What’s behind the hedge?

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 …

‘Not missiles, but microbes’ – Why didn’t we see it coming?

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. …

Are you rearranging deckchairs on the Titanic? Taking corporate risk management seriously

  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 …

Carillion – What can we learn?

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 …

Carillion – a salutary reminder on due diligence

Carillion has entered the pantheon of cursed companies following its recent failure. Politicians and the media have worked themselves in another fit of righteous indignation about greedy management and incompetent boards. The search is out for people to blame, shame and even prosecute. Regulators, sensing the flow of the political wind, are climbing on the …

Escape from the Rock

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 …

To buy or not to buy, that is the question

  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 …

What are dividends?

  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. …

“Marking our homework” – Why executives resent non-execs

  It won’t be long into your first non-executive job when you start to feel as if the executives resent you. It’s okay. You haven’t become paranoid. They really do resent you. Why?       Being an executive director is a tough job. You work all the hours that the Working Time directive allows, …

What’s your favourite part of being a non-executive director?

Now I’m going to take a wild guess here, that the least favourite part of a typical NED role is setting executive remuneration. To the media, and now even the government, it appears that NEDs love nothing more than awarding large pay increases, bonuses and pay-offs to executives. It often seems that investors share this …