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TOOLKIT 4

Resolving Corporate
Governance Disputes
VOLUME 3 : TRAINING
VOLUME 3 : TRAINING
MODULE 1 : What Skills Are Needed for Corporate Governance
Dispute Resolution?
3.1

Having directors with dispute resolution skills on the board can
make a tremendous difference on how corporate governance
disputes are handled. With the right dispute resolution skills, the
board can establish an effective process for surmounting opposing
views and steering the company towards its strategic objectives.
Without such skills, board deliberations may deteriorate as
factions emerge, antagonism permeates directors’ relations, and
resentment builds up.

Not everyone is suited to serve as a mediator, peacemaker, or
consensus-builder. Some personalities lend themselves better to
these roles than others. Yet all directors - especially board leaders
should strive to adopt interpersonal skills required for effective
dispute resolution.

At times, boards will need to draw on third-party expertise to
facilitate dif�?cult conversations and untangle disputes within the
boardroom or with external stakeholders. To be effective, third-
party experts must have suf�?cient experience, expertise, and
knowledge of corporate governance to deal with the complexity
of corporate governance issues. Peacemakers typically listen
well to others, are patient, command trust and respect, and have
sensitivity both to governance dynamics and the very human and
emotional issues that may underlie disputes.

THIS MODULE REVIEWS
Director’s conﬂict management styles
Director’s dispute resolution skills
Third-party dispute resolution styles and ethics
Third-party dispute resolution skills
Third-party understanding of corporate governance dynamics
MODULE 1
WHAT SKILLS ARE NEEDED FOR CORPORATE GOVERNANCE
DISPUTE RESOLUTION?

DIRECTORS DISPUTE RESOLUTION with procedures established to guard against dominance
SKILLS by one voice, particularly when decisions are being made.

Discourse and debate are at the heart of the board’s Good board practices, such as clear objectives for
work and essential in making decisions, guiding the meetings and shared norms, help to prevent misunder-
company, and ensuring that shareholders’ interests are standings and facilitate collegiality. The quality of board
well-served. discussions, too, depends on directors’ individual efforts
to communicate their information to others and to be
Decisions should result from a process in which directors good listeners.1
consider all the information available to them and
engage in productive, vigorous, and focused discussions. Differences of opinion and judgment are inevitable
Directors should be fully involved in these discussions, during board deliberations. However, tensions may
escalate, immobilizing the board — especially when
the stakes are high and the company is making dif�?cult
QUOTE strategic decisions. Directors may support positions
based on power politics and personal agendas rather
than on an issue’s merits. When board relations become
Dif�?culties Communicating dysfunctional, opposing moves by directors tend to be
During Conﬂict interpreted as additional evidence justifying the impulse
“As conﬂict emerges, we stop and take notice to be distrustful. A director may feel that, no matter what
that something is not right. The relationship they say or do, they will be perceived as being wrong and
in which the difficulty is arising becomes their efforts will not be appreciated.
complicated, not easy and ﬂuid as it once was.
We no longer take things at face value, but rather A dispute often takes a life of its own. It could be a minor
spend greater time and energy to interpret what
tension that is easily resolved. At the other extreme, it
things mean. As our communication becomes
more dif�?cult, we �?nd it harder and harder could be an escalating “war�? of words and actions that
to express our perceptions and feelings. We exacts tremendous costs and leaves disputants with
also �?nd it more dif�?cult to understand what emotional, professional, and other “scars�? — harming
others are doing and saying, and may develop the company in tangible and intangible ways.
feelings of uneasiness and anxiety. This is often
accompanied by a growing sense of urgency and
TO REVIEW THE CONSEQUENCES AND IMPACT
frustration as the conﬂict progresses, especially OF CORPORATE GOVERNANCE DISPUTES, SEE
if no end is in sight.�? VOLUME 1 MODULE 2.

