Reputation risk

2Tel and DEF Co may be vulnerable to criticisms that 'fat cat' directors are operating on
a mutually beneficial basis that brings them excessive rewards and is not in the best
interest of shareholders. Resignation would restore any lost confidence in the
remuneration committee, but there is no evidence yet that confidence has been lost to a
damaging degree.
Arguments against resignation
Evidence of malpractice
Although cross-directorships are against corporate governance best practice, it does not
seem reasonable to suggest that there is evidence of malpractice. Frank Finn's
remuneration package may have been poorly designed, but there is no evidence that
there was a deliberate intention to ignore shareholder concerns or damage their
interests.
Loss of Mr Ng
Avo Investments makes the legitimate point that the commercial contributions of the two
directors will be lost. This point highlights one of the complexities of corporate

ox
governance, being the need to weigh up strong and effective functioning of the board
(through the appointment of experienced members) against any potential threat to
independence.
Role of other directors lB
The remuneration committee does not consist solely of Mr Ng; there should be other
ba
independent non-executive directors on the committee whose presence mean that it is
capable of coming to a balanced proposal regarding appropriate remuneration
packages that will be supported by shareholders.
lo

Conclusion
G

On the basis of the above analysis it appears that, on balance, the suggestion by Hanoi
House that both Mr Ng and Mr Finn be required to resign from their respective non-
A

executive positions is unreasonable.

C
AC

430

facebook.com/dinhkhoannhunao