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StockHound81

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04/06/25

17:17

Post #: 79316372
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Originally posted by Fact Finder: ↑

If we are to judge Brainchip Holdings based upon Corporate Governance it is probably reasonable to understand what Corporate Governance actually is so that we can mark the Company's performance. After a little bit of research on my part I have found the following which I think should be useful to see how Brainchip Holdings shapes up in this regard:

"Key responsibilities of the board of directors
Recruiting top executives
Establishing executive compensation
Monitoring executive performance
Dismissing executives as needed
Approving the issuance of stock
Paying dividends
Managing internal controls and corporate governance
Establishing other company policies
Why is corporate governance important?
Corporate governance involves the relationships between various stakeholders, including shareholders, a company’s management, its customers, suppliers, financiers, the government, and the community.
Corporate governance is important for several reasons:
Protection of shareholder interests: Good corporate governance ensures that the interests of shareholders, who are the owners of the company, are protected. It promotes transparency, accountability, and fairness in decision-making, preventing the abuse of power by company executives.
Risk management: Strong corporate governance helps identify and manage risks, including financial, operational, legal, and reputational risks. Effective oversight and risk management mechanisms can prevent costly mistakes and crises.
Enhanced business performance: Good governance practices contribute to improved company performance and long-term sustainable growth. Transparent financial reporting, ethical behaviour, and effective management practices attract investors and boost the company’s reputation.
Access to capital: Investors, especially institutional investors, are more likely to invest in companies with strong corporate governance practices. This provides companies with better access to capital and lowers their cost of capital.
Stakeholder confidence: Transparent and ethical governance practices build trust and confidence among stakeholders, including employees, customers, suppliers, and the public. This can positively impact the company’s brand and reputation.
Legal and regulatory compliance: Effective corporate governance helps companies adhere to legal and regulatory requirements. Compliance with laws and regulations reduces the risk of legal actions and financial penalties.
Conflict resolution: Clear governance structures and mechanisms can help in resolving conflicts of interest among different stakeholders. This reduces the potential for disputes that could harm the company’s operations and reputation.
Innovation and adaptability: Good governance practices encourage a culture of innovation and adaptability. When decision-making processes are transparent and flexible, companies can more effectively respond to changes in the business environment.
Long-term perspective: Corporate governance encourages a focus on long-term goals rather than short-term gains. This can lead to more sustainable business practices and better alignment with the interests of various stakeholders.
Social responsibility: Companies are increasingly expected to consider the broader social and environmental impacts of their actions. Effective governance ensures that these considerations are integrated into the company’s strategy and operations.

Corporate governance is important because it provides a framework for responsible and effective management of a company, safeguarding the interests of shareholders and stakeholders, promoting ethical behaviour, and contributing to an organisation’s overall success and sustainability"

So how does Brainchip Holdings stack up against the Key Responsibilities required for satisfactory Corporate Governance:
Recruiting top executives - If I look at the calibre of the top executives there can be no doubt that Dr. Anthony Lewis, Dr. Jon Tapson, Stephen Brighfield and Ken Scarince are most certainly A Grade players. As for Sean Hehir he has certainly proven himself to be most effective in building ecosystems which was one of his key attributes and also objectives when he was first appointed. He has also been instrumental in ensuring the quality of the team he has around himself all of whom are A grade players. He has failed to meet budgets but he presented a five year plan to achieve Commercial success at Brainchip and so judging his performance is probably premature when it is clear that while not meeting budget he has signed up a number of impressive commercial deals. He has also overseen the direction outlined in the companies Technology Roadmap and it on my research aligns perfectly with industry trajectory. He also has introduced and overseen the University accelerator program which on all the anecdotal evidence from LinkedIn and elsewhere appears to have drawn in teaching staff and students and has produced a ready source of quality interns willing to work at Brainchip.
Establishing executive compensation - Executive compensation is obviously aligned with what is needed to obtain the services of those referenced at point one above. Further the company has commissioned an external body to survey the company's remuneration practices which were all found to be in order and in alignment with industry standards and published same to shareholders,
Monitoring executive performance - As I am not in a position to sit in the Brainchip Holdings business premises around the World and monitor all staff members I can only judge this from a distance and as the bulk of staff are engineers and scientists having regard to what I have witnessed they have made astonishing progress as evidenced in the Technology Roadmap and multiple scientific papers from a range of third parties. As for sales staff this is very hard to judge unless I am content to only use the metric of sales receipts. Personally do not consider that to be a reasonable or intelligent way to judge their performance. I do know that the CEO Sean Hehir has been comfortable with rolling heads in the sales area as he considered necessary.
Dismissing executives as needed - Brainchip Holdings certainly has not failed to act and dismiss executives when it was considered necessary. In this category I would also include the very intelligent succession planning that the company instituted for the retirement of Peter van der Made and Anil Mankar. The company can in my opinion only be commended for the way in which this was undertaken.
Approving the issuance of stock - This point is answered above under executive compensation.
Paying dividends - Obviously this is not relevant.
Managing internal controls and corporate governance - Again one needs a little insider knowledge which I do not have but Brainchip Holdings did devote a considerable amount of time a few years back to bring these up to date and we have access to most on their website although I suspect not all.
Establishing other company policies - Again this point is covered by the above but we see some of it in evidence in Job Advertisements where they set out the company's employment policies.

