have developed emotional ties to

the company. This emotional overlay can easily clash

with the perspective o investors or directors who may

be motivated by their own nancial objectives.

Shareholders and directors with a long-term view o

the company may accept lower nancial returns in the

short run to strengthen the companys uture. Other

shareholders or directors may avor short-term gains.

Disputes around these and other strategic issues may

emerge among shareholders or with the companys

board. Unresolved, such disputes can reach a point

where the disgruntled shareholders seek to replace some

or a majority o the directors, exercising their power

through voting rights that come with their stock.


13/93


disputes aecting inteRnal andexteRnal constituencies

Most companies are likely to experience corporate

governance disputes at some point. These disputes can

all into two broad categories: internal and externalcorporate governance disputes.

Internal governance disputes occur within the company,

especially among directors or between directors and

senior management. Such disputes oten have their

source in the relationship between the CEO and the

chairman and/or other executive and non-executive

directors.

External governance disputes involve constituencies

that are outside the company mainly shareholders.For example, dissident or dominant shareholders may

see a change in the companys policies or in the boards

composition. In some cases, other stakeholders, such as

employees or communities, may have grievances that they

want the board, rather than management, to resolve.

Internal disputes are obviously the most disruptive to

board decision-making, but shareholder disputes are

increasingly troubling directors. Unresolved, internal

and external corporate governance disputes can

impair the boards ability to unction and improve thecompanys perormance.

tO REViEW thE iMpaCt O CORpORatE

GOVERnanCE DispUtEs, sEE VOLUME 1

MODULE 2.

ir d

As boards generally operate out o the publics view, there

is little empirical data related to internal disputes. Yet

anecdotal evidence o board disputes that became public

indicates that boards do not always unction smoothly,

that they sometimes experience discord and strie.

In the United States, listed companies must disclose the

details o internal disputes involving directors when a

director resigns or reuses to stand or re-election due

to disagreements involving the companys operations,

policies or practices.2

Boardroom disputes oten reveal serious issues acing

the rm. The revelation o these problems, in turn, can

lead to large declines in share value, trigger changes in

top management, and disrupt the boards work.

Boardroom disputes can be classied into three broadcategories:

Board processes

Agency problems

Corporate strategy

e x A m p l e

Br c d

u s: p tbr

crr

i 1985, grou o mor reolder, led

b bord member Mcel herm, oug

o o ree deede drecor. te

bord crm e, De Coo, wed o

ee execuve member o e bord. herm

rgued e exg rucure w couer-

roducve d lced bo ovo d em

r due o ee comeo erll. i

ver orm meeg, bo de clmed oreree e ormer CEO legc. herm

reue w eer erd or ollowed; e

bord rucure remed e me. te bord

bl everele coued d led o

oor corore erormce. poex d o

ouce ubl lo or er. t,

ur, led o e rego o everl drecor,

cludg crm, e er ollowg e

due.

comment

Cofc w bord c eru o e o

were e bord become rlzed deecve. Ureolved bordroom due c

led o oor corore erormce.

SOURCE: R. Reuben, Corore Goverce: a prccl Gude

or Due Reoluo proeol. Washington, D.C.: American

Bar Association, 2005.


14/93


d l drr R

u s

t ble rovde clco o 168 due o our cegore bed o e m ue ced b regg

drecor: gec roblem, bord rocee, corore reg, d mcelleou due. Due eode re

deed rom sEC 8-k lg mde bewee 1995 d 2006 co Exhibit 17 (drecor regoleer) cg dgreeme.

categoRy o dispute examples o issues cited Requency

Br pr secl bord meeg were clled o or oce regrdg mor mer

Drecor were gve uce ormo o cl d oero

Reger w orced o voe uo umlr mer wou deue bord dcuo

no revew o corore dcloure d execuve emlome corc

Com mde rore ue o reger me gor 10-k lg

Due over moe (c or oc) owed o reger

Drecor d ocer urce coverge o reewed

65

a prb Mgeme eem o urue ow ere, ucored b e bord o drecor

Exceve oo gr o e CEO

Bord deco regrdg mgeme eroel led o roec reolder ere

Dgreeme w doo o reolder rg l

Cll or rego o CEO/Crm were gored

Bord goverce rcce, eecll CEO comeo d ucceo

CEO ued eudom o o mledg mege o iere oc mege bord

42

crr sr p

Dgreeme over e com dreco

Com moved w rom R&D ocu, o e reolder derme

Lc o clr bue, mreg, d cl l

Dgreeme w mgeme over ow o reore e com o robl

Bord rejeced eover oer would ve dded o reolder vlue

ideue erm o rve oer

Com uderclzed d, ereore, uble o delver o log-erm l

Reger dgree w com deco o eer o $15-mllo cred cl

43

m i Worlce evrome w couerroducve

Mgeme dd o oer dver e worlce CEO weld wge rom le emloee

proll xe were delue

Ueced dgreeme w e com oero, olce, d rcce

18

SOURCE: Anup Agrawal and Mark. A Chen. July 2008. Boardroom Brawls: An Empirical Analysis o Disputes involving Directors. University o

Alabama and Georgia State University. Working paper. Available at: http://papers.ssrn.com.


15/93


e x A m p l e

crr mrr d

u s: h-pkr

i 2002, e bord becme embroled

g over e com reg, eccll

weer hp ould merge w Com. Ever

drecor uored e merger exce or Wler

hewle, e o o hp co-ouder Bll hewle.

soo er hewle voced ooo, e

ml o Dvd pcrd, e oer co-ouder o

hp, ouced uor o e hewle ml

oo. togeer, e wo mle owed 18

erce o e oudg vog re. te

re o e bord w ver vocl uorg e

merger; e uorzed leer o reolder

dcreded hewle oo, g e w muc d cdemc d ever

wored or e com. Wler hewle

reoded b revelg e CEO o e wo

come would receve ol comeo

cge o $115 mllo e merger were o

be comleed. hp mgeme e ccued

hewle o demg mormo bou

emlome erm or eor execuve. te

lo clred e e CEO o hp, Crl

or, would ol ge zble comeo

cge e remed er oo or ree

er d delvered gc cree e

re rce. te due bewee hewle de bord led o col lwu. hewle w

o reoed drecor o e merged hp-

Com com, d e com mge

w ur b e med cmg.

comment

t mou due ow ow eve merger

d cuo c be, d ow el e c

led o col due. Moreover, due

rovde g o ow bue d erol

ue become erwed due ecle.

suc due oe co be coed

w e bordroom. te med become blegroud or e re volved.

