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Leadership 101 – The Role and Responsibility of Directors – Part 15

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Please note that this pertains to South African Legislation, the King Requirements, and Best Practice.

I doubt that any of us enter into a contract with either a client or supplier (or even a partnership or joint venture) with the intention of the whole thing going belly up or us getting into a fight that seems to have no way to resolve the issue or move forward in any way.

Here’s the thing . . . it does happen and when it happens there must be some way to break the deadlock and find a resolution.

Taking the issue to court is both expensive and hugely time-consuming as it can take years to find an acceptable redress and often the outcome can be both variable and unpredictable, which can also have a negative impact on the Company’s reputation.

As usual, it is a good idea to be proactive and have an ADR (Alternative Dispute Resolution) in place. It allows the Boards and Directors to find more creative ways to manage dispute resolutions and it is also one of the ways that good governance can be maintained. ADR is recommended and forms part of the Director’s fiduciary duties.

Here are some of the questions that Directors should be asking:-

1. “Is our organization involved in significant disputes.” If the answer is yes, then clearly there is a problem that needs some attention. As always prevention is far better than cure and perhaps it is time to change your mindset and find a better way to do business, one that does not always end up in a dispute.

2. “What do these disputes teach us about our customers/suppliers and our own approach to business?” It a hard question to both ask and answer, but it is definitely one that needs to be asked. What is the actual lesson and have you learned it?

3. “Has negotiation failed in these disputes?” If so why? Again, this is another one of those hard questions, but when you find the answer and you make the necessary changes it will enhance the functionality of your business in ways that you could never imagine.

4. “Can we consider an ADR process? E.g. mediation, conciliation, etc.?”

5. “Has the organization considered adopting a dispute response plan?” If the answer to this one is no, then clearly something needs to be put into place.

The next step of course, if the decision is to go ahead with an ADR plan, is to brainstorm and list the suggested alternatives.

Clearly, a lot more for the Directors to think about and agree upon, don’t you agree?

Next time we’ll tackle the final issue in the series and that is the Remuneration of Directors and Senior Executives.