Feltex Carpets, once a great New Zealand business went public a decade ago, in May 2004. However, the business was mismanaged and it went bust within two years. The $185m case against the board, brought by a former shareholder, is now before the High Court in Wellington. The primary defendant is the board (actually, the directors). The second and third defendants are Credit Suisse Private Equity (promoter of the sale) and Credit Suite First Boston Asian Merchant Partners (CSPE parent).
During submissions yesterday it was revealed that the company was likened to a lemon from which most of the goodness had been squeezed out. Further, one director referred to "these lousy shares" in an email several months before the company's IPO. These startling revelations place the defendants is a rather awkward position. How material will these pieces of evidence be to the overall case?
The case, which is expected to last nine weeks, is being watched closely by company directors, the IoD and many others, for it will more than likely set a precedent against which future cases of mismanagement and poor governance are measured.
Thoughts on corporate purpose, strategy and governance; our place in the world; and, other things that catch my attention.