SOURCE: R. Reuben, Corore Goverce: a prccl

Gude or Due Reoluo proeol. Washington, D.C.:

American Bar Association, 2005.

e x A m p l e

crr sr d

R: tnK-Bp

Jme Owe, e ce cl ocer o tnk-Bp,

ouced deco o reg augu 2008.

Owe exled w e w levg job

leer o e tnk-Bp CEO Rober Dudle d e

bord. i oo, e bord cofc w

e reolder dd o llow m o ulll

due cl drecor rre,

deede w.

aer umg e CO oo Jur 2006,

Owe becme member o eor mgeme

tnk-Bp. he rced regulrl bord

meeg d w crm o e corore

goverce commee. pror o oo,

e wored or Cevro.

te corore cofc bewee e Ru d

Br reolder o tnk-Bp volved due

bou e com regc develome d

corore goverce. te Ru reolder

ed o tnk-Bp exo erol

mre, eve comeed w Bp. te

uggeed Bp ve deede drecor

o bord o ecure r w e tnk-Bp

bord d duger come. te

Ru rooed Dudle be excged or

deede drecor.

te Ru reolder lo reueed

er Br couerr m blce

bewee e umber o oreg d Ru

exer worg tnk-Bp. Br reolder

d lred reued ee uggeo. a o

Ocober 2008, e cofc w edg e

cour. Dudle d o leve Ru d coued

mgg e com rom brod.

comment

t exmle ow ow reg d goverce

dgreeme c evolve o derucve due m dru e bord wor, rm e

com reuo, d led o e rego

o e execuve.

SOURCE: RBC new, English CFO Resigns.August 4, 2008.


16/93


While some dissension in a group may be inevitable, in

a corporate environment, certain situations signicantly

increase the risk that a disagreement will devolve into a

dispute. Oten, these situations occur during transitions

and beore or ater certain momentous events:

Adopting new strategies. When the company needs to

change course, directors opinions may dier or their

understandings may vary as to what the new strategy

should be.

Mergers and acquisitions. A company can undergo

tremendous structural and strategic changes during

its existence. Mergers and signicant acquisitions can

alter a companys culture and dynamism, particularly

i the company nds itsel embarked on a dierent

course rom the one beore the merger. Not alldirectors may be comortable with the changes.

Fundamental change in the corporation. Determining

the companys ultimate course can exacerbate board

tensions. For example, overtures rom private equity

concerns to buy a company and take it private involve

questions about whether the company is to continue

in its present orm. The possibility o a merger or sale

o a substantial part o the company raises proound

business issues, but it oten has an emotional

component.

Transormation rom not-or-prot to or-prot

company. Non-governmental organizations are oten

inclined to swap the not-or-prot company model

with a or-prot one to attract more capital to meet

their growth challenges. For example, micronance

institutions are increasingly experiencing such a

transormation by establishing themselves as banks to

mobilize deposits and diversiy their product range.

Board disputes at such companies may arise where

some board members ear a mission drit and want

to continue to align the companys social objectives

with those o its shareholders to make prots.

Crisis situations. Not all directors have the same

approach to crisis management. Such situations can

easily lead to counter-productive disputes in the

boardroom. Whether the crisis is due to alarming

nancial results, major quality issues with its products

or services, a natural disaster, directors views on

how to weather the crisis oten diverge. Some board

directors tend to want to minimize the problems

impact while others preer to widely disclose (beyond

mandatory disclosure requirements) the problems even i this may result in a short-term drop in share

value.

Post-crisis environments. When the company

has emerged rom a signicant crisis nancial,

operational, government inquiry, litigation, etc.

the crisis itsel may have been the boards uniying

element. The immediate objective o surviving the

crisis supersedes other goals. Once the crisis is over, the

board may nd itsel without shared goals or strong

bonds to unite the directors. As a result, dierencesmay arise regarding corporate strategy and goals.

Board composition changes over time. Some members

leave, and new people take their places. These changes

dont always go smoothly, especially when they involve

either a large number o directors or the appointment o

a new CEO or chairman.

F O C u S

n evr dr i d

Dcoure d debe re e er o

e bord wor. a gc objecve o

vg dvere, deede bord o

clude brod ecrum o vew d de

e drecor delbero. Derg vew,

erecve, d de oer corucve

debe. t brg more ormo o

e deco-mg roce, cllege

umo, d re ocu. Debe,owever, ould o be ree-or-ll oug

mc. Rule d rocedure ould be

ebled o eure e debe orderl

d roducve.


17/93


Change in board composition. Changes in the boards

composition that involve a signicant number o new

directors in a short time can lead to misunderstandings

and increase disputes markedly. For example, a merger

may involve directors rom the acquired company

joining the acquirers board. Or, an entirely new boardmay be ormed, and the directors may not be amiliar

with one another since they havent worked together

beore. Until the groups members have experienced

working together, the risk o underlying discord and

overt disputes is substantial ly heightened.

Succession on the board and in management. Choosing

successors involves agreeing on the companys current

and uture needs. In turn, these perceptions are

related to understandings o long-term strategies.

When directors do not agree on these undamentalmatters, disagreements and disputes emerge.

New CEO; new chairman. When either the CEO or

the chairman is new, he or she must simultaneously

master his or her new job while developing relationships

with the directors. These daunting tasks are rie

with possibilities or misunderstanding and poor

communication. Trust is imperative or good CEO-

Chairman-Board relationships, and anything that

impairs building and sustaining that trust presents

opportunities or dispute.

Directors nominated by dissident shareholders. Once

someone is elected to a board, he or she must use his

or her best judgment and act only in the interests o

the corporation and its shareholders. Thus, directors

nominated and elected by dissident shareholders

should not simply serve as representatives or

mouthpieces or the specic interests and investment

strategies o those who nominated and voted or

them. However, as a practical matter, when directors

nominated by dissident shareholders are elected, they

join the board with opinions about the companys

ocus and direction that likely dier rom those o the

incumbents. This clash o ideas and vision becomes

immediately ripe or disputes.

Other issues with a high risk o dispute involve ongoing

irritants to the boards unctioning. These include:

G l O S S A R Y

d srr drr

d rr ooe rmmgeme or mgeme olc. or

exmle, dde reolder o hewle-

pcrd ooed rm oer o urce

Com Comuer.

d rr w o cge rmolce d geerll c ooo o e

oer drecor currel eld vew.

