Corporate Governance and Regulation
This essay examines the example of two former directors of retailer David Jones – Leigh Clapham and Steve Vamos. The two directors made the decision to purchase shares in the company during a delicate period for the company and while decisions were being made about it’s future. Discussion on the damage this decision caused to David Jones and the ensuing fallout, whereby the two directors and the chairman of the board were put in a position where they had no choice but to resign.
This essay will address the role of a board within a ...view middle of the document...
In the public domain, examples of governance failures are unfortunately argued over perception, rather than the evidence on hand. There is now, more than ever, a push to ensure companies formulate a robust corporate governance framework.
This essay will examine the issues surrounding two former directors of department store giant David Jones and their actions purchasing shares in the company around the time that decisions were being made regarding the future of the company.
This results of this case, like so many, was not decided but what really happened, but by what the public thought may have happened. In a competitive environment, like the one in which David Jones operates, public perception is everything.
The issue of governance was raised at David Jones following the actions of two former members of the board in late 2013. The facts around this case are as follows:
* On 28 October 2013, David Jones receives an offer from Myer – a “merger of equals offer”, meaning Myer will take over David Jones, but shareholders from both sides will receive an equal share of the combined group (Sydney Morning Herald).
* On 29 October 2013, two David Jones directors – Leigh Clapham and Steve Vamos purchased 20,000 and 12,500 shares, respectively. (ABC News)
* On or around 1 November 2013. David Jones released quarterly sales figures, prompting shares in David Jones to climb by 7%. (ABC News)
* ASIC investigated the two directors, but were forced to issue No further action letters to the directors – an acknowledgement in time that there is insufficient evidence to take the matter further. This is not an exoneration – the case can be re-opened at any time if further evidence is discovered.
As a result of these actions, there was significant backlash from David Jones shareholders. At the next AGM, shareholders voted down the remuneration report. This prompted a full apology from David Jones chairman Peter Mason. The two directors would later both leave the David Jones board in February 2014, four months after purchasing the shares.
3. Damage to David Jones
The fallout from these actions left a lasting impression on David Jones as a company. It served as an important lesson: image and public perception are far more important than whether or not these directors acted within the boundaries of the law.
Directors considering buying company shares in future need to consider whether the information they are in charge of could be or is considered market sensitive information – while also highlighting a key governance issues: obligations relating to disclosure, director responsibilities and rules surrounding directors engaging in trading shares of their companies. (corrs.com.au February 2014)
4. The role of a board
Under the Corporations Act 2001, companies in Australia are required to have at least one director (proprietary companies), while public companies are legally required to...