Three tactics for a great board presentation

You can be facing a tough audience when you are presenting to a board of directors.  Since the board sits at the top of the hierarchy, the directors get to make their own rules and run their own timetable.  So if you are presenting to the board, you have to fit in with their rules and their agenda.

Here are 3 suggestions to help you get the best possible response from the board:

1.   Check the board paper and the presentation slides carefully

Directors generally hate typos and numbers that don’t add up.  If they find one, it will at best chip away at your credibility, and at worst derail the whole presentation.   Look at Quade Cooper’s kick-off in the World Cup semi-final – out on the full and setting an adverse tone for the whole match.  One little typo can do that to your presentation. So, before your board paper is circulated to directors:

• Do a final proof read, and add up any numbers again (and don’t just rely on spell-check, or you might let “manger” slip through instead of “manager”)
• Get someone else to do a cold-eye review of the paper, just to be sure, to be sure
• Do the same for the slides which you will be using in the meeting.

2.   Have at least two versions of the actual presentation you will make to the board

Board meetings invariably don’t run to time, and things get squeezed.  The further down the agenda you are, the more likely it is that the time originally allotted for your presentation will be compressed.  Even if you are ushered into the boardroom  on time, the board will often ask you to shorten the presentation to help them stay on track with other agenda items. To avoid stressing yourself:

• Be prepared, and have a second version of the presentation up your sleeve which is half the length of the scheduled one.  That way, if you are squeezed you will still be able to get your desired message across without having to rush, or make decisions on the run about what you will leave out.  If you end up with more than half your time, it is easier to add things back in than decide what to chop.
• If you find yourself outside the board room with your allotted time ticking away, don’t sit there fretting.  Stay calm and, each 5 minutes or so,  mentally work out which of your slides you will skip, so you can have a presentation which will fit comfortably into the remaining time.

3.   Never assume they will remember

Boards generally meet no more than once a month, or even less frequently.  Each director has at least one other job, and often sits on one or more other boards.  They probably don’t keep previous board papers (and arguably they shouldn’t).  It is no surprise that they may not be able to keep mental track of  all the relevant issues for your organisation.

You should expect that they will not remember what was discussed last time that the issue on which you are presenting came before them, or what decision was made. You can avoid false starts this way:

• Always start with a re-cap of what has previously happened in relation to the issue, and what the current state of play is.  Everyone will then be at the same point from the outset.
• Don’t be concerned if it sounds to yourself that you are stating the bleeding obvious. I can pretty much guarantee that at least one director will remember nothing, or remember it differently and incorrectly.

If you have done these 3 things, have a good grasp of your material, and have plenty of illustrative examples for your important points in your pocket, you will be able to present confidently, and greatly increase your chances of getting your desired outcome.  And you won’t kick out on the full.

Effective conversations, part 5 – Dealing with power differentials

Have you ever felt compelled to have a conversation with your boss, when you reckon they are wrong and you just might be right?

My friend Donna asked me about a conversation she needed to have with her boss.  There are some current pressing issues in the organization, and the boss has been forced into some difficult decisions to address them.  The boss might think she’s gone far enough, but it is likely that some further hard choices will need to be made to make the solutions sustainable.

Donna’s underlying difficulty with the conversation is the power differential which will exist in the room while the discussion is taking place.  What can you do to get the best outcome, when there is an imbalance like that?

Here are a few steps which might be taken, to give you the best shot at your desired result:

Neutralise the power

Consider how the situation can be re-framed to negate the power differential.  One way to do this is to position yourself as the subject matter expert, rather than the subordinate.  Grasp your professional discipline, if there is something appropriate you can refer to.  It might be financial expertise, legal experience, retail or engineering or IT knowledge.

I guess I was lucky with my bosses – I could always say:  “Look, I’m just going to put my lawyer hat on for a minute,” whether it was strictly a legal matter or not.  Find whatever reason you can to re-position the situation from a reporting line frame to an advisor/client kind of setting.

Why do this?

Be clear with yourself what the reason is for you having the conversation.  If or when the discussion becomes difficult, you will have a compelling reason for standing your ground.  For Donna, she expressed her reason simply as “I care.”

Why me?

