eBriefing

Directors and “Unfettered” Rights to Company Information

By Doug Raymond

A recent case involving petroleum coke seller Oxbow Carbon and one of its significant investors, Crestview, shines a light whether there should be “unfettered” director rights to all information in the boardroom.

Crestview had invested in Oxbow Carbon in 2007 and as a result had the right to appoint two directors to the board. By 2014, Crestview apparently wanted to pull out and wanted the company to either buy out its units or sell the entire company. The majority investor, who was also the CEO, disagreed.

As a consequence, Oxbow Carbon alleged, Crestview persuaded its appointed directors to assist them in a “secret mission” to replace the CEO. Thereafter, the directors allegedly took steps to effect Crestview’s objectives. In response, the company filed a complaint alleging that the Crestview-appointed directors had breached their fiduciary duties by becoming adverse to the company, and thus should no longer enjoy “virtually unfettered informational rights that included access to the company’s privileged documents.”

Opinion: Corporate Directors MIA in Cybersecurity Battle

By Todd Thibodeaux

The roll call includes some of the biggest brand names in the business world. Target, LinkedIn, Yahoo, Home Depot, Anthem. Now Equifax adds its name to this roster of infamy.

Once again, tens of millions of innocent, trusting consumers are left in a digital lurch, with personally identifiable information stolen, financial accounts compromised and passwords pilfered.

Once again, a small number of C-level executives pay the price with their jobs, either through firings or forced retirements.

Once again, fingers are pointed at out-of-date software, faulty hardware, careless employees or incompetent contractors as the cause of the breach.

And once again, a group of individuals who should be front and center in cybersecurity discussions stays silently in the background.

It’s become far too easy – almost standard practice – for boards of directors to scapegoat CIOs, CISOs and IT teams when avoidable data breaches like the one at Equifax occur.

Should the internal team at Equifax have implemented security patches in a timely manner; enforced stricter password policies; and taken any number of other common sense security safeguards? 

Investor’s Idea of a Great Shareholder Meeting

By Eve Tahmincioglu
Shareholder meetings come in all shapes and sizes, but it’s not the swag and rock stars large investors are looking for.

“We like meetings that are open and honest, and where management interacts well with shareholders,” says Trip Miller, managing partner at Gullane Capital Partners. “We think it’s important for the management team and the board to view investors like partners.”

That means, he continues, spending a lot of time taking questions and educating shareholders and the general public on the company. That doesn’t mean shareholder meetings shouldn’t be grand.

The four shareholder meetings he’s attended and considers great examples include Berkshire Hathaway Inc., FedEx Corp., Biglari Holdings Inc. and Fairfax Financial.

Transitions West

The conference created for business families by business families.
 
Join us in San Diego for Family Business Magazine’s Transitions West.
 
Transitions will held at the Cornonado Island Marriott and will cover a host of topics, including:

• The Impact of the Business on Family Identity
• The Board's Role in Balancing Family and Business Concerns
• Aligning the Strategies of the Family and the Business
• Leveraging the Strengths of the NextGen
• When to Think Family and When to Think Business
• Special Session: Fam Tank--NextGen Entrepreneurs Pitch Business Ideas to a Family Business Panel 

Equifax Cyber Breach & Leadership Cracks

By Eve Tahmincioglu

The CEO and chairman of Equifax, Richard Smith was ousted soon after a massive cyber breach left nearly 150 million Americans’ personal information exposed, but what about the board of directors?

Some media articles pointed to a “cozy” relationship between Smith and the board, focusing on a higher-than-average director tenure.

From TheStreet.com:  Equifax's board, excluding Smith, has an average tenure of 9.2 years, above the average director tenure of 8.7 years. Seven of Equifax's 10 independent directors have exceeded that average tenure. The director with the longest tenure is Phil Humann, who's served on Equifax's board since 1992.

While board entrenchment is a concern, the main problem may have been flat-footed leadership.

“The key issue is not the fact that the breach happened under former CEO and chairman Richard Smith’s watch, but that Equifax’s response demonstrated that the company’s leadership was not prepared to deal with the issue once it occurred,” maintains Matthew Luzzader, a partner at Kelley Drye & Warren LLP.