Hi memegenerator,i can see your point. It is true that an...

Hi memegenerator,

i can see your point. It is true that an executive director is not a conflict of interest just by itself. You are right to point out where other companies arrange themselves that way, and we should also pay close attention to associated changes they must make to balance out the potential conflicts that arise.

When u say ‘nothing has changed here’ it’s gets harder to follow along. Corps Act specifically provides scope for major shareholder to appoint a nominee to the Board, because it’s non-executive and also balanced out by a group of neutral and/or independent non-executive directors that also sit on the Board.

Now a nominee director of the major shareholder is the company CEO. Significant discretion and personal judgement is delegated to the CEO role on the return assumption that the individual places the interests of the company as their only priority each and every day. No conflicts are permitted.

This proposed appointment presents many potential problems. It sets up every ingredient of the fraud risk triangle. I would expect to see a string of announcements from CKA with updates to the company constitution and employee policies to counter those risks. I would also begin to wonder whether Karan remains an employee of Ahana and/or retains any influence in operations or shareholding. Why? Every major operating decision for CKA taken by the proposed CEO effectively becomes a related party matter.

The manœuvres required for CKA to balance the clear and real risks introduced by this situation are complex, but not impossible to handle. Doing nothing however would make it hard for the other CKA Board directors to demonstrate they were discharging their duties to all shareholders and the company as a whole.

This scenario gets more messy with each passing month.

Yikes.