Express to yourself the reasons why you are the best (or only) person to be having this conversation.  That may be because of your knowledge, or some particular analysis you have done, or some facts that only you have been able, or bothered, to gather.  Or it may be that no-one else is prepared to take on the task of having the necessary conversation.

These reasons, when identified, can give you confidence to press your points, especially if you haven’t been able to neutralise the power imbalance.

Find your space

Use all the above aids to help you visualise the metaphorical space in which you will be standing during the conversation.  What does that space look like; where are its boundaries; where will you be coming from; what will the discussion sound like?

Your space might look like the high moral ground, or you might have your back to the wall, or you might have the rest of the team standing with you cheering you on (or hiding behind you).

You might be coming from a place of genuine concern, or compassion, or solid belief in your position.  The discussion might sound measured and composed, at least on your side.

Wherever the space is, it’s better to have been there before and know what it looks like.

Rehearse

Finally, as with any difficult conversation, consider rehearsing it with someone you trust; preferably someone not involved in the situation.  Things can sound different when they are verbalized, rather than spoken in your head.  You can also fine tune things your points with the help of your sounding board.

Conversations involving power differentials can be daunting, but the chances are that you will feel worse if you don’t have them when the need arises.  Finding the right space to stand in can make such conversations a whole lot more manageable.

So good luck with your boss, Donna:  you are in the right space – let’s hope she sees the light.

Effective conversations, part 4 – giving tough feedback

I was rehearsing a potentially difficult conversation recently with my mate James, who is a senior executive.  He needed to pass on some tough feedback to another executive which he had received from a third party.

In the rehearsal he started the proposed conversation off like this:

“Steve, you’ve been doing a really good job, and you’ve been very effective in sorting out the transition to our new structure.  BUT … I need to talk to you about an issue that’s come up which isn’t going very well …”

He was then going to add in a reference to a previous (allegedly similar) incident which happened 6 months ago.

Giving effective, targeted feedback is an essential part of effective people management these days.  James was about to commit a couple of cardinal feedback sins:

1.  The devaluing “BUT”.  If you want to give positive feedback, go right ahead, and do it often.  But let that positive feedback stand on its own.  If you use it as a prelude to giving “constructive” feedback, you will at best erode the re-inforcement value of the positive feedback, and at worst negate it entirely.  Let the good stuff stand alone; let the constructive feedback come out clean, without artificially trying to sugar-coat it.

2.  The “allegedly similar situation”.  The best feedback is timely and specific; trying to link a current issue with something else which has been, or should have been, already addressed can take the conversation into counter-productive territory.  Think about what it feels like when, on the strength of something you’ve done or failed to do, your partner starts off with “You always …” or “You never …”  There’s nothing so likely to get a discussion off to a rocky beginning.

So if you need to pass on some tough feedback, try and keep it as clean and stand-alone as possible, and think about rehearsing it first with someone you trust.

And remember that the recommended ratio of positive to constructive feedback is 10 to 1!

Effective conversations, part 3 – coming to the conversation clean

Ever feel like you have missed something important? I did an interview a few days ago, and looking back now, it feels like I was sitting there in judgement mode instead of listening mode. And in doing so I may have done just that – missed something important.

I was interviewing a member of a team as part of an evaluation process.  This interview was the last but one of the series.  There have been 7 previous interviews with other team members.  Nearly all of them have had something to say about yesterday’s interviewee, both positive and negative.

This person holds a key position in the team, and the consensus seemed to be that he handled most of the role with great expertise, but lacked that last 20% which would have really enhanced his value to the team.

I realise now that I conducted the interview based around that consensus view.  The interviewee’s responses to the questions I asked were all filtered through my pre-conceptions, and I allowed them, correctly or not, to validate that view.  I probably did some retro-fitting as well.

It could well be, for instance, that the last 20% represents something that the team should be providing for themselves, instead of expecting someone else to produce it.

I wonder what I would have heard in the interview if I had come to it clean, treating it like a blank canvas – instead of seeing it as a paint-by-numbers exercise where I tried to make each response fit into one of the pre-drawn shapes.

I have been constructing a tentative set of recommendations for this assignment, even though all the interviews are not complete.  I’d better go back, unscrew the judgement filter, and let the various elements find their place – without my built-up pre-conceptions force-fitting them into a particular shape.

