Conrad Black Trial and Corporate Governance

Valid HTML 4.01 Transitional

This page has been validated HTML 4.01 Transitional by

Conrad's Black's View of Corporate Governance

The Pitfalls When Entrepreneurs Take Private Companies Public

Conrad Black's case involves numerous corporate governance issues when he was Chairman and CEO of Hollinger International Inc. In a report, an internal committee at Hollinger accused Black and his partner David Radler of operating a "corporate kleptocracy" and allegedly stealing more than $400 million from the corporation.

At a 2003 Hollinger annual general meeting, Black told shareholders that whereas there are "some serious abuses in some large and now infamous companies, here, what we are talking about is ... relatively small amounts of money, properly approved and fully disclosed, paid to those who built and guided this company in a short span from an embryonic state to the brink of the prosperity that does excite the hopes of all of us."

Not Me - Blame the Corporate Governance Zealots & Fad

Black, who was forced out of his positions at Hollinger International in 2003 amidst scandal and charges that he treated a public company like a private business without due regard for governance best practices, has remarked, "Like all fads, corporate governance has its zealots and its tendency to excess."

The Pitfalls When Entrepreneurs Take Private Companies Public

Reading Black's comments, it is increasingly evident that many founders and builders of companies, cannot make the transition from owning and running a private company to governing a publicly owned and traded corporation. This combined with a lust for extreme power and wealth (what Warren Buffett calls an "epidemic of greed") can drive them to overlook their responsibilities to shareholders, some of whom invest their life-savings or pension plans in these corporations. They feel they have a right to the assets of the corporation, including shareholder funds and pension plans, and the right to determine their level of compensation.

Shareholders' concerns are an inconvenience and and irritation. While these corporate bosses demand accountability from others, they refuse to be accountable themselves. When corporate governance advocates seek to promote a balance through guiding principles and best practices - corporate governance and its proponents, are derided. One incensed CEO called corporate governance advocates "birdbrains."

However, some of the main proponents of corporate governance best practices are some of the most successful business leaders who have achieved fame and fortune without abusing the rights of others. Warren Buffett, the world's second richest man, is one example.

Donald Trump: 'Black Shouldn't Have Gone Public'

Donald TrumpBlack is accused of treating a public company as a private business - of taking money that belonged to shareholders to pay for an extravagant lifestyle.

On Monday, March 19, 2007, Donald Trump said, "In retrospect, he (Black) probably shouldn't have gone public." Trump said that not everyone has the right mindset to run a public company and that Conrad Black should have kept his company off the stock exchange. "A public company is a different mindset. It's never easy for an individual entrepreneur who owns things because it is a whole different set of ideas."

Trump has no intentions of taking his own company public.

What is Corporate Governance Anyway?

Here is how a World Bank President, J. Wolfensohn, defined corporate governance for the Financial Times: "Corporate governance is about promoting corporate fairness, transparency and accountability."

The OECD defines corporate governance as "Corporate governance is the system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company's objectives are set, and the means of attaining those objectives and monitoring performance."