Governance lessons from the Blackmores board stoush

October 27, 2021

October 27, 2021

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Conflict

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Brett Herkt

It’s a great opportunity to unpack a live conflict and draw lessons on governance and ownership. Essentially, demystifying the somewhat complex inner workings of board and owner conflict at a $1.4B publicly listed entity and makes the lessons accessible for governed SMBs and NFPs. You can read more about the background to the stoush here in the AFR.

The situation in simple terms:

A major player in this conflict is Marcus Blackmore, the son of Blackmores founder, past CEO and 23% shareholder. He took the helm of the company from his father in 1975 and is credited with a central role in building a powerhouse with revenues of $600M.

He resigned from the board in Oct 2020, (later revealed to be) under something of a cloud with prior board resignations and allegations of adherence to principles of respect in the company’s code of conduct.

He’s since taken umbrage with the board, maintaining they’ve lost their entrepreneurial spirit - focusing more on risk management and box ticking than growth. He’s running a campaign to convince shareholders to elect a self nominated board member, George Tambassis and has threatened to vote against re-election of Chair, Anne Templeman-Jones. 

From an outsider’s perspective, it looks like Blackmore now wants to exert some influence again - putting his candidate back into the roost.  Templeman-Jones and the board have responded through several shareholder letters, recommending shareholders not vote for Tambassis. 

In private companies, the calculus would be different. An owner as powerful as Blackmore would rally loyal shareholders who have benefited from the rise and simply muster the votes to install whoever they liked to rule the roost. 

Unfortunately for Blackmore, at a publicly listed company, the loyal shareholders have long departed or slipped far down the pecking order in terms of voting power. 

Blackmore’s 2021 annual report lists 15,700 individual shareholders and six of the top eight, representing 45% of the shares, are nominees of financial institutions. Unfortunately for Blackmore the register and the vote is now in the hands of portfolio investors - thousands of ma and pa investors and wealthy individuals. Portfolio investors and agents - the financial institutions controlling their nominee holding companies - are usually passive investors and typically don’t actively engage in understanding and voting on resolutions for companies like Blackmores. They typically outsource that function to proxy advisors. 

Proxy advisors are typically cautious, backing the board’s judgement - especially where a company like Blackmore has performed well in the past year - reversing a profit slide and lifting the share price by 50%. 

Governance and ownership lessons for SMBs and NFPs

So what are the lessons for boards with a powerful figure like Blackmore in the mix: 

  • Remember, you’re stewards with a duty to act in good faith in the best interests of the company as a whole. Sometimes this puts you in conflict with a shareholder.
  • Do a stock-take of the shareholder’s power. If the shareholder has enough loyal followers to rule the roost; accept their values and work diligently to pursue the purpose or don’t take the assignment. Influencers like this can turn board members into workers. It is important for you not to have an inflated view of your position.
  • Your job is to protect the other stakeholders; but above else, try and avoid wars in the first place.
  • Build partnerships with your stakeholders, based on these 4 principles:
  • Effective, timely, relevant, honest, communication.
  • Consistency of action, and words, 
  • Shared values (principles that steer your life), that guide your actions. 
  • A shared purpose, clear roles and clarity around expected outcomes. (Shared objective).
  • Accept that not all people are rational, articulate and useful, thus you also have to develop negotiating and calming techniques as part of your communications strategy.
  • Identify who to listen to and who to calm down and who to negotiate with.

Credit to Bruce Sheppard, shareholder and board member at BoardPro, lessons adapted from his work.


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