I will also have to be careful in future to let each conversation I have with someone be one of those blank canvases. Who knows what fresh or important insight might paint itself onto that plain white background if I do?

Tools for effective conversations, part 2 – “Shut up and listen”

You know the feeling.  You’re in the midst of a serious conversation and the other person is making some point or answering a question.  You are only half-listening because you are busy formulating either your response to their point, or the next question you will ask.  As soon as there is a tiny break in the flow of the other person’s delivery, you burst in with your contribution, whether they have finished or not.

Sure, it was good to get your part off your chest.  There may have been a price for that opportunity, though:  you didn’t really hear what the other person was saying because you were busy thinking out your response, and/or because you have cut them off before they had said all they were going to say.  Either way, what might you have missed?

In interviewing or coaching people, I find myself continually facing the temptation to prepare my response then interrupt with it.  I frequently have to give myself the message: “Shuddup, take a breath and listen.”  If I succeed with that intervention, I can usually wait until there is a natural break in the conversation, suggesting that the other person has finished.  Hopefully then I will have received the full value from what they are saying.

I suppose it is really around what the conversation is for.  Is it about:

• Finding out the other person’s views and ideas?
• Having a discussion which allows both of you to hear and build on each other’s thoughts and contributions?
• Providing a platform for you to expound your own brilliant ideas on things?

If it’s anything but the last one, you will probably get good value from shutting up, waiting and listening.

But if you wait and listen, instead of formulating your response while they are talking, how will you be ready to chime in when the right opportunity presents?  My only suggestion for that is – trust your intuition.  In that brief instant of silence between them stopping and you starting, there is space and time for the right response, or next question, to formulate itself, based on information which you might not have otherwise had.

Sometimes there may not be a natural pause in the other person’s delivery.  This may be because they really need a spill, in which case let them go on, and on.

Or they may be one of those people who just don’t stop talking.  What then?

• Decide whether this is a conversation you have to have.  If not, consider just not being part of it any more.  What’s the point?
• If it is a necessary conversation, as in a work or professional setting, consider a process intervention – instead of wading in with your own contribution, draw attention (subtly or not, depending on what feels right at the time) to the fact that you cannot get a word in edgeways, and it’s not working for you.
• If you can’t break in at all, try a physical signal – at times I have had to resort to making that “T” sign with my hands, like they do in basketball, to say “Time out!”

Unless you are actually having a debate, productive conversations are not about winning or losing.  Let go of the competitive urge, shut up, take a breath and listen.  You might find some gold nuggets you weren’t expecting.

Tools for effective conversations – part 1

Bill the builder came around yesterday with his new favourite toy:  his Toyota Huski baby bobcat.  I swear he had a gleam in his  eye like a kid who’s just got that new movement sensor gadget for their X-Box.  I thought it was a pretty cool tool as well.

Since I’m not a tradie, I have different tools for home and work.  The tool I most often reach for lately in the shed is my Hitachi cordless drill/driver.  It’s just essential for so many jobs.

I pick it up and it hefts nicely in my hand.  It goes up ladders with me, onto the roof, into the ceiling cavity, under the house, round to my family’s places.

I can switch it to hammer action when there is brick or concrete to drill.  I can run it real slow when there’s a delicate job.  Or push it hard to drive a screw home, until the torque setting starts to clatter, telling me that it’s gone as far as it’s going to go.

In fact I wish I had two – one for the drill and one for the driver, so I don’t have to swap between the two modes in the middle of a job.

So much for home tools.

I spent last week doing interviews for a board evaluation, having some great conversations with directors and senior executives.  By the end of the week, I realised that in my board of directors toolkit, I have the equivalent of my cordless drill.  It’s the Open Question.

If I am really interested in finding out what someone thinks or has to say about an issue, I give myself a slight pause.  I make sure the question I am about to ask is not one to which they can give easily a yes or no answer, but rather is an open question.  I want to give them the opportunity to expand on the issue at hand, or at the very least not to dodge it.

How do you know when a question is likely to be open, rather than provoking “yes” or “no”?

• Don’t start it with a verb, like: “Did you …?”  “Will you …?”  “Have you ever …?”  “Is that …?”  Phrasing like that can invite a closing down of the issue after a brief answer.
• Instead start with one of the key words that will open out a question, which mostly seem to start with a “w”:

 -       “What does that bring up for you?”

