Monthly Archives: November 2014

Blurred Lines

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AMB-blurred

Although Alan Thicke is handsome and talented and perhaps a bit troubled (thus interesting fodder for blogs), he is not the only person confused by “blurred lines.”  Folks who are trying to navigate publicly traded businesses have more reason to be confused than ever.

Look at what is happening with the DARDEN Corporation. They own/operate The Olive Garden, Red Lobster and other restaurants. You don’t have to be an investor to know that Red Lobster parking lots seem less crowded and TV advertising seems more crowded with Olive Garden menu changes. Among other options, DARDEN’s executives have been considering the possible sale of Red Lobster. If you have been reading publications, like the WALL STREET JOURNAL, you know that a group of “activist investors” who own a fairly small percentage of DARDEN stock were recently able to get the entire DARDEN Board of Directors replaced. What are parameters of investor rights?  It wasn’t that long ago when only major shareholders, like Carl Icahn or Donald Trump could wield that kind of power and influence.  It some ways, this feels like the 1960s.

I would want to see the details of the market analysis, the company’s financials, the logic behind the executives’ recommendations, etc. before expressing my opinion about whether selling Red Lobster is/isn’t a good idea. Isn’t that the point!? The confusion in this situation isn’t as much about whether a line of business should be sold. The confusion seems to be about who has the authority and responsibility to make the decision.  This situation would make many leaders of $Bil privately held companies think twice (perhaps three times) before going public!

At the annual board leadership conference of the National Association of Corporate Directors (NACD) I heard several illuminating presentations about best practices. Several case studies included details about boards being involved in strategy formulation instead of the old “review and concur” model. More than one speaker expressed the belief that boards “own” strategy.  Most of the CEOs I know would say ”the CEO owns strategic direction.  The boards hire, compensate, and evaluate the CEOs. Board members shouldnt meddle in the executive’s primary areas of responsibility and expertise!”

I have served on several nonprofit and a few for profit privately held company boards. I recently earned my FELLOW status from my investment in excellent NACD education. When I talk with other directors and CEOs, it seems to me that it is time for most companies (publicly traded or not) to revisit the responsibilities and deliverables of executive teams, boards, and investors.

Are you sure that an activist investor group couldn’t disrupt everything for you?

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