A friend of mine asked me some questions this week and I would like some feedback so that I can give him good advice. Let us suppose that he is a shareholder in a public company and unable to find a market for his shares, but he is very dissatisfied with the way the CEO and the board are running the company and he asked me what recourse he has. He’s even wondering if criminal charges could be brought against them or if they are above the law. It is that serious! I figure that in the multitude of counsellors there is wisdom, so I hope to hear from some of you.
From my understanding, the CEO does not communicate well or often and the shareholders and other stakeholders do not know what is really happening in the company. The board of directors has also been making decisions that do not make any sense. They have sold off assets at less than market value; they have entered into contracts which are not to the benefit of the company or the shareholders; and it is even suspected that they may have personally benefited from some of these contracts. Furthermore, it seems that nearly every contract they have entered into on behalf of the company has had overruns and the tender process that is supposed to happen for each one, has not always been adhered to.
My friend says that the auditors came in year after year. Yet, they have not had a clean audit report for years and nothing seems to be done by the regulatory agencies who should have some power to question their non-compliance with the rules and regulations. In fact, there seems to be no accountability and the CEO and the board are acting as if the company is theirs and they have no responsibility to the shareholders and the other stakeholders.
We all know what the economy of Barbados has been like over the last eight to ten years, but the CEO and the board recently reinstated their salaries which had been cut, while refusing to increase the salaries of the workers. My friend was less than impressed. Granted, from all reports, the company is operating in the red, so realistically they cannot increase salaries and they should never increased their own.
Worse yet, my friend tells me that the company is in serious debt and is having problems paying its expenses. The company’s share price has fallen several times in the last few years which is why no one is finding them a good investment. The company needs a serious injection of capital but is so heavily in debt that it cannot go to any of the regular lending agencies and would have to find some unorthodox financing to be able to get out of the situation or get a miracle of some sort.
The thing is, to maintain appearances, the company still does some token community outreach to make it look as if it has the interests of those in lower economic levels at heart, which is fine if it was not at the same time destroying the very people that helped to make it successful by contributing to its growth.
Apparently when the CEO does bother to communicate, all he does is assure the staff and shareholders that everything is fine and the future looks bright without revealing plans of how he will ensure that. My friend is generally an optimist, but even the most optimistic person would be finding that a little difficult to swallow now, especially since the financial outlook for the company (as it is required to publish financial information) is not the best.
I was shocked by all my friend told me, but can you imagine that this company has no strategic plan? Nobody seems to know what the vision of the company is, what its goals or objectives are and what strategies it has to put in place to go forward. It has been producing the same products and services for years and has not created the infrastructure for staff to innovate and to take the company into the future. It is not even a cash cow any longer; it is fast heading to the decline stage of the business cycle.
Thankfully, I don’t believe all is lost. The first thing I will suggest to my friend is to try to connect with other shareholders and stakeholders and vote to replace the CEO and the board of directors. There is clearly a need for some new, innovative thinkers who have solutions to take the company forward and who are willing to be accountable to the people who appoint them. These people also need to have the humility to know that while they are leading the company, they are servants of the stakeholders and it is their interests that they should be looking out for. They also cannot be people who are intimated by the multinational companies to make decisions which will impact the future of the company and should be willing to work with other companies in the region to make a global impact.
If those things were to happen, I would definitely want to buy shares in that company and I’m sure that it could attract investors, not just from Barbados, but from around the globe. That’s what I’ll tell my friend. Looking forward to getting your input to share with him as well.