-       “Where do you think a strategy like that may lead?”

-       “What’s missing …?”

-      “When did that approach last work for you?”

-      “What could you have done better?”

• Perhaps the most useful open questions start with “how”:

-      The classic one – “How did that make you feel?”

-    “How could that be done a different way?”

-     “How could you respond to something like that next time?”

The one “w” word which I find isn’t always helpful is “why”.  Asking “Why is that?”, “Why did you do that?”, “Why can’t you …?” requires some analysis by the respondent, or some judgement to be made.  It can bring the flow of discussion to a halt, or lead off on a tangent.  Using the other words of enquiry allows the respondent to be descriptive rather than analytical.  It seems to be easier for the respondent to describe, rather than to explain.  So I try to be judicious in asking “why”.

One of the other potential consequences of a well-phrased open question is that the respondent might find, in answering, some insight which they haven’t brought to mind before.  The usual signal for that is a mildly apprehensive look, and the reply: “That’s a really good question.”

Sometimes the battery in my cordless drill goes flat in the middle of a job, and it’s good to have the spare battery charged up and ready to go.  Having a fall-back open question up your sleeve can be useful if the discussion starts to falter.

I got out of a couple of tight spots last week, when difficult issues looked like they were going to close down before they were well-ventilated, by asking “So how do you think that will play out?”  It’s a bit of a last resort, but it’s better than letting something significant sneak past without being aired.

Another useful open question when the conversation may be stuck is simply to ask “How is this process going for you?”  This is at least an opportunity to find out if anything significant process-wise is affecting the flow of the discussion.

So there are my favourite tools at the moment.  Which one do you find yourself most frequently reaching for, in the shed or at work?

“Forgive us our trespasses” – are we “simplifying” the wrong things?

Call me old-fashioned, but do we have to update everything?

I went to church last Sunday. It’s not a frequent occurrence, but it was a day of family celebration, the first anniversary of the death of my beloved mother-in-law and the unveiling of the small but beautiful stained glass window which had been commissioned in her memory.

In Christian terms I might be considered a heathen, but my parents did their best, sending me to Sunday School every week. In fact I became a bit of a bible nerd, and in those far-off days of the early sixties we actually had exams to see how much you had learned at Sunday School. There was an extra exam which was for either really holy kids, and/or nerds. Of course I did that one, for the glory rather than the holiness – trying to over-achieve at the age of 8. I won a couple of prizes for it from church head office as well.

So anyway, to a certain extent I know my bible. (Brigitte says, “So what, you don’t believe any of it.” Well, that’s not quite true. I can get along with most things in the bible except for original sin.)

The bible we were learning from in those Sunday School days was the King James version, which by definition was written in 17th century language. It was before any of these new-fangled translations. So I am kind of attached to that flowing, almost majestic language.

The gospel reading last Sunday at mass was from Matthew chapter 6, the bit where Jesus is telling people not to worry. In the modern version being read from, the final verse said:

“Each day has enough trouble of its own.”

I know that particular passage, which used to be about “the fowls of the air and the lilies of the field” before it was “updated”. I was feeling a little disappointed about its modern translation and that mundane conclusion. As we walked out of the church and were farewelled by Father John, I said to him: “Father, when I was a boy, I thought that last verse in the gospel reading said:

‘Sufficient unto the day is the evil thereof.’ “

“That’s exactly it, my boy,” said Father, generously overlooking the smart-arse comment from the lapsed Protestant. But isn’t the King James version of that verse a whole lot more memorable than the plain English version?

Call me old-fashioned, but my point is this. In the search for meaning and relevance of things spiritual, maybe we are dumbing it down too much. Trying to be up-to-date, we throw away some of the heritage and lineage which might actually aid the grasping of spiritual lessons. We strip away some of the mystery which has to be an inevitable part of any spirituality, even when it is dressed up as “religion”.

When I am doing my marriage celebrant gig, I am continually surprised but comforted by the fact that so many couples want to do the old-fashioned wedding vows, the 17th century version with “to have and to hold”. I guess it’s the ritual thing. It just seems to help make the occasion special.

