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8005CGOV Examination Case Study

David, is the Chief Executive Officer (CEO) of Gold Limited (GL) a United States (US) listed goldmining
entity with its head office in New York. His tertiary attainments include an undergraduate degree in
accounting and an MBA specialising in Human Resource Management. He also holds a designation of
Certified Practising Accountant (CPA) and is a registered auditor. Prior to joining GL, David held executive
roles in the mining sector including Chief Operating Officer (COO) of the United Kingdom (UK) publicly
unlisted entity Silver Ltd (SL) and General Manager of Copper Pty Ltd (CPL) a Canadian unlisted private
entity. Silver Ltd has three directors; Deborah the chairperson and CEO, Sally who replaced David, and Bruce
an independent director. According, to recent advice, SL is soon to be listed on the stock (securities)

Recently, GL announced to the market they had struck 'pay dirt'. The forward gold production reserves were
estimated to be $5 billion dollars over the next 20 years. Upon hearing the GL news, market traders and
investors sent stock (share) prices to record highs and the media into a frenzy.

Last month, the board of GL advised shareholders that in response to corporate governance needs and
feedback from the risk committee an entity called Gold Risk Pty Ltd (GRPL, i.e. a majority owned subsidiary
entity) will be incorporated soon. The role of GRPL is to provide risk management advice to GL (i.e. parent
entity) across its multinational mining operations.

At GL's last monthly board meeting, David expressed his frustration at the lack of financial performance
incentives for executive director's. As a member of the remuneration and nomination committees, he believes
that his remuneration should be better aligned to agreed Key Performance Indicators (KPI's) such as market
stock price and financial performance outcomes. Also, he feels that the accounting and financial reporting
practices of GL are far too conservative, understating both the board's performance and his own as CEO.
David insisted that change must occur soon.

Grace, an executive director of GL, recently met with Cecil the chairperson of GL. Grace mentioned her
concerns about David's role on the remuneration committee, and his demand for a pay rise. In response, Cecil
asked Grace to accept David as the 'golden-haired boy' and vote in favour of his new remuneration package.
Cecil mentioned that this will be tabled in the agenda for voting at the next board meeting. He stated, 'I have
the full support of the board and expect your vote as the only female director on the board'.

Finally, Cecil, asked Grace why it was the case that the GL financial accounts were the subject of
conservative accounting practices and that the audit committee endorsed such an approach without question.
He stressed to her the importance of having positive financial accounts in preparedness for the next secondary
share offering, an agenda item at the Annual General Meeting (AGM) in three months. Therefore, to assist
with such changes he felt it timely that David move from the remuneration and nomination committees to the
audit committee. In turn, Grace could fill the vacancies on the remuneration and nomination committees.
After all, he points out, her pay is less than her male executive peers and she could probably argue for a pay
rise in light of the new gold discovery.

Grace is outraged by the conversation with Cecil and raises her concerns in confidence with her best friend
Alison, the company secretary and legal counsel at CPL. Alison was not surprised by the news. First insisting
on Graces' confidence, she outlines her concerns regarding David's ethical conduct while working at CPL.
Apparently, while working at CPL, David led negotiations as part of a joint venture (JV) agreement with SL
to explore for gold deposits. At the same time, he was an independent director of Self Help (SH) a not-for-
profit entity providing support to indigenous persons residing in the location where the JV parties were
exploring for gold deposits.

Alison, now an independent board member of SH, was told by the chair of the SH board that he told David

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the location of the gold deposits. This was on the condition that SL and CPL invest in the wellbeing of the
local community by providing a medical centre, employing local workers and taking care of the environment
on native title lands. Alison says, 'I can only guess that David felt uncomfortable and unable to commit to
provide such re-compensation and so did not disclose the whereabouts of the gold to the JV parties'.
Interestingly, at the time of joining SL, David resigned from SH, making a public statement that cited his
reason for resignation as an excessive work burden.

Shocked, Grace asks Alison, 'But what about the gold discovery that happened only six months after David
got the role of CEO at GL?' Well, news is that SH is outraged that GL think they can mine their land without
consultation and agreement with the community elders. After all, it is on native title lands with restrictions.
However, it appears that David and friends have 'made a killing' on the stock market and now do not care
either way about the future of GL.

In a recent media interview, the chairperson of SH angrily referred to David's conduct as 'disgraceful', citing
that he ignored his legal and ethical duty as an executive director of SH by disclosing 'secret business' on the
whereabouts of the gold deposits. GL are denying SH's claims citing that their investment in exploration
technology resulted in the gold discovery and endorsing the strong leadership of David as the CEO. However,
the regulator is concerned about the matter and commenced an investigation into GL's affairs citing director
and corporate governance concerns.

Disclaimer: This corporate governance exam case study is strictly for higher education assessment purposes,
is hypothetical in nature and not intended to represent directly or indirectly any individual, organisation, event
or circumstance, past or present, known or otherwise in the public domain.

~~ End of case study ~~

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