Can a director serve two interests? – a dilemma

Xevach is a director on the board of a government trading enterprise. He also chairs the governance committee. The company has a significant geographic monopoly and owns and operates a vital piece of infrastructure in the industry. One of Xevach’s colleagues on the board, Yolanda, is a former director of a larger, competing, government trading enterprise from a neighbouring geographic area. She has worked in the industry for all her life and, in addition to her seat on this board, is a well-respected consultant in the industry.

Xevach’s company is seeking development consent for expanding its infrastructure. At the same time the government is reviewing industry structures and considering imposing a levy to fund the cost of dealing with industry externalities, such as pollution, noise and nuisance for neighbouring communities. Yolanda has been retained by a group of customers to represent their interests and draft a submission to the government about the effects of the proposed structural changes to the industry. The effects on the customers will be different to the effects on Xevach’s board and Xevach is concerned that Yolanda may find herself in a position of conflicted interests, lobbying for both the customers and the supplier. Yolanda asserts that this proves she will be seeking a ‘win / win or optimal outcome and that there is no conflict.

Xevach’s chairman admits that he is not sure of the right course of action and has asked Xevach to advise the board on how to move forward with the issue. What should Xevach advise?

 

 

Many readers of this blog will be familiar with my newsletter The Director’s Dilemma. This newsletter features a real life case study with expert responses containing advice for the protagonist. Many readers of this blog are practicing experts and have valuable advice to offer so, again, we are posting an unpublished case study and inviting YOU to respond.

If you would like to publish your advice on this topic in a global company directors’ newsletter please respond to the dilemma above with approximately 250 words of advice for Xevach. Back issues of the newsletter are available at http://www.mclellan.com.au/newsletter.html where you can check out the format and quality.

The newsletters will be compiled into a book. If your advice relates to a legal jurisdiction, the readers will be sophisticated enough to extract the underlying principles and seek detailed legal advice in their own jurisdiction. The first volume of newsletters is published and available at http://www.amazon.com/Dilemmas-Practical-Studies-Company-Directors/dp/1449921965/ref=sr_1_1?ie=UTF8&qid=1321912637&sr=8-1

What would you advise?

Julie Garland-McLellan has been internationally acclaimed as a leading expert on board governance. See her website at www.mclellan.com.au or visit her author page at http://www.amazon.com/Julie-Garland-McLellan/e/B003A3KPUO