(I even had a groom recently who wanted to include: “With this ring I thee wed.” Which went just fine after we had explained to the bride, whose first language was Korean, what “thee” actually meant.)

It’s no surprise that so many of those Buddhist teachings appeal to me. They recognise the place of mystery, and leave it to the individual seekers to find and deal with the ultimate questions, and maybe even some answers. Rather than over-simplify in the fruitless cause of religious certainty, and consequently de-ritualise, they accept the unknowable.

So give me any day (when the occasion requires it) that old-fashioned Lord’s Prayer, and the plea to “forgive us our trespasses as we forgive them that trespass against us.”

And notwithstanding all that, I’m pleased Father John asks God for forgiveness of my sins if I happen to turn up at his church. I’ll take blessings from wherever I can get them.

Working with professionals (but is this how my clients think of me)?

I love working with professionals.  There is some stuff which you just can’t pull off on your own, even as a dedicated DIYer.   You have to get in someone who knows what they are doing, and if you are lucky, that person will be a genuine professional.

I just had two of them at my place, where the consequences of two different screw-ups came together.

(One of the things I have realised about this blogging life is that to give the right context to the messages I want to pass on, I have to tell stories against myself.  Oh well, here’s another one.)

A few years ago, I had this great idea to bring my early 20^th century oak roll-top desk into the computer age.  To keep the various power cords and USB connectors for my laptop and peripherals out of sight, I would cut a really unobtrusive hole in the back of the desk, and the cords could all pass through and plug in without them having to drape over the front or the side of the desk.

I got out the 1 inch hole saw I inherited from dad, rolled back the roll-top, and started drilling away.  I hadn’t pushed the roll-top back quite far enough for the best access, so I stopped, pushed it back a bit more, and went at it again.

When I was done, there was a discrete hole in an unobservable part of the desk.   Pleased with myself, I closed up the desk, and discovered that I had also put not one, but two, neat one inch holes in the roll-top.  What I hadn’t realised was that that the unobtrusive place I had chosen was where the top rolled out of sight.

I kinda solved that cock-up by just leaving the desk open for the next few years.  I had to suffer the occasional ribbing from Brigitte about my gaffe, and the ignominy when she would tell the tale to other people with morbid glee.

Just recently, though, Jim the Bulgarian piano restorer came into my life.  He had just worked a miracle repairing the leg of Brigitte’s baby grand piano.  The leg had been snapped off in a glaring display of incompetence by some removalists who claimed to be, but were definitely not, professionals.  (Check out Jim’s website)

Brigitte, with her usual dash of schadenfreude about the whole roll-top incident, had told Jim about the desk, and asked him if he might work a similar miracle there.

So Jim proposed that he come up to Leura, and bring with him his friend Chieko the piano tuning wizard.  Chieko would tune the piano, which was suffering from discordance after having been dropped by the non-professional removalists, and he would fix my desk.

It sounded like a great plan, until I showed Jim the desk.  He inspected my handiwork, and my heart dropped about a foot when he said: “This will be one of the greatest challenges of my professional career.”

Meanwhile, Chieko diagnosed and solved some thorny technical issues consequent on the dropping and repair of the piano.  I guess that’s why she is a “piano technician”.  (Check out her website)

Notwithstanding the challenge, Jim came up with a plan which involved rooting around in my box of assorted fasteners for 8 small brass screws; mixing up some plasti-bond; drilling some fine holes on the sides of the damaged areas; and then painstaking filling the gaps with the plasti-bond.

“Oh, like a dentist putting a pin in your tooth to do a really big filling,” I said.  “I guess so,” said Jim.

Fill, sand, fill, sand.  What did Edison say about genius – the relative components of inspiration and application?  Eventually the one inch holes disappeared, replaced by two pale pink disks of smooth plasti-bond.

I thought that was pretty good, even though the filler was a bit obvious.  But Jim wasn’t finished.

Her pulled out a few little jars and an artist’s fitch brush out of his tool box.  (“If it can’t be fixed with what’s in this toolbox we are in real trouble, ” he had said when he arrived.)

He mixed up some bits of this and that on a folded-up sheet of paper, which ended up looking like an oil-painter’s palette.  He found the right shade somewhere on the palette and brushed it onto the filler.

It was a perfect match for the oak.