SOURCE: http://fnancial-dictionary.thereedictionary.com.

e x A m p l e

c ir d

K: tv sr gr

i Ocober 2008, ke Business Dailyreored

dgreeme mog e drecor o e

cl dvor d oc broerge gec,

tvo secure Grou, ve egeed cocer

over corore goverce o cl mreermedre.

tvo e ecod ce or o me

were bordroom rgue ve reeed

oud mgeme o ecure dur

rm. te ble tvo re beleved o ve

bee red b e com em o re

more cl o ce exo roug

s250-mllo rve lceme.

comment

aloug mo bord due rem e

bordroom, e med re cregl reorg

o erl corore goverce due, wc

lel r e com reuo.

SOURCE: Emmanuel Were and Eunice Machuhi, Boardroom

Intrigues Threaten Tsavo Securities.Bue Dl, October

17, 2008. Available at: http://www.bdarica.com.


18/93


member. Relationships with the CEO can be raught

with opportunities or dissent.

CEO-Chairman diculties. In companies where the

positions o chairman and CEO are separated or in

a two-tier board structure, major conficts can arisebetween dominant personalities who espouse dierent

visions or the company or who ail to understand the

parameters o their dierent roles.

Dissatisaction with content and conduct o board

meetings. Whether the meeting chair is the problem,

or whether the board has been using procedures that

prevent discussion, dissatisaction with the meeting

itsel can become an ongoing irritant.

Failure to respect the boards role versus managements

role. Boards have an oversight and policy role. I

directors begin to cross the line and start managing,

or i management does not respect the boards

role, the company is headed or trouble. Similarly,

management may overstep its role, intruding on areaswhich the board eels are its own. In a two-tier board

structure, this would translate as the ailure to respect

the supervisory boards role versus the management

boards role.

Board-CEO diculties. The board depends on the

CEO to run the company and develop strategies

that the board can scrutinize and adopt. The CEO

typically has a dual role manager and board

e x A m p l e

Br vr ceo d

u s

te ewl recrued CEO ucl relzed e md-c, ecolog-reled com rcl roduc

ced obolecece. W e el o oude coul, e develoed lere rege, oe o wc

e bord, er ome covcg, doed. a r e execug e ew reg, e cured oer

md-c com. te reg d o: e oc rce jumed, Wll sree w , d e bord

udo cme.

severl mo ler, e bord ummoed e CEO, o cgr, o ecl meeg. a meeg, e

led drecor ded m ree-ge leer crgg m w volg com olc, cludg brece

o e ec code. a gl ecl ero, e CEO dd o beleve e d ever voled e ec

code. te bord co le m wou ooru o reue crge. urou, ur, d embrred

b w e CEO erceved o be grol ur co b e bord d udde cge uor, e

reolved o bde me, w ul me-rerced oc veed, d e reg. te due w e

bord w ever reolved eve oug, rom e o o vew o e overll bue, e CEO d drve

eecve regc urroud. Ulmel, e CEO le e com cg el reo.

comment

i ce, eo d obvoul bee buldg bewee e bord d e CEO. te CEO led o bod

w e drecor d uderd er dvdul vew bou e com d bue. te bord

mde o eor o wor w e CEO, exl cocer, d em o reolve e roblem beore e

ecled o coroo. no drecor ced e CEO meor.

t ce llure e oel coeuece we vrull o due reveo d mgeme

ecue re emloed. sce commuco were eecve, ue mmered below e urce, d

ere w o eor collborve roblem-olvg bewee e bord d CEO.


19/93


e x A m p l e

Br vr ceo d

u s: mrr l

Merrll Lc Crm d CEO s Onel

cme uder re 2007 we e world lrge

broerge rm ouced rd-urer loe

o $2.3 bllo. ye w Onel exloro

o merger oble w Wcov wou

e bord owledge d rovl led

o e lo o uor o e rm 11 drecor

w w clled corore mu. Onel w

dmed Ocober 2007.

comment

to vod due over e bord role veru

o mgeme, ll drecor d eor execuve

mu ve cler, commo uderdg o e

bord due d reoble.

SOURCE: NPR, October 30, 2007. Available at: http://www.

npr.org/templates/story/story.php?storyId=15768986 .

One or more poorly perorming directors. Being a

director involves a great deal o work and responsibility.

Directors who do not share the load, or whose

perormance is lacking, hamper the entire board in

accomplishing its objectives.

Potential conficts o interest. When conficts o

interest appear, directors may be pulled in dierent

directions. For example, in a private equity situation

where the CEO will be given the opportunity to

continue in his or her role ater the company is taken

over, the CEOs personal interests may be dierent

than those o other shareholders. A CEO, who is also a

director and pushes an agenda that benets himsel or

hersel, can create disagreements and disputes within

the boardroom.

Personality clashes. Sometimes disputes occur because

personalities clash. Two directors may simply dislike

one another, and their antipathy can poison the boards

atmosphere. Whether directors like one another is not

a criterion or board membership. People must put

their personal and emotional dierences aside when

serving together on a board. Disputes between the

chairman and the CEO with one or the other trying

to dominate the board can be especially disruptive

to the boards work.

Conrontational directors. Periodically, some people

serve on boards who are contrarians or who, because

o personality or other issues, cannot arrive at a

consensus with others when acting as directors.

This type o personality creates a constant series o

disputes. Sometimes, a director is by temperament

a contrarian who makes a point o contesting the

prevailing view. In other situations, particularly

those involving less experienced directors, the

director may not understand that one can argue a

case and participate in a debate without adopting aconrontational attitude. Similarly, less experienced

directors may initially eel that their status as an

independent director requires them to overtly

conront management. Being a contrarian and

challenging prevailing norms can be healthy and

invigorating or a board. However, the challenge

or the board is to encourage independent thinking

q u O t e

Br d

Board disputes usually involve a frms topmanagement and rarely occur just among

outside directors. Moreover, in most cases,

these disputes are related to substantial

rits between the views o directors and

management regarding board unctioning,

agency problems, frm strategy, or specifc

corporate control or fnancing transactions.

This suggests that board disputes are likely

the result o power struggles between top

management and certain board actions.

anup agRawal

pROEssOR, UniVERsity O aLaBaMa

maRK a. chen

pROEssOR, GEORGia statE UniVERsity

SOURCE: Anup Agrawal and Mark A. Chen, Boardroom

Brawls: An Empirical Analysis o Disputes Involving

Directors. July 1, 2008. trd aul Coerece o

Emrcl Legl sude per. Available at: http://ssrn.com/

abstract=1101035.


