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SignsofTrouble

Indicators Relating to the Board Danger signs


High turnover of board members- symptoms of infighting, militant divisions, poor compensation. an inexperienced board, could result in poor efficiency, diminished productivity. Board entrenchment- opposite of high turnover Low change rate of board members from one term to the next despite poor corporate performance.
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Indicators Relating to the Board Danger signs


Recruiting difficulties- inability to compensate highly. Poor attendance at board meetingsineffective board.

Indicators Relating to the Board Danger signs


Back-room deals- lack of open communication among members. Reflects individual interest. Open distrust between board members and CEO

Indicators Relating to the Board Danger signs


A fractured board- two or more clear factions of directors working against each other. Conflicts of interest- sustained conflicts of interest represent a high risk. Insufficient independence- contain members who are not also involved in other areas of the corporation. Independence should be given.
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Indicators Relating to the Board Danger signs


Failure to comply with policies- ethical policies and those relating to decision-making processes. Poor communication with investors- unable to exercise their rights of vote and proposal submissions effectively. Ignorance regarding the corporations activities- members of the board must have a reasonable level of knowledge.
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Indicators Relating to the Board Danger signs


Unquestioning compliance with executive initiatives and decisionshierarchical structure of the corporation becomes reversed and the executive leads the board. An overbearing board- Stepping beyond their role and attempting to run the corporation over the heads of the executive .

Indicators Relating to the Board Danger signs


Ignoring shareholder proposalscontinually dismissing shareholder proposals can have a pattern of ignoring shareholder interests. Minority issues hijacking meetingsmembers dominate a director meeting with issues that do not represent the concerns of the shareholders.
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Indicators Relating to the Executive Danger signs


Disregard for board policy- power imbalance between the board and the executive. The executive dominates the board, the needs of shareholders will not win. Distrust or disdain toward the board- mutual respect and trust. the purposeful blocking of information and an unwillingness to communicate with the board or with specific board members.
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Indicators Relating to the Executive Danger signs


Infighting among executive members- due to promotion, space and budget allocation. Conflicts of interest- the member will act in the interests of others rather than those of the corporation. hindering growth and development. No changes to executive membershipentrenchment hijacks the objectives of the corporation and steals them from the shareholders.
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Indicators Relating to Shareholders Danger signs


Poor attendance at annual shareholder meetings- allow minority or executive interests to dominate. Poor voter turnout for board elections and proposal votes- do not attend meetings A minority voice hijacks shareholder issues- a minority shareholder voice should be fairly represented and allowed neither to dominate nor go unheard.
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Indicators Relating to Finances Danger signs


Continually unmanaged debts- e.g. Kingfisher Airlines Depletion of reserve funds without viable plans for rebuilding Failure to meet targeted performance ranks- company that fails to meet its targets is likely experiencing financial problems.
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Indicators Relating to Finances Danger signs


Inaccurate financial reports- e.g. Satyam Continual difficulty complying with SEC regulations Difficulty complying with the requirements of SOX- govern the auditing practices within corporations.

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