Reference no: EM132576862

Independence has just been granted to the South Pacific Island of New Thistle. Over a thousand miles away the CEO of DEF, a huge metals and mining group is considering the impact. The group was sold off bythe national government 10 years ago, the government retaining a 55%share. Now, having granted the island  independence, DEF's national government has given away the company's ownership rights to a local nickel mine in order to appease the newly independent islanders.

The CEO and minority shareholders are unhappy with this action. Minority shareholders are drafting resolutions and appeals on a daily basis.

DEF had, for many years, been dominated by the CEO, a legendary figure in the mining industry, who had worked for the company for most of his life. The board of directors never queried, disagreed or voted against his wishes and were all handpicked by the CEO for their loyalty to him.

The same minority shareholders, led by a powerful pension fund that owned a considerable stake in the company, had recently voiced their concerns over the lack of truly independent non-executive directors (most were business associates of the CEO, none representing stakeholders such as environmental groups) and the lack of remuneration, nomination and audit committees in board operations.

When approached over these issues the CEO was dismissive. He pointed out that he understood the company better than anyone else and therefore he ultimately decided who worked within his organisation. His view was that non-executive directors beyond those already employed and the use of committees seemed unnecessary 'window dressing' for shareholders. Further, the loss of the mine would mean a need to rationalise costs, not incur additional overheads in such committees.

Required:

(a) Briefly describe what is meant by independence and evaluate the CEO's comments about independence at DEF.

(b) Discuss the objectives of a nomination committee should one be created at DEF.

(c) Describe the actions available to the minority shareholders in relation to their grievances against DEF.