20/93


tO REViEW pROCEssEs anD tEChniqUEs tO

pREVEnt anD REsOLVE BOaRDROOM DispUtEs,sEE VOLUME 2 MODULE 1.

er d

Not many years ago, directors rarely had any directcontact with the companys constituencies other than

management. The rationale or the boards isolation was

simple: To ensure that the company spoke with a single

voice, boards let it to management to communicate

directly with outside stakeholders, including

shareholders. Times have changed. Shareholders are no

longer passive. As a result o high-prole scandals and

growing mistrust, shareholders are now more actively

scrutinizing companies strategy and perormance while

increasingly seeking involvement in board matters.

Dominant shareholders (large institutional investors,

or example) oten loudly express their disagreements

with board policies and actions. Increasingly, unhappy

shareholders more requently nominate their own slates

o dissident directors when they have ailed to resolve

their issues with the board. Disputes that go unresolved

and debate and to arrive at consensus without the

deliberations devolving into internecine disputes.

Adverse regulatory nding. Management is charged

with running the company in accordance with all

applicable legal requirements. I regulatory agenciesaccuse or determine that the company has violated

a regulation, recriminations can start and become a

source o dispute.

Executive misconduct. When the CEO is accused

o misconduct, or i the board believes the CEO

has engaged in misconduct, whether true or not,

misunderstanding and dispute could arise.

When the circumstances described above occur or are

even suspected boards should recognize the increasedrisk o a dispute ollowing shortly thereater. In such cases,

risk-management responsibilities involve recognizing the

heightened risk and developing or activating processes

and procedures to resolve disagreements beore they

become disputes, or, i the disputes occur, to bring

parties together to develop a consensus.

e x A m p l e

crr mrr d

gr: d tk t-o

te mjor o t-Ole reolder d gve e go-ed arl 2005 or e reegro o e com

o Deuce teleom, e Germ elecommuco g. ye, Deuce teleom could o move orwrd

w l o reegre erel led iere rm t-Ole becue everl reolder ooed

e oer erm. t-Ole ed e cour o llow merger w Deuce teleom o be comleed dee

objeco rom dde reolder. ye e cour ruled g e merger, d t-Ole d o el e

rulg b e regol cour Drmd. a er ler Jue 2006, e ederl Cour o Juce clered e

w or e merger.

comment

t ce ow ow legl ble reled o corore goverce due c del mor regcdeco. ye, Deuce teleom roblem w reolder dd o ed ere. some mor reolder

coued o coe e re excge ro o e merger, g dd o refec e vlue o t-Ole

re. i Mrc 2009, cour ruled e Germ elecommuco g mu rembure ormer t-Ole

reolder. te co could ol $252 mllo. pl ll coder e gure oo low d could le ew

coml w e cour.

SOURCE: Agence France Presse. November 29, 2005.


21/93


crr sr d

c: evr m s i.

i re relee ued o Mrc 3, 2005, e Dde sreolder o Evromel Mgeme soluo

ic. (EMs) ouced e d led cour dv deged o eure e secl Meeg o EMs

reolder be eld ceduled o Mrc 17, 2005. te meeg w clled becue e ve comleel lo

codece e curre bord o drecor. te drc cge e vo, dreco d reg o e com

bee drou or ll reolder. te beleve e curre bord emg o del e secl Meeg

order o llow me o coue w e reg o ellg o core e d dvo o EMs.

te Dde sreolder beleve e wrog reg or e com d wll ol coue e

roce o erodg reolder vlue. O Jur 20, 2004, e d e curre bord w ouced, EMs re

rded $3.60 er re. te re rce cloe o rdg o e toroo soc Excge o Mrc 2, 2005 w

$0.78 er re, reduco o 78 erce.

te reolder o EMs mu be gve e rg o elec le o drecor wll mmedel x e crcl

cl e o EMs d u rore bodg lce o EMs c bd o gc corc. Ule e

Mrc 17, 2005 meeg roceed, ew bord eleced d rore cg u lce, EMs wll loe

e ooru o ubmg bd or mllo o dollr corc d EMs d reolder ere wll be

urer rrerbl dmged

te Dde sreolder beleve EMs ree bue model cged o drcll o loger

uor e ol oluo roc bu rer become orgzo w lo o de, dreco d

vo. te Dde sreolder beleve e orgl vo d reg uo wc EMs w ouded, o

become ol egred ervce rovder o e evromel remedo dur.

comment

sreolder cludg dde d mor reolder, re cregl cllegg mjor bord deco. i

reolder oo d ueo re o del w mel, roer mer, due re lel o eru, d,

ur, be dcloed o e med d/or broug o cour.

a ce, e co o ee due c be exremel g. te EMs 2005 aul Reor ed: te ormer

prede d CEO, uo ermo, eed umber o u g e Com d Bord o Drecor. tee

co, log w e oced co o deedg g dde reolder reuo led b e ormer CEOreuled rerucurg crge d oer em o $5.3 mllo durg e welve mo eded December 31,2005

comoed o:

$1.0 mllo everce exee or emloee ermed rougou e Com;

$2.0 mllo o corore legl, orec ccoug d coulg crge reled o reorgzg e oce o eCEO;

$1.7 mllo or e eleme o lgo broug bou b e ormer CEO d reled re;

$0.3 mllo o reme cloure co d co o ex leed cle; d

$0.3 mllo ddol co oced e ecl reolder meeg;

Oer co reled o e reorgzo o e Weer Cd oero were cled r o dcouedoero.

urermore, e reor oe , Wle e obl o lgo r ced b mo come, EMs emo o 2005 volved lgo w vrou re oced w ormer CEO r Daddro oed

re o vbl bue. te ucer cued b ee legl co w brrer o rerucurg

log-erm lo, rrgg or uure cg d ecurg bodg reured or o w gc ew corc.

te eleme egoed 2005, d comleed e r urer o 2006, reduce coug co d, more

morl, remove gc ucer bou e uure o e Com.

SOURCE: Business Wire, EMS Dissident Shareholders Seek to Protect Shareholders. Available at: http://www.allbusiness..com/company-activities-

management/company-structures-ownership/5029597-1.html. Environmental Management Solutions Inc. Annual Report 2005 Business Wire, March

3, 2005. Available at: http://www.englobecorp.com/pd/annual- report /2005_ Annual_Report.pd.


