What Went Wrong in the Boardroom part II

Just when you think you've heard all the boardroom horror stories-think again.

Most of us are aware that a board member has a personal responsibility and liability to the shareholders of their organisation.  If board members make the wrong decisions they may face very serious consequences such as:

  • Being banned from serving as directors in the in the future
  • Fined
  • Found liable for damages
  • Jail time

With the possibility of facing jail time at the back of their minds, it's easy to see why corporate survival and success are a board's greatest concerns. As a board presenter, then, your role is to address these concerns first and foremost, as clearly and succinctly as possible.  Remember-without identifying and discussing the risks that keep board members awake at night (the elephants in the room!) it will be very difficult to calm the board members concerns.

What I bet you didn't know is that board presentations are dangerous not just for the board members, but the board presenters too. Many promising executive and board careers have been blighted by a poor presentation in this arena. It is the highest level of corporate life and the stakes are similarly high. It is a strange and uncommon environment where protocols, behaviours and legal liabilities may be very different from those in executive life.

Two recent court cases in Australia highlight the importance of effectively presenting to boards to avoid future risks. With these court cases, you will have a greater understanding of how there is a responsibility upon executives presenting in boardrooms that is as great as, if not greater than, the responsibility of the directors who will make decisions based upon those presentations.

In the James Hardie case (insert a footnote reference to NSW Supreme Court decision in Australian Securities and Investments Commission v. MacDonald (No. 11) 2009) ASIC alleged that executives, including the CEO, Company Secretary and General Counsel failed to advise the board that a stock exchange announcement was worded "in too emphatic terms".

The court agreed. The court also found that the CEO and CFO failed to discharge their duty of care and diligence by failing to advise the board that reviews of the proposed course of action were limited to the logic and legality of the course and did not consider the appropriateness of the underlying assumptions.

It is obvious from this case that there is a responsibility upon executives presenting in boardrooms that is as great as, if not greater than, the responsibility of the directors who will make decisions based upon those presentations.

In the OneTel Case (insert a footnote referencing) it was alleged that the executives 'profoundly misled' the board as to the true state of affairs of the company. After a long and detailed court examination the court held that the executives had not misled the board.

The board reports and presentations had been sufficient for the directors to have formed a correct view of the financial status of the company.

In the James Hardie case much attention has been focussed on the reputational damage, legal costs, fines and banning orders (a court prohibition on being involved in the management of a corporation which effectively prevent individuals from returning to their former employment even at a different or smaller company) imposed on the directors. The executives were found guilty of more offences than the directors and faced larger fines and longer bans. The lack of public interest is not a reliable indication of leniency.

In the OneTel case there were potential liabilities for $92 million stemming from actions taken subsequent to the board reporting that was the focus of the court's inquiry.

Presenting in the boardroom is a high risk activity.

To receive the proper and careful presentation needed to avoid finding yourself in the above situations, please visit www.boarddirectorspresentations.com and learn more about expert Julie Garland McLellan's conference speaking, coaching and mentoring or in-housing training services.

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