The roll-top desk is back together again now, an attractive piece of furniture with just the right amount (for me) of patina.  I’ve decided not to update it for computers.  The odd cord or two can hang out over the side, and I’ll put them away when they are not actually in use.

As we were finishing the job, Chieko had just completed doing whatever piano tuners do, which is a black art to me.  As is the custom with piano tuners, she then gave it a test run, and launched into a high-speed rendition of the Rondo alla Turca.

“Why is she playing it so fast?” said Jim.  “Because she can,” I said.

Yep, I love working with professionals.

So, am I sure that my clients think the same about me?  It’s definitely got me thinking.

It’s okay to cry

Doesn’t just about everyone cry sometimes?  I can’t watch Steve Martin in Father of the Bride without tearing up a bit.  I had to wipe a few away as the lights came on in the cinema after Mrs Carey’s Concert a month or so ago.

Crying at funerals, as a product of genuine grief, doesn’t seem to generate too much discomfort for the non-criers – it seems natural and accepted, even expected.  Brides and mothers crying at weddings is just part of the fun.

Then there is occupational crying.  I was in a session recently where the person I was with started to cry.  Which was a fair enough reaction given that we were touching on some deeply felt professional issues which went to this person’s view of themselves.

No matter how used to tears you may be, someone crying in front of you in a work setting is a little challenging.  There are natural reactions:

• you may feel a little shiver of anxiety yourself
• there may be a transference of that person’s pain or distress, or some small part of it, to you
• there may be some embarrassment that this happening in front of you
• there can be some slight sense of “there but for the grace of God go I”.

If you coach, manage, advise or mentor people;  if you have to do performance appraisals for your staff, or have to give “constructive feedback”;  if you have difficult news to deliver like “your position is being made redundant”; then sooner or later someone is going to cry in front of you.

A few decades ago now, when I was at learning-to-be-a-lawyer school, we had a crusty old instructor taking us through family law  practice.  “If you have a female divorce client coming to see you,” he said, “always have a glass of water ready, because they can’t drink and cry at the same time.”  In other words, he reckoned, try and stop the tears at all costs.

So what should you do, when someone breaks down in front of you in a professional context? Starting from the premise, of course, that you haven’t been mean, malicious or gratuitously provocative.  Here are a few thoughts;

• First of all, don’t panic, or rush to try and stop it.  Crying is a natural, even helpful, reaction.  It’s okay if people cry.
• Consider feeling privileged that someone is sharing a deep emotion, and trusts you enough to cry in front of you.
• Be prepared to let some of the emotion play out, even if it makes you feel uncomfortable.  You don’t have to own the whole teary situation, and you don’t need to have those feelings of personal anxiety.
• That said, offering some tissues is really helpful.  They can help the crier maintain a bit of personal dignity which can otherwise be difficult when tears are running down into their mouth and their nose is dripping into their lap.
• Take a pause, and don’t press on immediately with the agenda.  Don’t worry about a bit of silence.  Even so, crying is not a  reason why eventually you shouldn’t continue with the business of the session.
• Try and maintain a safe environment, without external interruptions.
• If the cause of the tears isn’t obvious, (e.g. not “you are being made redundant” or something similar) you might gently  enquire, after some composure has been regained, “What pushed that button for you?”, and then help them explore it.
• Before you terminate the meeting, give them a chance to pull themselves together, and minimise the prospect of further embarrassment from having to walk through the office with red swollen eyes and a wet face.

So you don’t have to be thrown by someone crying at work.  Now, if I could just get over my own mild embarrassment as the lights come on in the darkened cinema and I try unobtrusively to brush away a few stray tears.

Catastrophes can happen, and sometimes do

I thought it might put my last post into perspective, if I shared the story which first got me fired up about this directors’  liability stuff.

When I was a young lawyer, I saw a hard lesson learned, and learned one myself. I didn’t understand the full import of either of those lessons until some years later.

We were all paying for the sins of the eighties one way or another.  I had been part of the Commonwealth Bank of Australia legal team that bought the State Bank of Victoria from the State Government.  SBV had for many reasons, including some very imprudent lending, fallen into a state where its future looked grim. The sale was inevitable, and essential to the interests of its customers; nevertheless it was traumatic for many Victorians, in many different ways.