22/93


e x A m p l e

dr d

Br: pr

i Jue 2008, bodolder or e Bulgr uel reler perol were cocered bou e com lure o

dcloe uded, coolded cl gure or 2007. perol d lced Euro100-mllo bod oerg

w 8.375 erce couo Ocober 2006, ee bod rded o e Lodo soc Excge.

a me, e bodolder d e coolded reor w wo wee le d er reue or

ormo rom perol we uwered.

O e record, com ource blmed e del cl reorg o e le o 75 perol llg

o d uel be o locl rvl Luol. te del rel rggered e eed or correco e 2006

d 2007 coolded reor.

perol d lred reved uwrd 2.3 me e ucoolded ro or r urer 2008 o BGn103.7

mllo reul o e Luol rco.

te bodolder lo comled e d o bee ble o ob ormo bou l or edg

e roceed rom e Luol del.

a perol bodolder reveled e were ver w e bue model o e uel reler d w

e mcble reoluo o w Luol. Bu e c e bod rdg below oml vlue

ource o cocer, d e would le mgeme o ed lg o e com cve.

perol ouced would ve mo o e roceed exo o bue o ucl oe

e lo o mre re er e le o 75 oule o Luol.

however, e le o zeble cu o e rgger eve could rom bodolder o ee

ccelered reme o er rcl, ccordg o ome bodolder.

Uder e oe codo, perol oblged o ve e roceed rom e le o perol o mlr

bue cv or oerwe ee veor coe o cel e ud o oer bue.

Cloud ceed bove e Bulgr uel drbuor er e globl rg gec c Rg o seember

30, 2008 lced olvec d bod rg o Rg Wc negve.

te move w rggered b bd corore mgeme edg BGn463.5-mllo o e le roceed

o re bubc e ecod urer 2008 d, oer uroe veerg o rom e bue exo

l ld ou o e gec.

te uel drbuor reurced oc wor more BGn90-mllo o drbue dvded o mjor

ower e bodolder exee, reeg e com lud, c d.

te gec wred , ule perol delvered exr ormo o e wrogdog, rg ouloo m

be dowgrded o egve. perol old c e re bubc emorr veme.

comment

t ce llure ublc due bewee corore bodolder d reolder bdl refec o

e com d bord. te bord execed o be more rre bou e com l d o

reolve e due o reure bodolder, revere e bd rg, d mrove mge e med.

SOURCE: Dev Dl, June 4, 2008.


23/93


e x A m p l e

sr V d

R: utK

i December 2004, dee e deede drecor objeco, Utk bord decded o ell 52.5 erce o

re teleo-al or $6,196,575. Utk deede drecor beleved rco rce w

below mre vlue bed o eme rom rg gece.

i December 2005, er eme w cormed we Mts boug e remg 47.5 erce o teleo-

al rom rd r or $32,600,000. te re vlue o teleo-al w ve me ger December

2005 e e revou er we e com corollg e d bee old.

Uder Ru lw, loug e bord ee e moer vlue o e, vluo o be bed

o r mre vlue.

O Jue 21, 2007, e iveor proeco aoco, o bel o Utk mor reolder, led cour

co g Utk bord or dmge uered b e com.

te mor reolder rgued e lo o ro due o e le o udervlued re 2004 cued

Utk o uer ubl dmge. Utk mor reolder reueed Utk drecor dem e

com or dmge emed $8 mllo.

O augu 30, 2007, e Mocow arbro Cour (Commercl Cour) dmed e ce er r erg.

Ded w e deco, e iveor proeco aoco coug o ee redre o bel o

mor reolder.

comment

Worldwde, mor reolder re cregl cruzg mor deco mde b bord d re

demdg co e eel er rg ve o bee reeced or ce e beleve e

bord mde deco w o e com be ere. t exmle lo ow mjor due

m re mog reolder eecll bewee corollg reolder d mor reolder.

SOURCE: Investor Protection Association, Russia June 8, 2008.

can threaten the companys governance structure and

perormance.

Several situations in particular can lead to disputes

between the board and shareholders. In Finland, or

example, the most common dispute is related to thevaluation o share prices during a merger or acquisition.

It is typically a battle between the majority shareholders,

who initiate the transaction, and minority shareholders,

who ear they might be sold short. Unresolved, these

disputes can lead to high-prole court cases, heighten

reputational risk, impair governance, and threaten to

change the companys course. Not all shareholders

act and think alike. Shareholder disputes involving

shareholders can become extremely complex given the

with various viewpoints involved.

Matters and areas that are increasingly leading to battles

between the board and the companys shareholders

include:

Mergers and acquisitions. Disputes between

shareholders and boards regarding a proposed

acquisition or disposal o a substantial part o the

companys assets are common.

Takeover procedures. Shareholders increasingly

scrutinize terms and conditions o a proposed


24/93


e x A m p l e

sb d

u s: e mb

a grou o eo ud d uol veor ccued Exxo Mobl Cor. o lg o c o globl wrmg

cocer d demded meeg w e com bord over e ue.

Exxo Mobl d log bee rge o evromel d cv or ueog e cece bed globl

wrmg.

Demd or e com o do more o ddre clme cge cocer d ve reewble eerg

ource gered momeum e d ed o e com ul meeg, ceduled or M 31, 2006

Dll.

te grou, comred o eo ud ruee rom eg e d new yor C, well eg oer

uol veor, d e were cocered Exxo dlg o e clme cge ue le lggg

bed eer, uc Bp d Rol Duc sell.

Exxo Mobl mg mve be w reolder moe e world ddco o ol wll o be or

decde, Coeccu se treurer Dee ner d eme. a veor, we re cocered Exxo Mobl o ucel rerg or omorrow eerg d ru e r o lggg gcl bed

rvl.

i reoe, Exxo d d ogog dlogue w e grou member d w eg u meeg

Jul 2006 o dcu ee ue.

however, e Jul meeg w ol execed o be w Exxo , oewom or e veor grou d,

og e were eeg udece w e com bord.

Exxo releed ul corore cze reor, g reodg o e clme cge ue b

mrovg eerg ecec d cug greeoue g emo, mog oer g.

i r, our oo clude e c we recogze e ccumulo o greeoue ge e

Er moere oe r m rove gc or oce d ecoem, Exxo Mobl d

eme. We beleve ee r ju co ow, bu e eleco o co mu coder e

ucere rem.

comment

sreolder re oldg come ccouble o er oblgo or uble bue rcce. Eggg

dlogue, rg ower or e ue, d demorg commme ddreg reolder

cocer re ome o e w wc bord c reolve cofc.

