Ann: Company appointment of new Chairman, page-110

Some thoughts based upon my own experience working overseas--sorry for the length

This post is about my own experiences, and will conclude with some guesses by myself about the latest appointments. While the guesses are based upon what I know, they are just my opinion.

I have lived and worked in several overseas countries almost continuously for two and half decades. Many of them would be considered low on the scale of financial probity. The attitude of some posters here - and also the AFR - is that anyone remotely associated with such places must be a charlatan of the highest order, a fraudster, a conman, and completely untrustworthy. Smearing by geographical association.

In my experience this couldn't be further from the truth. Over here, I can divide various companies into three broad categories: (1) locals with good political connections; (2) locals with few or poor political connections; and (3) foreigners.

All of these jurisdictions have strong anti-corruption crackdowns, that vary in scope, intensity and duration. These blunt instruments will pick on category (1) never; on category (3) if at all possible, and on category (2) if they can't find any in category (3). Consequently, expatriates are keenly aware of being scrupulously clean.  Apart from being under the microscope from home office (and home office is often very concerned about potential reputational loss in such countries), no-one wants to end up with their family in a local prison. It has happened before, and no doubt will happen again. Ask Packer.

Hypothetically, if a local wants, say, a dodgy company where few questions are asked, they have plenty of local institutions to choose from. The reason that the likes of UBS and others are in places like Russia is because they can see that there is a glaring deficiency in a well-run, reputable, above board banking institution in that country. It is in the interests of foreign financial institutions to keep their enhanced reputation in such places. Why on earth would they risk ruining that, which would have a huge effect on their world-wide operations and reputation? They make far more money because their customers trust them, and their reputation is everything.

So I can safely say that at the institutional level the probity of major Western banks in such countries is really beyond reproach, both because of company policy and also because of the fear--rarely admitted but always there--of expatriates living in such countries becoming caught up in a local corruption crackdown.

Looking closer at the appointments made recently, I see two with many years of experience in Russia banking. I see nothing unusual about that. Firstly, such men typically are after the difficult and the adventurous, and are willing to work hard in unusual situations to get ahead. Secondly, I have speculated in earlier posts that I thought the first appointment was quite quick, and I concluded that this was because it was already in train before BIG's suspension on the grounds that you can't just find a board appointment that quickly.

Continuing this logic, once BIG was suspended and in need of a new Chair, I have no doubt that the first appointee would have been asked if he could recommend someone for the position. It is quite likely that they know each other well, having moved in the same small circles. So it does not strike me as unusual to have two appointments from the same small pool.

More speculation: I see that Mr Jordan has recently moved from being a CEO (in October last year). Perhaps he misses being a hands-on CEO and so was looking for a situation such as BIG where he could have more authority than his current position. Or perhaps he was asked by Finstar to become Chair of BIG with the intent of finding out if BIG was a suitable investment for them. Or perhaps he was looking for an opportunity to move out of Russia where he has been for about a decade, and do something different. Perhaps all three reasons.

They do say that the best experience for a Chairman is to have previous experience as a CEO. I see Mr Jordan's experience as CEO of a company that provided financial help to start-up tech firms as being of considerable benefit to BIG shareholders. He has an excellent background; it's a solid appointment.

I'll conclude by saying that the knee-jerk reaction to label all members of a particular country, or people who have worked there, as untrustworthy and corrupt seems to be quaintly parochial. I come back to Australia every now and then and I am often struck by how small-minded many Australians are.

For the AFR to write as its first sentence: "Suspended ASX-listed online video company Big Un Limited has appointed the former head of Lehman Brothers' Russian operations, who is said to have reported links to the Kremlin, as its chairman." is a bit like saying that Fairfax must be run by mobsters, because Chopper Read is an Australian too. The AFR managed to get "links to Kremlin", "Lehman Brothers" all into the first sentence--guilt by association. It says a lot about the AFR but tells you nothing about BIG.

I don't think the Russian background thing is anything to be concerned about. But then I judge things based on...

Only the facts, please.