So that covers all the Key Responsibilities of the Board of Directors. Unfortunately there is not one headed "Duty of Chair of the Board to be up to speed at an AGM and in so doing make himself and other Board members look foolish ". I do not have sufficient evidence to say how his error arose and speculating does not assist. I do not have nor do shareholders a detailed explanation for the error just the Chairs apology for his mistake from the podium at the AGM.

Looking back to his previous performances at AGMs he has always been on top of his brief though he has been criticised for his comment "the share price will do what the share will do". This comment perhaps was better left unsaid or put a different way but it certainly was not a lie.

It is trite to say that it is not good Corporate Governance for companies to engage in ramping of their share price.

I personally believe this statement was designed to communicate that he and the Board would be applying correct principles of Corporate Governance and would not engage in ramping to increase the share price to appease some shareholders.

It should be remembered that a previous CEO and the Board as it was then constituted had come under the notice of the ASX for just that misdemeanour and in consequence Brainchip Holdings had been placed under special supervision. It could therefore be argued quite reasonably that what the Chair was doing was ruling a thick black line between himself , the Board and those who had created this difficulty.

It is my understanding that Brainchip under this Chair and the current Board have managed to have Brainchip Holdings removed from the group of companies that the ASX consider require such special supervision.

The Chair as I have said took full responsibility for the ASX Announcement policy. In fact he left no doubt that he was totally responsible. Why?

Perhaps it was his policy which in a large part convinced the ASX to remove Brainchip from the naughty list. Most certainly his policy made it very unlikely that Brainchip could be accused of once again engaging in ramping.

In opining this I still believe they have gone too far with this policy but the Chair stated at the AGM that they are engaging with lawyers specifically on this question of what they might reasonably announce on the ASX.

If my thoughts are correct I could possibly criticise the Chair and Board for not bringing shareholders into their confidence on why they were doing what they were doing though they did give out some information.

Reflecting back to my days as a lawyer the problem I would foresee for the Chair and Board in saying too much about their reasons is that the ASX might decide that this was not true culture change but a sham to get themselves out from under the thumb and that the minute they were released they would fall back into their bad old ways.

So here I am after all the above left with no choice but to opine that on balance Brainchip Holdings is not deficient in the area of Corporate Governance based upon what Corporate Governance actually is all about.

My opinion only DYOR

Fact Finder

Expand

Think youre missing a number of key criteria there Mr Fact

Adherence to asx continuous disclosure rules and no selective disclosure. Social media should not substitute for ASX disclosure

Transperent agms, with genuine Q&A not cherry picking questions

Responsive and transparent Investor Relations

Protecting and building shareholder value and as part of that preventing dilution

Transparent renumeration, with clear links between pay and performance

Some may give this board a free pass but for mine its a fail on governance
Last edited by StockHound81: 04/06/25

BRN Price at posting: 22.0¢ Sentiment: Hold Disclosure: Held
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