SOURCE: Reuters, Investors Attack Exxon on Global Warming. May 19, 2006 Available at: http://www.enn.com/top_stories/article/4288 .

takeover, including compliance with internal (e.g.,

articles o association) and/or external (e.g., listing

rules, securities legislation) rules.

Share and bond valuation. Disputes between share-

holders and the board on the share/bond valuationmethod are increasingly common when there is a

compulsory acquisition o the stakes o a small group

o shareholders rom a joint stock company by means

o cash compensation (squeeze out). In Germany,

or example, a pool o shareholders owning at least 95

percent o a companys shares has the right to squeeze

out the remaining minority shareholders by paying

them an adequate compensation. The decision toenorce a squeeze out must be made by voting at

the general meeting. Since the major party already


25/93


commands the vast majority o votes, this usually is a

mere ormality. The compensation value is determined

by the companys nancial situation when the general

meeting occurs, the minimum compensation being

the shares average price during the past three months.

Lack o disclosure. Disputes between shareholders

and boards oten concern the poor quality o nancial

disclosure and the lack o nonnancial disclosure

based on best practice and regulations.

Shareholder agreements. When acquiring a

companys stock, major shareholders increasingly sign

a shareholder agreement that describes the companys

governance, including bylaws on the sale and purchase

o shares, investment policies, etc. Although they can

help protect investors, these agreements can also be aertile ground or disputes.

e x A m p l e

cr-Brr d

m: nk - h

ne, ic. d e e o correc worer-bue roblem cor ue Ml. te lec

rel g d co refec cocer bou e cour croc lbor orge d ow ec

cor worer.

ne lleged bue hex iegred Bd., kul Lumur-bed grme mucurer ow cor

roducg ne t-r. ne, wc bed Bevero, Orego, d d comleed l vego

o clm o ucceble lvg codo, woldg o worer or, d grg o wge

beg er aurl elevo reor lleged worer mreme hex.

Mcel sw, execuve drecor o hex, d e com me w ne comlce ocl o dcu

volo o ne code o coduc or oreg corc mucurer, d hex reced e

ue. We ve bee worg or ne or e 15 er, sw d, mg e llego o

bue b e aurl reorer were ou o rooro o e c.

ne el bled crcm o lbor rcce ce e 1990.

commentiveor d eolder re cregl reurg come o dere o rcce eure emloee

worldwde ve ume worg codo. a reul, CsR d goverce olce doed b erol

come c reul due w er ubdre or uler. tee cro-border due c be urer

comlced b derece lw, ocl more, judcl rocee, d corore goverce rcce.

SOURCE: te Wll sree Jourl a.August 4, 2008.

Non-respect o corporate governance best practices.

With the adoption worldwide o corporate

governance best practice codes and stock exchange

listing requirements, shareholders can review the

governance o the companies they invest in by

accessing the companies websites and comparingcompany practices against governance norms.

Disputes may arise over the interpretation and

implementation o codes and the e ective application

o the comply or explain principle as provided in

many corporate governance codes.

Discharge o individual board members/executives.

Shareholders more actively express their satisaction

or dissatisaction with board members. Disputes

may erupt over the perormance o individual board

members and/or the alleged mismanagement o asenior executive.


26/93


Edoe

1 This denition o corporate governance was provided by Sir Adrian Cadbury in 1992 in the Report on Financial Aspects of Corporate Governance in the United Kingdom.

London: Gee and Company. Available at: http://www.ecgi.org/codes/documents/cadbury.pd.

2 Anup Agrawal and Mark. A Chen. July 2008. Boardroom Brawls: An Empirical Analysis o Disputes involving Directors. University o Alabama and Georgia State

University. Working paper. Available at: http://ssrn.com/abstract=1101035.

.

Nomination/appointment o board members.

Disputes can easily emerge among majority and

minority (or dissident) shareholders and between

shareholders and the board over the nomination or

appointment o board members and senior executives,

as well as over the nomination criteria.

Remuneration/bonuses o board members and senior

executives. Disagreement over the remuneration

and/or bonuses o board members and senior

executives, as well as with the boards compensation

policies is, eectively, a disagreement with the

boards perormance as overseer o the companys

management. I the boards compensation decisions

are rejected, directors suer public embarrassment,

and it becomes clear that the board and the

shareholders, whose interests the board represents,are not in alignment. Say on pay, in which

shareholders express their approval or disapproval o

senior executive compensation, is a sensitive, highly

publicized issue that can trigger disputes.

In jurisdictions where say on pay is not required, the

question as to whether the board should adopt this

practice can itsel be contentious.

Corporate social responsibility. Social and ethical

issues involving the companys broader range ostakeholders are increasingly becoming an issue

or shareholders, especially institutions that invest

across borders. Disputes may arise over shareholders

concerns about employment policies and/or the

companys interaction with the communities or even

the countries in which it does business.

Sustainability. As the world increasingly ocuses

on matters involving sustainability, questions arise

about the companys long-range uture and the

strategies that will increase the companys value while

working to protect the environment and operate in a

sustainable manner.

Cross-border operations. Globalization and cross-border trade increase a companys risks that social,

political, and cultural dierences can create deep rits

between the company and its external constituencies.

Reputational and operational risks can increase

dramatically.

When a companys business crosses national borders, or

when shareholders and directors come rom dierent

countries or cultures, the potential or a dispute increases.

Dierent perspectives may exist as to a companys

purpose and whether that purpose involves creatingwealth or the company and its shareholders, or whether

the company exists principally to perorm a certain

public unction. For example, in some countries, the

primary purpose o utility companies, such as electric or

water companies, is serving the public good. Directors

and shareholders rom dierent national or cultural

perspectives may view the same companys principal

purpose as creating shareholder value as measured in

nancial terms. Thus, dierent national, political, or

cultural perspectives can result in decision-makers using

various criteria to shape their view and decide theirvote. These dierent perspectives can become the basis

or severe disputes deeply rooted in cultural values and

perceived national or political interests.

Other issues involving culture and national law or policy

can easily exist in the ethics arena, or in situations in

which the policy o one country diers rom that o

another. Global companies may have conficting laws

and dierent ethical mandates to address.


27/93

Cmpans, t bas, nsts, an t ky staks

n t ca abt cpat gnanc spts bcas nc

ty as, ty can am t cmpany. lt ncck, cpat

gnanc spts can a a gy ngat mpact n t

cmpanys ptatn, patns, an pmanc an tby

a t a ss n sa a an makt stanng.

