Is Your Board or Management Team Conflicted?
According to the experts, the Mining BSMA (buy, sell, merge, abandon) phase, is due to crank into gear. This will be a busy time for boards, who will all be aligned, working away tirelessly in the best interests of all stakeholders right?The Eureka Stockade, 3 December, 1854 Eureka, Ballarat, Victoria, Australia
That’s one image, however to me it often seems that many boards and management teams are heavily influenced by self interest and conflict, despite the best intentions for them not to be. As well as these internal issues, the environment of BSMA often involves a battle between a big guy and a little guy and someone wanting to impose rules on someone else. The oppressed party will quietly feel as if they being forced to do something they don’t want, or to live by rules they don’t agree with. This brings to mind another great mining initiated battle. As brutal as the Eureka Stockade was though, I imagine the two sides had reasonable alignment within their respective ranks. In contrast, imagine trying to repeal the external enemy, while simultaneously trying to deal with internal conflict. These can be difficult times for mere mortals. I know this from personal experience. Some years back we sold 51% of our company (MPi) into an IPO process. I continued as Managing Director of MPi, running it effectively as an independent (but majority owned by the parent) subsidiary, while also serving as an Executive Director of the publicly listed recruitment company. This was difficult enough, but a few months in, the GFC hit, the parent company got into trouble and we weren’t having the best of times ourselves. The GFC saw commodities prices slashed worldwide, therefore hitting resource industry hiring intentions savagely! Eventually it was decided that the original, private owners, would buy back our 51%, which assisted inject funds into the parent and contributed to it getting through the tough patch. This was an impossible period and I have never felt so exposed from both sides of the fence and emotionally stretched in my entire life! It was a small comfort that my fellow board members felt similarly. Whose side was I on? How should I vote? How hard do I negotiate price? How does anyone chair a committee or a board, but also play a role as a participant at the table? When are you conflicted (I think always) and when are you not? My situation was an extreme (albeit small scale) one, that I feel was akin to “tightrope walking”, but I recognise now, it is actually a pretty common feature of the mining (in fact any) boardroom. This is not an experience I would like to repeat, but it did make me wonder if it is a normal part of everyday corporate life and something we need to spend more time preparing first-time Executive team members and Board members for? Just on that, as an aside, a short plug for The Australian Institute of Company Directors (AICD). About 12 months ago, I joined The AICD. They have excellent resources, seminars and courses to help prepare people for exactly these situations. I’d recommend membership to senior executives as well as some of your senior management aspirants. Don’t get me wrong, this isn’t about dumbing everyone down and creating compliant pussycats. As the Eureka Stockad-ers eventually found … Sometimes you DO just have to stand up and fight!
Hopefully you will be fighting aligned with your colleagues but sometimes you will be fighting alone. It’s about thinking it through, getting the balance right and checking in, with yourself and with others. So ... Mining BSMA here we come? The mining industry is supposedly entering this period, when the amount of Buy, Sell, Merge, Abandon (BSMA) activity is going to increase significantly. I don’t profess to know if this will actually happen, as I’m not an expert in those matters, however it is being predicted by a lot of analysts, so I guess that means it ‘might’ happen. What I do feel well experienced to comment on, is how the individuals involved will feel and perhaps what are some of the things they might want to keep in mind, as these deals get debated. I read an article last year which tackled this subject excellently and now feels like a good time to use it. I’ve provided a link to the full article below but here were some of my own key take away points and questions;
- It is not uncommon for previously successful and aligned directors, to sometimes end up literally despising each other and in some cases, in highly public brawls
- The time horizon of each board member, has a huge influence on their opinion and how they will vote on almost every decision
- A CEO working 16 hours a day, cannot predict the future, so how reasonable is it to presume that a board member, or external shareholder, knows what might be in the shareholders best interest?
- When Apple was headed down the drain in the late 1990’s no-one agreed with Steve Jobs, but he was proved to be the only one who was right. Circumstances, the genius we now know him to be and the balance of power at the time, enabled him to sway the day. These circumstances come along rarely and are therefore available to a small few
- In some cases the role of the board becomes about moderating risk, by homogenising decisions. This though, won’t cut it for companies under threat of extinction or those that must take risks to grow. Exploration companies fall into this category.
If you’re interested in more on the topics of Human Emotion, Conflict and “What’s In The Shareholders Best Interest”, check out the full article here Shareholders Best Interests by Ben Horowitz. As always I’m sure some of these comments will create some disagreement but if it generates healthy debate then that can’t be a bad thing as you and your colleagues perhaps have to deal with BSMA activity in the period ahead. Look out for each other and try to enjoy the experience, even though it will at times feel VERY uncomfortable.Steve Heather Managing Director & Principal Executive Search