JOHN PAUL LEDERACH
PROFESSOR OF INTERNATIONAL PEACEBUILDING At a dispute’s onset, the relations among the parties
UNIVERSITY OF NOTRE DAME, INDIANA involved tend to be strained as communications become
more dif�?cult. Perceptions of the issues and solutions
SOURCE: John Paul Lederach, “Conﬂict Transformation.�? may differ, based on cultural, personal, political,
October 2003. Available at: http://www.beyondintractability.
org/essay/transformation/?nid=1223. psychological, and other factors. Different levels of
expertise, personal skills, intellect, and commitment also

MODULE 1 What Skills Are Needed for Corporate Governance Dispute Resolution? VOLUME 3 1
shape a dispute’s dynamics and each party’s participation directors must understand their conﬂict-management
and inﬂuence. Emotions may enter into disputants’ styles. In 1979, researchers Afzalur Rahim and Thomas
conduct particularly as self-con�?dence, the need to Bonoma2 differentiated the styles of handling conﬂict
dominate and “win,�? one’s sense of one’s esteem and using two basic dimensions: concern for self (also
“rank,�? and other psychological issues converge to shape referred to as “assertiveness�?) and concern for others
disputants’ perceptions and behavior. These emotions (also referred to as “concern for relationship�?). The �?rst
add to the substantive disagreements and the actions that dimension explains the degree (high or low) to which
disputants pursue. Toleration for hostility, aggressiveness, a person attempts to satisfy his or her own concerns.
or disrespect may exacerbate tensions among directors. The second explains the degree (high or low) to which a
person attempts to satisfy others’ concerns.
For boardroom debates to remain orderly and discussions
with external stakeholders to be constructive, directors The combination of these two dimensions results in �?ve
must understand and apply dispute resolution skills. speci�?c styles for handling interpersonal conﬂict:
Although some directors may have a natural talent for
ironing out disputes among their peers, other directors Integrating (high concern for self and others).This
will require training to: style, also referred to as collaborating or cooperating,
is associated with problem-solving. This approach
Understand the dynamics of corporate governance involves openness, exchanging information, looking
disputes for alternatives, and examining differences to reach
an effective solution acceptable to both parties. This
Evaluate the risks and consequences associated with style is often described as a “win-win�? approach that
such disputes

Become aware of one’s personal conﬂict management
style STYLES OF HANDLING
INTERPERSONAL CONFLICT
Build dispute resolution and interpersonal skills
CONCERN FOR SELF
Develop sensitivities to cultural issues HIGH LOW

Learn ADR processes and techniques
HIGH

Know when to seek third-party help for managing and Integrating Obliging
CONCERN FOR OTHERS

resolving internal and external governance disputes
involving shareholders and/or other stakeholders

TO REVIEW A SAMPLE CORPORATE GOVERNANCE Compromising
DISPUTE RESOLUTION COURSE FOR DIRECTORS,
SEE VOLUME 3 MODULE 2.
LOW

Dominating Avoiding
Conﬂict Management Styles
Conﬂict management literature provides many guidelines
on how interpersonal conﬂict in organizations can be
handled to maximize individual, group, or organizational
SOURCE: M. A. Rahim and T. V. Bonoma, “Managing Organizational
effectiveness. To effectively and constructively prevent Conﬂict: A Model for Diagnosis and Intervention.�? Psychological
and manage corporate governance disputes, boards and Reports, 1979, 44, 1323-1344.

2 VOLUME 3 What Skills Are Needed for Corporate Governance Dispute Resolution? MODULE 1
satis�?es the concerns of both parties and is associated the decision-making process and leave little room for
with functional outcomes. A board whose dominating debate and discussion. A chairman/CEO “cult�? may
style is integrating, which is consistent with corporate prevail, resulting in directors’ deference and reluctance
governance best practice (namely, board members to challenge “unanimous�? decisions. Boards with more
discuss and debate strategic decisions in a company’s than one dominating personality are fertile terrain for
best interests). disputes.