Atg t ct s t tatna ay sng spts

n many jsctns, t mpact tgatn cpat

gnanc spts can b gy cnt-pct. T

pcngs can nfam t spt, ncas ts cst, amag t

cmpanys ptatn, an ay t stn statgc sss.

M, cpat gnanc spts tn ack t ga

bass t b t n ct, a pms m n psna sss

an/ bsnss jgmnt tan n ga pncps.

ThiS Module reviewS

impact cpat gnanc spts n t cmpanysptatn, patns, pmanc, an sa a

impmnts an mts tgatng cpat gnancspts

N t cty a t cpat gnanc spts

voluMe 1 : rATioNAle

Module 2: wy Ca abt Cpat Gnanc dspts? 1.2


28/93

MODULE 2 Why Cae ab Cpae Gvenance Dpe? VOLUME 1 25

Shareholder activism, or the ability o shareholders

to assert their power as the companys owners to

inuence its behavior, is a positive trend. Shareholders

who scrutinize a companys perormance and question

its strategic decisions are part o a healthy corporate

governance system that helps protect shareholder rights

and keeps board members and senior executives alert.

Yet, i boardroom disagreements and/or shareholder

conicts are not dealt with properly, they can devolve

into acrimonious disputes that undermine a companys

operation and perormance. Let unchecked and

unattended, these disputes escalate quickly into public

matters that can have severe, long-term consequences or

the company and its key stakeholders.

When disputes become public and are discussed

in the press or trigger litigation, they indicate an

important ailure o governance. They demonstrate

a mismanagement o conicts within the board or

between the company and its stakeholders mainly

its shareholders, but sometimes also its suppliers, clients,

creditors, and the communities in which the company

operates. Corporate governance disputes reect the

inability o executive managers or directors to address

major strategy issues and conicts.

TO inD OUT MOrE abOUT inTErnaL anD

ExTErnaL cOrpOraTE gOVErnancE DispUTEs,

sEE VOLUME 1 MODULE 1.

Corporate governance disputes undermine confdence

in the company and harm its competitive position.

External and internal corporate governance disputes

can impair a frms ability to prosper and grow. Unless

resolved quickly, and especially i they become the

subject o a lawsuit and media headlines, governance

disputes can weaken the capital markets confdence in

a company, threatening its ability to attract capital and

retain investors.

Disputes putting the Companyat Risk

In the boardroom, disagreements are oten

unavoidable especially when the board is composed o

independent-minded, skilled, and outspoken directors.

This is not a bad thing. There should be debate in the

boardroom, and decisions should result rom a process

in which directors consider all reasonably available

inormation. A board that never argues or disagrees

is most likely to be an inactive, passive, or inattentive

board in other words, an ineective board that is

neither ulflling its oversight unction nor carrying out

its duty o care.

E X A M P L E

t nd r Dr Brdr

ud s: gr mr

Twetet cetu ue uu aled slo(1875-1966), wo w geel Moto m

om 1937 to 1956, teed te mote o

odoom dete umm u te ed o

gM eeutve meet ollow:

getleme, i tke t we e ll omlete

eemet o te deo ee, e d.

Eveoe odded te ed eemet.

Te, e dded, i ooe we otoe ute

duo o t mtte utl te et meet to

ve ouelve tme to develo deemet, d

e ome udetd o wt te

deo ll out.

Comment

bod ould du d dete tte

deo. Deemet e ot dute, ut let

uoke, te m eome dute.

Source: Te Eoomt, G: Ald Slan. Janay 30,

2009. Availabl at: http://www.nmist.m/bsinss/managmnt/displaysty.m?sty_id=13047099.

moDule 2Why carE abOUT cOrpOraTE gOVErnancE DispUTEs?


29/93

VOLUME 1 Why Cae ab Cpae Gvenance Dpe? MODULE 226

The ull implications o disputes generally do not become

clear until the dispute becomes public. In most cases, the

dispute becomes toxic as soon as news organizations

and/or bloggers report inormation about it. The

companys reputation is immediately aected, creating

doubts or shareholders and other stakeholders (e.g.,potential investors, clients, and vendors). Investors may

want to sell their shares. Credit agencies may revise their

ratings downwards. Creditors and suppliers may turn

less exible in the business terms that they are willing to

accept. Employees may start questioning their employers

uture; the most capable ones may leave to work or better-

run companies. In short, the company may come under

tremendous pressure to resolve the conict and restore its

share value, as the ongoing dispute plays out in public.

FRom healthy DeBate to pathologiCal Dispute

ignoRe inteRnalDispute

DisagReement

BoaRDRoom DeBate

DisagReement

shaReholDeR aCtiVism

ignoRe eXteRnalDispute

DisCuss | ResolVe

DisClose DeCision

ReaCt ConstRuCtiVely ResolVe With minimal haRm

ReaCt ConstRuCtiVely ResolVe With minimal haRmDispute inFlates

DisCuss | ResolVe

Company in tRouBle

Dispute goes puBliC

BoaRD splits shaReholDeR Fight

DisClose DeCision

gooD goVeRnanCe

The media can be a critical element in a disputes

unolding. While shareholders and stakeholders have

a right to be inormed about ongoing disputes, senior

management or the board must ensure that the supply

o inormation is properly managed i they dont want

the situation to spin out o control. The media areoten used as a tool by parties to a dispute, dissident

board members, and shareholders to raise awareness

and pressure the other party(ies) or the company into

addressing the dispute and fnding a solution. This is

especially true when large corporations are involved, or

there are social and ethical issues. Boards must be able

to communicate eectively and in a timely manner with

the media at all times, but especially when the company

aces a crisis or is entangled in a dispute.

negatiVe meDiaheaDlines

laWsuitsDiReCtoR

Resignations


30/93


P r A C t i C E

C Crr gvrc D

all ome ue etve oeuee

om oote ovee dute. Te tul

mt e dult to meue. i mot

e, te mt udeetmted d ol

tke to out te det ot o te dute,

utle, d te oted lel ee

eell te dute oe to tl. We

e dute mt, te ollow

to ould e odeed:

cot o te dute elto to te vlue ote mtte dute

nume o t meme volved delwt te dute

amout o t tme volved del wt

te dute

Deee o tto wt te duteoutome

Level o eove om te dute

idee o detuto ueelto

idee o deto d / o eo eeutveeto

idee o lo o eolde

idee o lo o ue ootute

nume o oote tte deo

deled

amout o oodwll o eutto lot

amout o etve med ovee

Ote?

