Produced by Julie Garland-McLellan, Consultant at AltoPartners Australia and non-executive director and board consultant based in Sydney, Australia.

Contribution by Ian Taylor, Executive Director of Sheffield

This edition of the newsletter was first published on The Director’s Dilemma website and the full newsletter is available for viewing here. To subscribe to future editions of the newsletter, click here

The Director’s Dilemma - November 2020

Our dilemma this month looks at how other people can make life difficult for a board that has not been party to any wrongdoing. And at how boards can add value regardless of this.

Brinley Chairs a government-owned board that opperates in the community services sector. Some of the company’s revenues are from ‘payment for service’ with the rest being funded by various grants which usually operate for several years and give a reasonable spread of funding sources across government departments and programs.

A few months ago Briney’s company was awarded a large grant for a three-year program. Everyone was delighted and the funds were very soon allocated to outsourced service-providers and spent on getting the foundations right for service delivery.

Last week the press has been full of reports that the grant program was manipulated, and funds were allocated to projects in marginal seats. Yesterday the Minister was asked about this in parliament and responded that the funds would be ‘clawed back’ and reallocated.

Brinley is aghast. His company has committed the funds and already spent much of the money. It will be costly and difficult to rescind contracts already awarded. He is also smarting at the injustice; his board has done nothing wrong and neither have the intended beneficiaries of the program. Yet now they face uncertainty and potential inability to deliver.

The chair of the Audit Committee has called Brinley and asked what the board is going to do.

What can Brinley say?

Ian’s Answer

I advise that Brinley follow these steps to address the issue at hand in a consultative manner:

• Brinley to talk to his board and seek input to a remediation plan.
• Brinley to talk to beneficiaries and providers about the situation and seek input.
• With support of a Communications specialist, Brinley to seek a meeting with advisors and Minister to set the current scene and assess risks of ‘pulling back’ the programme.
• With joint input structure a media campaign that addresses the rationale of the programme.
• Beneficiary input will help neutralise the politics of the concerns/objections. This will need to be ‘sold’ to the Minister.
• A review of spending allocation, at the same time, might ensure remaining funds are targeted to non-marginal electorates but to equally worthy causes. This message can be integrated into any Communications strategy and take the political heat out of the situation.
• Brinley needs to maintain focus on communication with all parties through the negotiations.

Julie’s Answer

Brinley should tell his Audit and Risk Chair not to panic just yet; the company has – hopefully – done nothing wrong. They should not suffer as a result of alleged political malfeasance.

First Brinley must talk with the CEO and the company’s senior public or media relations staff member. It is important top get the message out, quickly and accurately, that the terms of the grant program were met by them. It is equally important not to make matters worse by appearing to complain about the government of the day. Even if they have made the mess that Brinley is now in.

Brinley should ensure that his board are advised of the situation and can discuss and agree the way forward. An emergency phone hook up should suffice.

Brinley’s proposed way forward may include:

• A brief press statement that the company applied for, and complied with, the grant program as part of its normal business practice.
• Internal reports on the monies received, spent and committed.
• The CEO and/or CFO talk to their counterparts in Treasury and alert them that the funds are already committed or expended. Treasury will not want to trigger solvency issues by demanding a return of funds. If ‘claw back’ does become politically expedient, they can help Brinley’s board continue to meet their obligations.
• Brinley and his CEO talk immediately with their Minister and – if different – also with the Minister responsible for the grant program. Keeping Ministers well briefed is imperative.
• Ask staff to be patient, remain confident and refer all inquiries for comment to authorised spokespeople. A brief statement similar to the press statement may be given for use if they need to comment.