To explain my reasoning further…
When his transition to CEO was announced in March, Dirk Van Hyning observed that Alexium was a different company than it was four years ago. If this observation is correct, and I believe that it is, then this difference should be reflected in Board composition.
Four years ago, Alexium was strictly an R &D stage company, focused on developing better and safer flame retardants for use in the textile sector. Its focus market was the US and its main target customer was the defence forces.
Today's Alexium is supplying and growing sales into commercial markets. The revenues it is now deriving from its thermal regulation technology are outstripping revenues from its original flame retardant technology. There are now plans to license one of the company's FR technology to other major global chemical companies. The original target sector of textiles is being supplemented with other target sectors such as electronics and the building industry. Production and sales are now occurring over multiple continents and there is a third “chemistry space” in the pipeline. Hence, it is a much changed company.
But when I look at the composition of the current Board, it is like I'm looking through a rear view mirror at what the company was and aspired to be four years ago, rather than what it is now and what it is striving to become. This is the Board you would assemble if your company's entire focus was on gaining US government contracts. All three current NEDs have a strong US government or military background. Two are otherwise employed as lobbyists. And if that wasn't considered sufficient, now with chief lobbyist Nick leaving the company, yet another lobbyist will be engaged to look after Alexium's interests in Washington.
As Parsifal questioned, is the effort and expense of all this lobbying justified? To what degree is it likely that a tiny company like Alexium can impact government decisions? There are more than 12,000 other lobbyists simultaneously attempting to influence US federal government policy, who collectively spend over $1 billion annually in pursuit of their goal. Dow Chemicals is but one example of another company using lobbyists in an attempt to influence legislative outcomes -it spent $13.6 million doing so last year. And for all the money spent and even if a favourable decision just happens to be won, companies are then at risk of falling victim to the next round of budget cuts or the next change in administration …..
While I’m not suggesting that Alexium forsake all lobbying and ditch the entire Board, I am suggesting that there is a clear imbalance in the current Board composition that should be addressed.
One area lacking representation in the current Board is industry experience. It is generally acknowledged that Boards should include directors with a detailed knowledge of the company or the sector in which the company operates, as well as those who understand the broader industry environment. Typically, a small specialty chemicals company such as Alexium would have one or more directors who have held top executive positions in other companies operating globally in the specialty chemicals sector.
For the purpose of comparison, I’ve included links below to two smaller US specialty chemical companies, one of which is a microcap around Alexium’s size. I think it’s worth noting the kind of qualifications and experience held by the directors, along with the strong emphasis on industry background.
http://omnova.investorroom.com/index.php?s=114
http://investors.chromadex.com/phoenix.zhtml?c=212121&p=irol-govboard
