At the very last minute the Insolvency Service, acting for the UK Government, has just abandoned disqualification proceedings against five former non-executive directors of Carillion, which collapsed in 2018. This is a massive relief, not just to those individuals, but to the whole non-exec community as it would have put full responsibility on all non-execs and audit committees to detect and stop hidden executive misconduct. Three ex-Carillion...
If there’s one topic that is almost guaranteed to quieten a board meeting, it’s when the CFO starts proposing that the company takes out a hedge. This is a very complex area of financial management and almost no-one understands them, and even fewer want to admit it1. Typically, the proposal is couched in obscure technical language, usually inspired by clever bankers, who outdo themselves to devise ever more complex devices and jargon. However,...
I travelled from Tashkent to Moscow on an Aeroflot Ilyushin 86 in the early 1980s. The seats were basic metal framed deckchairs, screwed to the floor1. Why don’t airlines nowadays use simple deckchairs on airplanes, instead of very heavy, crash-resistant ones? The fuel saving alone would be enormous and the temptation, especially to low cost carriers, must seem overwhelming. The answer is obvious, I hear you say; safety. But airlines spend...
The collapse of Carillion was a tragedy, especially for its 45,000 employees and 25,000 pensioners. In an earlier article, I looked at its last Annual Report to see if there had been clues that could have tipped readers off to the impending catastrophe. Since then, we have had Select Committee hearings and their January 2018 turnaround Business Plan has been released. This now gives quite a bit more colour to understand better what happened and...
I gave a nervous laugh. The headhunter asked me if I would like my first non-executive director role, joining the board of Northern Rock. It was October 2007, a few weeks since the first run on a UK bank for 150 years. Struck by an uncharacteristic sense of adventure, I did indeed agree to serve on the Northern Rock board for the next year, becoming Chair of the Audit Committee, through the various bids, nationalisation and the rebuilding of...
A simple question, I’m sure you’ll reply. Everyone knows that a dividend is money paid to shareholders by a company to reward them for owning its shares. However, a non-executive director needs to know a little more than this, as dividends can prove surprisingly complex. A dividend is a form of shareholder distribution. However it is not the only form of distribution, the main alternative being a share buy-back. I’ll come back to that in...
Whether ‘tis nobler to buy back shares or pay a dividend?  Introduction Maybe Hamlet was not so concerned with shareholder distribution, but most modern company directors certainly are. In an earlier article I reviewed why and how companies make shareholder distributions and in particular pay dividends. However there is another form of distribution, the share buy-back. Share buy-backs Companies can purchase their own shares, using cash...
The board is contemplating an equity raise. The brokers and CFO talk in respectful terms about preserving pre-emption rights and what this means for how they raise the new capital. Maybe you, as a new non-exec, are sitting there wondering what is this all about and why is it so important? However all directors should understand these issues, particularly as shareholders take this very seriously, and may well hold the whole board to account on...
Famously, in 2008, the Queen asked economists why no-one saw the great financial crisis coming, not least as they were giving her a full retrospective inquest into why it happened1. She might well ask the same question again now about the COVID-19 pandemic. Of course, some commentators did predict the likelihood of a similar pandemic. Bill Gates, not a renowned epidemiologist, in 2015 said; “If anything kills over 10 million people in the next...
Corporate Governance
Economics
Notes From A NED