After the completion of the sale, I became part of the clean-up team.  We dealt with the matters that CBA had inherited as the successor to SBV.  One of these was a lawsuit which became known as “CBA v. Friedrich”:  It had arisen out of the operations of an organisation which most people who came across it would have described as a “not-for-profit”.

In a judgement which at times verges on lyrical, Mr Justice Tadgell opened with the following comments:

“This proceeding stems from the ruin by fraud of a company called the National Safety Council of Australia Victorian Division … The plaintiff’s claim is unusual not least because of its immense size – nearly $97 million having been claimed against each defendant individually – but also because it was made against directors each of whom served in an honorary and part-time capacity.”

I settled the case with all of the defendants except the chairman of the board of directors, Mr Eise.  When the case eventually ran against him, a very sorry tale emerged.

The National Safety Council had gone through an extraordinary period of growth in a relatively short time, under the leadership of its chief executive John Friedrich.  Friedrich had by the time of hearing died.  Mr Justice Tadgell described Friedrich and his activities like this:

“… Friedrich gave the board the general impression of being an ideal chief executive of exceptional industry and ability to which the company’s remarkable expansion since his appointment had largely been due.  He did, it seems, drive the board along with
an almost euphoric sense of high achievement, a sensation which the board greatly appreciated and enjoyed.  Friedrich was awarded the Medal of the Order of Australia in the Australia Day Honours List in January 1988 …

 “Notwithstanding those qualities Friedrich was, I should judge, manipulative and deceitful; and he made himself extremely plausible by dint of being an accomplished liar.”

Through what seems, with hindsight, an astoundingly inept performance by the board, the company’s true financial position (which was increasingly parlous) did not become apparent either to the board, or to SBV who in 1988 had lent it nearly $100 million.  At the time of the loan, the company was insolvent; conversely, the financial statements provided to the bank, which had
been signed by two directors including Mr Eise on behalf of the board, showed it  to be in a sound financial position.

Friedrich used many ruses to achieve the deception.  Here is one.  At an annual general meeting of the company, a director enquired whether the financial statements had been audited.  They had been, and the auditors had raised a number of fundamental concerns about the company’s position which Friedrich was seeking to hide.

In response to the question, Friedrich waved a document and proclaimed that the “audit report” was available for inspection.  “Apparently,” records Mr Justice Tadgell, “no person present sought to inspect the document, and it was not read out.”

Mr Justice Tadgell concluded:

“It is true enough that the directors, including Mr Eise, did not know or suspect in May 1988 what the company’s financial position was.  For that they blame Friedrich’s fraudulent conduct.  Mr Eise said more than once in his evidence that the matter of the company’s financial difficulty never crossed his mind before December 1988 and even after that.  He merely assumed that all was well and had never had occasion to think otherwise.

 “It is to be steadily remembered, however, that the Board was the controlling body of the company and that the directors, including Mr Eise, did not take reasonable steps that were open to them, and should have been taken, to obtain proper financial information.”

Mr Justice Tadgell finally awarded CBA a verdict against Mr Eise of $96,704,998, a staggering amount against a part-time, unpaid, non-executive director of a not-for-profit organisation.  He obviously felt some personal qualms in doing so, and gave this almost-apology:

“If the result of the judgement seems severe, the severity will probably be perceived for three reasons.  The first lies in the size of the award to the plaintiff, but that is no more than a reflection of the size of the debt actually incurred by the company.  The second is that Mr Eise was a victim of Friedrich’s fraud.   That is a matter which arouses sympathy.  But, if the fraud was extensive so was the directors’ failure to monitor the company’s financial position …

“The third reason is that there are or may be grounds to think that the State Bank of Victoria was imprudent in making he advances that it did.  The fact remains that the company had the benefit of the advances and it thus incurred the debts.  [The legislation] does not draw a distinction between a wise and a foolish lender to whom the company incurs a debt in the circumstances it describes.”

A hard lesson in director’s duties indeed for Mr Eise.  A memorable lesson for me: to take particular and demonstrable steps as a director, to ask hard questions and to follow proper processes in relation to a company’s financial position.  I know that more than one CFO has thought me pedantic, over-cautious and possibly doubting of their personal integrity.  But I will never forget Mr Eise.