Obliging (low concern for self and high concern for Avoiding (low concern for self and others). This style
others). This style, also referred to as accommodating or has been associated with withdrawal or sidestepping
harmonizing, is associated with efforts to play down the situations. An avoiding person fails to satisfy his or her
differences and emphasize commonalities to satisfy the own concerns and those of the other parties. This style
other party’s concerns. An obliging person neglects his is often described as a “lose-lose�? approach that does
or her own concerns to satisfy others’ concerns. This not satisfy either party’s concern and is associated with
style is often described as a “lose-win�? approach that dysfunctional outcomes. This style is predominant in
satis�?es the other party’s concerns and is associated with passive or non-active boards where directors mainly
functional outcomes. This style is typical for family rubber-stamp functions.
�?rms’ boards, where family members on the board
defer to the founder. Interdependent relationships — The literature indicates that the more cooperative
directors serving on each other’s boards — among peers conﬂict management styles, such as integrating and
may result in decisions based less on merits and more on obliging (in which a meaningful amount of concern is
nurturing those relationships. Directors, as �?duciaries, shown for the other party), are likely to produce positive
may not put personal interests and duties before the individual and organizational outcomes, while such
duties they owe to the company. Legal liabilities antagonistic styles as dominating and avoiding (in which
and time commitments may constrain directors’ little concern is shown for the other party) frequently
involvement in board discussions and actions, resulting result in escalation of conﬂict and negative outcomes.3
in their being “obliging.�?
In his conﬂict style inventory, author Ron Kraybill,
Compromising (intermediate in concern for self and explains that conﬂict management styles correspond to
others). This style involves “give-and-take;�? both parties an individual’s way of responding to conﬂict with others
give up something to forge a mutually acceptable based on his or her preferences and habits.4 There is no
decision. This style reﬂects board practice in which right and wrong style. Each conﬂict management style
directors have the best interests of their constituencies has its own strengths and weaknesses. Board members
at heart but follow well-established decision-making must be aware of their personal style and those of the
processes. other board members. When individuals do not know
their preferred style, they run the risk of running on
Dominating (high concern for self and low concern “autopilot�? and reacting blindly. Directors who are
for others). This style, also referred to as “competing�? aware of their own conﬂict management preferences,
or “directing,�? has been identi�?ed with win- as well as those of the board, can make better choices.
lose orientation or with forcing behavior to win For example, directors should take time to connect
one’s position. A dominating, highly assertive or with individuals who have an obliging style before
aggressively competitive person works hard to win settling down to serious business. When dealing with
his or her objective and, as a result, often ignores an individual whose style is avoiding, it is conversely
other parties’ needs and expectations. This approach important to give him or her adequate time to review
is associated with dysfunctional outcomes. This style both statements and documents and to take special care
is predominant in boards where a director, but more in engaging them in board discussions, and thereby
typically the chairman or the CEO, may dominate bene�?t from their viewpoints.

MODULE 1 What Skills Are Needed for Corporate Governance Dispute Resolution? VOLUME 3 3
PRACTICE

Conﬂict Management Style Questionaire

For each statement below, check the appropriate TRUE SOMEWHAT SOMEWHAT FALSE
TRUE FALSE
column, as it applies to your actual behavior on
the board. 4 POINTS 3 POINTS 2 POINTS 1 POINT

I look at issues with others to �?nd solutions that
1 meet the company’s best interests.

I try to negotiate with board members and
2 adopt a give-and-take approach to contention
situations.

I try to meet the expectation of the chairman and
3 committee chairs.

I argue my case and insist on the merits of my
4 views.

When there’s disagreement, I ask questions and
5 stay engaged with all board directors.

When I �?nd myself in an argument, I usually say
6 very little and leave as soon as possible.

I try to see conﬂict from both sides: I reﬂect on
7 personal and directors’ needs.

I prefer to compromise when dealing with con-
8 tentious issues and move on to the next agenda
item.

I �?nd conﬂicts over strategic issues challenging
9 and stimulating: I enjoy the battle of wits.

Being at odds with other board members makes
10 me feel uncomfortable and anxious.

4 VOLUME 3 What Skills Are Needed for Corporate Governance Dispute Resolution? MODULE 1
For each statement below, check the appropriate TRUE SOMEWHAT SOMEWHAT FALSE
TRUE FALSE
column, as it applies to your actual behavior on
the board. 4 POINTS 3 POINTS 2 POINTS 1 POINT

I try to accommodate shareholders’ wishes and
11 the interests I represent on the board.

I can easily �?gure out the decisions that need to
12 be taken. I am usually proven right.

To help break deadlocks on important decisions, I
13 am willing to help meet others halfway.

I avoid hard feelings by keeping my
14 disagreements with other directors to myself.

I may not always agree with the decisions taken
15 at board meetings, but it is a small price to pay
for keeping the board’s peace and harmony.