f o C u s

ic Crr gvrc D

altou om m e do well,

oote ovee dute tt e let

ueked d ueolved ve te

ollow etve mt o te om:

leVel 1

Dvet odoom eoue

Dut od wok

Otut om oeto

Del mjo tte deo

leVel 2

Udeme om eutto

redue mket e

Dete veto

cue e vlue to ll

Dvet oote l eoue

Dvet oote um eoue

Weke tel d etel tkeoldetut

pomt eto o od meme deo eeutve

leVel 3

im owt

iee ovee ot

Etl ltto ot

cue ekdow tkeolde elto

aet oote eult


31/93


f o C u s

Crr gvrc D

d md

i ueolved d let to ete wtout e

ddeed ukl d eetvel, te dute wll

ttt med ovee. gve te oleto o

ommuto teoloe, mjo oote

ovee dute do ot em dde o

lo.

ir c b d r

vr dcd d b:

pt(e) to te dute (e.., eolde,deto, eo eeutve)

Wtlelowe (e.., emloee, edto,let)

Te om (e.., ol delto tote e)

stkeolde, lud ddet eolde

Lwut (e.., ul l)

R r d dcr cd:

stete t oto

attt tteto to te dute

at o te ommo ood

le lwut

slee umo

Bf d dcr cd:

iom eolde d tkeolde

geet eue to eolve te dute

cot d u umo

R d dcr cd:

cet tl, mled omto ote dute

ie umo

Elt te dute (e.., te medeome ttleoud o te dute)

cet ul emmet

E X A M P L E

pbczd Brdr D

ar: n ar B

i lte 2003, to ee o ueo, cle

alle, m o te ntol autl bk,

out to omote oe o deto, gm

Kee, to te oto o deut m. Et

out o e deto eed wt t oe. some

lt eleve tt te loet ev deto,

ctee Wlte, voed e ooto eue

e oveted te m eel. Te od

deded to otoe t deo te te to

e lt.

i eu 2004, alle d te bk m

deto, k cutto, eed te e o

mjo oe-ee td dl. T tme,

gm Kee w umoul voted te

k ew m.

yet ltou ctee Wlte, wo ed te

od udt ommttee, voluteeed to oveee

te pewteouecooe-led vetto to

te aUD360-mllo td lo, te od ve

te tk to Kee, wo w lo te ed o te

k ommttee. Outde eleve tt t deo

teed te ollo etwee two -ole

deto, dut te od ollelt.

ide umed tt Wlte eleved te pwceot would e ued cm Kee to

emove e om te od. se uetoed pwc

deedee, ued te m o ot

omto wt ote deto, d lmed to e

te vtm o vedett. To ed o tm,

te m deded to e pwc vl, Delotte,

to vette e wee pwc ould e odeed

to e ofted. he lo ed lw m to oveee

pwc wok

Wlte, utemoe, tzed te k ommttee,

w w et u te evou e ut d ol

met oe eve tou t kew out te leulto oe ove te k oe-

ee td tvte.

Wt teo u wt te od,

Kee ued Wlte M o lek

omto to te med. Wlte etoted tt

e w omto te et teet


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o eolde, ut tt e d eve dvuled

odetl omto.

i M, we te pwc eot w eleed,

Wlte d to ve u e oto o te

udt ommttee. altou te eot ddt le

out Wlte, t dd ot to ll deto ee

to od ovet ue. ellow udt ommttee

meme Kee d Ke Mo wee omoted.

Wlte eted te od deo to emove e

om te udt ommttee ut eeed oe

ove med m wed eot to out

e.

Te m wote to e o M 18, tt

e d ete odee o tt o te ote

deto. seve o-eeutve deto ull

oued te teto o ll etod

eel meet to vote e o te od.

Wlte outeed tt te od d led to

ull vette te td dl d tt ll

te deto ould e we te tee-e

oll tem ee, wtout etemet eet.

i al, te od oued tt t would old eel meet o eolde o M 21 to

ode ve deet eoluto:

remove ctee Wlte om te od

remove ll o-eeutve deto ove tme

ceue te od

reuet e o ew

Ee vew to te e-eleto o o-

eeutve deto d etemet eet

Ude eue, Wlte d two ote deto

(lud Mo) eed el M, d te

eel meet w eled. cm Kee

eed to te dow oe Mel ce, wo

w oted to te od Jue, took ove

te ew m seteme.

a oo te otmet o te well-eeted

Mel ce w oued, nab e

eed 1.43 eet.

Comment

altou te td dl teed t

l ulzed dute, te od eme

dvded eue o ueolved ue etwee te

m d ddet deto. a eult, te

od lot t ou d led to ull te om

out o mjo . Eteed te dute, te

od t led to t te om et

teet. T emle lo ow ow te med

eome mott ttleoud o tel

dute we ue e ot oel dled

wt te odoom t el te. T e

etemel dm o te om eutto

d led to lo eolde odee.

Source: sde Mo held Ole, Hads rll at NABv Fign exhang Sandal. Mah 12, 2004. Availabl at:

http://www.smh.m.a/atils/2004/03/12/1078594547046.html. NAB Pss rlas, chaiman otlins Bad rnwalPgam. Apil 6, 2004. Availabl at: htt p://www.nabgp.

m/0,,46793,00.html.


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boards attention and resources are diverted, which can

lead the board both to neglect its oversight unctions

and to reeze decision-making. Chaos and lack o clarity

can then spread quickly throughout management ranks.

While on the surace, the companys operations may

appear to be on track, managements ocus and efciencycome into question.

To appreciate the harm that unchecked internal

disputes can cause, one must understand how boards

can take actions to unite a corporation. Unlike the rest

o the corporation, the boards structure does not have

a built-in arbiter o disputes.

ic ir Crr gvrc

D

Internal governance disputes are those that arise within

the company itsel or example, among directors,

or between the board and the CEO. Whether these

internal disputes become public, they can impair aboards operation.

A board mired in dispute cannot provide management

with the direction it needs or a strategy o long-term,

sustainable growth. When governance disputes occur,

board and management can lose ocus on their roles in

creating value or the company and its shareholders. The

E X A M P L E

ic Crr gvrc D

ud kd d ud s: Cdbr scw d hr

i 2007, Todd sttze, e eeutve o cdu swee l te Uted Kdom, met wt outet

t te U.s.-ed hee co., rd Le, to ooe te eto o lol oetoe oweoue.

cdu to Euoe mket eee would omlemet hee not ame tet, stlze

ueted. Te omed cdu-hee

ADR Toolkit Volume1

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