CARGILLS, CORPORATE GOVERNANCE AND COVID -19

For almost all Sri Lankan Private Limited Companies Pandemic situation of the COVID 19 affected every aspects of the business management areas. In this blog it is specifically try to identify the effect of COVID 19 to the Corporate Governance of Cargills Ceylon Plc. As an essential service provider in the county the company operated continuously in the middle of the first wave of the pandemic and also faced unique and very profound challenges for the maintenance of the corporate governance of the company. This post outlines several issues related to the corporate governance where the directors of Cargills Ceylon Plc need to consider for the challenges and risks in this pandemic situation. The post basically explains the monitoring and oversight responsibilities COVID -19 and directors of the company, considerations for the liquidity and capitalizations of the company, executive Compensation matters of the Cargills Ceylon Plc and finally takeover defenses for the preparedness for the situation and it minimize its impact to the Corporate Governance of the Company.

 

Monitoring and Oversight Responsibilities of Directors 

The one of the main responsibilities of the director of Cargills Ceylon Plc is to enhance the existing structure of the reporting of the company. The information of the company needs to enriched to make the oversight decisions in this pandemic situation and the structure then need to be enhanced to have the more and more information as possible to make sure receiving correct information for the decisions for the management of the company. This type of situation ensures the board of directors to have more precise information and relevant information for the decisions to solve the upcoming problems of the company. It is essential to format a committee to take the responsibilities and as a possible tool which is available for the board of directors to make the correct decisions after passing through certain monitoring and evaluating activities. Timely and precisely detailed minutes are expected to report in the committee to review in future concerns when ever necessary. For the considerations of after due matters the committee need to be adopt all the clear measurements for the good faith of these oversighting decisions. Enhancement of the communication with the company management, confirming the feasibility of disaster plan of the company and seeking information and details related to the available alternative options for the company and proper evaluation of the potential disruption for the normal business operations and assessment of the potential key areas for the review of board and for the succession plan of the management is essential in this action for the re assessment of long term corporate strategy.

Consideration for the matters related to the liquidity and capitalization

One of the main key areas that related to the corporate governance of the company and the pandemic situation of COVID 19 is to think about the liquidity and the capitalization of the company. The periodic updates need to be taken for the liquidity position of the company through the management and as well as consideration for the capitalization matters. This specifically includes the crisis of the on the company related to the cash flow of it.  For the this the short-term current liabilities need to be re considered with the current assets of the company as well as long term indebtedness of the company need to consider also for the upcoming settlement of the liabilities of the company. The suspension of the ordinary dividends pre existing stock buy backs are need to be re considered in this of situation. Further if the company make this type of the decisions it is essential to counsel the expertise regarding the matter and re consideration need to be done for the proper timing for the announcements of the company matter. 

Matters Related to the Executive Compensation

In the period where the COVID – 19 is prevailing in the world it is the time of setting performance related targets and metrices for the period of current status and for the budgeting for the forthcoming time periods as well. This was the time where the management of the companies consider about bonus payments increments and other compensation and remunerations. All the awards granted for the prior years are seriously affected with the COVID situation and almost all additional awards are banned and restricted. Since the stock prices of the Cargills Ceylon also suppressed and depletion of the share prices causes a damage to the company market value in more drastic way. The targets of the Cargills Ceylon Plc have been reset and it is also adjusted to the scheme of the remuneration and compensation of the executives of the company as well.

Preparedness and Takeover Defenses

Since as a public listed company Cargills Ceylon Plc is experiencing a stock loss at this moment. These significance decline over stock prices are one of the prudent ways to ensure the company preparedness towards stock prices of the and alternative investments of the company. Most of the time board of directors of Cargills Ceylon Plc is annually consider about investments plans and this is the time for think about the aggregation of the alternative investments or slow down the process investments at the moment.

One of the specific takeover defenses of the company argued that poison pill is the right plan for the shareholders plan for the company. Even though the takeover offers of the company may not appropriate as earlier days friendly approach need to be taken for the other activities of the takeovers as well and the consideration for the oversight decisions need to be taken as well.  

Irrespective to the COVID 19 Situation the Roles of Board of Directors are Fiduciary

In here the roles of Board of Directors are fiduciary in nature, the board need to be revealed all the necessary information to the shareholders of the company and the management of the respective activities of the company instead of Board of Directors is a must for the proper assimilation of the day today activities of the company. Even though in the previous cases the Board of Directors of the Cargills Ceylon Plc as other companies all over the world are keeping written minutes for their performance and the decisions made by the directors of the country, it is ensure that in at least help of  the virtual methods and from the technologies like ZOOM WEBEX the relevant meetings need to be presented and the methods of presentation need to be adhere with the situation of the company for the as well. There are no excuses required for the unwritten meeting minutes in the case.

Financial Reporting Concerns and COVID 19 impacts

Based on the COVID 19 situation of the country it is obvious that there is a delay in the annual financial statement Publication in the company hence with the existing situation it is very difficult to publish the annual statement and conduct audits for the company. This disclosure obligation is very important aspect in corporate governance matter and the company has to adhere for regulation in their maximum contribution towards. Not only for the publication side of the Annual reports but also conduction of AGM of the company is also affected in the situation. With the precautions imposed by the Ministry of Health of Sri Lanka the company not yet conducted its annual general meetings and activities such as declaration of the dividends, appointment of the directors of the company, appointment of the external auditors, appointment of the secretaries of the company is delayed all the way. Hence as companies in worldwide in Sri Lanka also Private Limited Companies Pandemic situation of the COVID 19 affected every aspects of the business management areas.

 According to the discussed outcomes related to the COVID 19 and Corporate Governance of the company it is specifically try to identify the effect of COVID 19 to the Corporate Governance of Cargills Ceylon Plc. Since Cargills is an essential service provider in the county the company operated continuously in the middle of the first wave of the pandemic and now in the middle of the Second and Third wave of the COVID and also faced unique and very profound challenges for the maintenance of the corporate governance of the company.

 This reflective article covered the several issues related to the corporate governance where the directors of Cargills Ceylon Plc need to consider for the challenges and risks in this pandemic situation and where they need certain improvements to the situation too. The post basically explains the monitoring and oversight responsibilities COVID -19 and directors of the company, considerations for the liquidity and capitalizations of the company, executive Compensation matters of the Cargills Ceylon Plc and finally takeover defenses for the preparedness for the situation and it minimize its impact to the Corporate Governance of the Company. Specially it discussed the impact of COVID to the Financial disclosures in the corporate governance  

Deloite, 2020. The heart of resilient leadership responding to covid 19- Guide to Senoir Excecutives. [Online]
Available at: https://www2.deloitte.com/fr/fr/pages/covid-insights/articles/covid-19-resilient-leadership.html
[Accessed 13 10 2020].