Shareholders to hold board accountable

The trend towards holding boards accountable for company performance appears to be alive and well, with news that shareholders plan to vote against two incumbent directors at listed company Rakon. It seems that shareholders are starting to lose confidence in the leadership of the business, after several years of poor financial performance. Rakon's share value has plummeted in recent times.

The board has led the development of strategy, but performance has floundered. Clearly, something has gone wrong. It could be that the linkage between strategy and the business' purpose was not tight; the strategy was not appropriate for the prevailing environmental conditions; the strategy was not implemented well; or, executive hubris may have stifled good decision-making. Regardless of the actual cause, the board should have monitored performance against strategy more closely. Adjustments should have been made as soon as discrepancies between planned and actual performance became apparent. Shareholders are right to hold the board accountable for performance in this case, because it was the board that created and approved the strategy, and committed the company's resources.