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Corporate lawyer Peter Dey, who sits on the boards of CP Ships, Stelco and Atlas Cold Storage Income Trust, which have all faced crises in the past year, says the markets have become far tougher on boards. CP Ships, for example, has faced a flurry of lawsuits since revealing in August that it had to restate its profit for nine quarters back to 2002, as a result of "accounting deficiencies" uncovered by a new software system.
"You restate your financial statements and, bang, you've got 10 class-action suits," Mr. Dey says.
He joined the Atlas board last year after initially being hired as an adviser. But he was already on the Stelco and CP Ships boards when their recent problems occurred.
"I've seen it from the perspective of an adviser, and I've seen it from the perspective of a corporate director. It's a lot easier to be the adviser," Mr. Dey says.
Given his experience, it is perhaps unsurprising that Mr. Dey says one issue a board has to confront quickly in a crisis is whether it can solve the problem alone, or needs to bring in outside expertise. That can mean adding new directors to create a special committee, or hiring special advisers to the board.
"There's always a tension to decide if the problem can be fixed internally or not," Mr. Dey says.
He says there is a natural instinct to want to contain a problem, sometimes making it difficult for boards to opt for a strong response in the hope that a smaller adjustment will be good enough. This may not be the right solution, he says.
"That's why fresh eyes make a lot of sense," he says.
At Atlas Cold Storage, for example, the board hired a new director to join a two-person committee to examine its accounting problems, and the committee hired Mr. Dey as its legal adviser. The committee's report led to a substantial replacement of directors on the board.
Mr. Dey says the special committee process makes it easier for directors to accept difficult decisions -- even to agree to replace themselves -- because events take on momentum.
"For the board to depart from a committee's recommendation, it would have to have very supportable grounds for doing so," he says. "You've started the process, and you have to dance with the one you brung."
Mr. Dey also recommends that a company's major shareholders become more engaged during a crisis. Shareholders can guide a board on hard decisions, he says, including the need for new directors or new management.
"If I had to characterize their role, it's to force upon the board a reality check," Mr. Dey says. "And if the reality check says. 'Hey, you need some new eyes for a fresh look at what has transpired here,' then the shareholder can force that. That's a very constructive dynamic."
Claude Lamoureux, chief executive officer of the Ontario Teachers Pension Plan Board, agrees that major shareholders like Teachers can offer another perspective during a crisis -- preferably one that will be thoughtful and take a longer-term perspective.
"Most directors see a crisis maybe only once in their lifetime, whereas a large owner . . . we see a lot of these things over and over," Mr. Lamoureux says.
"And eventually you can offer some advice. But it's not every board that wants to take advice. Some people, it's like, 'don't bother us, we know what's good for you.' "
He says shareholders are more aligned with proposals of any sort when they have been consulted, even if all of their advice was not accepted.
"You tend to vote for them at that point. You feel more part of the process," he says.
Mr. O'Brien says one of the toughest decisions for any board confronting a problem is determining when a solution or strategy should be scrapped.
"It is a continuum of things, but ultimately a board says, 'We have had enough now, and we are going to move on to something else,' " he says.