In the chart below, add the points for each statement as indicated. The row with the highest score indicates your
most preferred conﬂict management style.

The row with the lowest score indicates your least preferred conﬂict management style.

Competing Total points for statement 4+9+12 =

Avoiding Total points for statement 6+10+15 =

Compromising Total points for statement 2+8+13 =

Accommodating Total points for statement 3+11+14 =

Collaborating Total points for statement 1+5+7 =

SOURCE: Adapted from Timothy F. Dowty, My Counseling Site. Available at: http://www.my-counseling-site.com/conﬂict_resolution_questionnaire.html.

MODULE 1 What Skills Are Needed for Corporate Governance Dispute Resolution? VOLUME 3 5
Board retreats and self-assessment sessions can serve Being particularly attuned to board relations, the
as appropriate venues to discuss directors’ conﬂict- chairperson (or lead director) is typically expected to
management styles and preferences and to help deal mediate between disputing directors. In some cases, a
constructively with existing or potential differences. talented board member proactively serves as peacemaker
When individuals know and understand each other’s by convincing directors to settle their differences with his
style, they are less combative, if not reactive. They are or her assistance. Ultimately, all directors should be able
more likely to be patient with each other’s responses. to strengthen the board’s corporate governance through
dispute resolution practices. The board is collectively
Dispute Resolution Skills and Expertise responsible for managing disputes in a timely, constructive
In managing the board’s business and acting as its manner. Enhancing the board’s dispute resolution skills
facilitator and guide, the chairperson (or lead director) is a dynamic process, requiring board leadership and the
must encourage productive board discussions and manage willingness to learn and adapt.
disputes. While conducting meetings, he or she stimulates
debate, builds consensus, and ensures that disagreements Directors — especially those who have a collaborative
are resolved constructively and in the company’s (and conﬂict-management style — commonly draw on
shareholders’) best interests. This creates an environment mediation techniques without always being aware of
that encourages the directors to work together. The doing so to �?nd common ground. Such peacemakers
chairperson maintains control of proceedings without will ask questions, listen attentively, and encourage
dominating discussions; each director is treated equally. parties to resolve differences. They strive to bring clarity,
Skillful questioning helps clarify issues and encourages improve communications, and re-focus attention on the
the directors’ full participation. company’s interests. With the assistance of peacemakers,
board directors, but also investors and other stakeholders,
TO REVIEW THE ROLE OF THE BOARD IN search for acceptable solutions to conﬂicting positions.
PREVENTING AND RESOLVING CORPORATE
GOVERNANCE DISPUTES, SEE VOLUME 2 MODULE 1.

QUOTE
QUOTE
Successful Board Leaders

The Loquacious Director “It is the interpersonal skills of the diplomat
that are paramount for helping directors
“You may have a loquacious director, the and management �?nd mutually acceptable
fellow who’s so articulate he feels he has to solutions to common challenges. And because
expound on every subject, sometimes even on these skills are so subtle and don’t always come
both sides of the subject. I’ve had to give this with the job description, it is hardly surprising
kind of feedback: ‘Sir, here is what your board that choosing a lead director can be one of the
is telling you. Your fellow directors love you, most dif�?cult decisions a board can make.�?
but you’re so articulate that you intimidate
them.’“ THEODORE DYSART
MANAGING PARTNER
WILLIAM HOLSTEIN HEIDRICK & STRUGGLES
COLUMNIST, “ARMCHAIR MBA�?

SOURCE: William J. Holstein, “The Problems with Boards.�?
Business Week,December 27, 2007. Available at: http:// SOURCE: Theodore Dysart, “Becoming a Super Lead Director.�?
www.businessweek.com/managing/content/dec2007/ Directorship. October/November 2008. Available at: www.
ca20071227_236732.htm. directorship.com/media/2010/09/2010-DIRECTORSHIP-100.pdf.

6 VOLUME 3 What Skills Are Needed for Corporate Governance Dispute Resolution? MODULE 1
DYNAMICS OF DISPUTE RESOLUTION

ANTAGONISM IN A CONFLICT PEOPLE CAN USE COLLABORATION

WHICH CAUSES WHICH ALLOWS THEM TO

ANGER | FEAR | DEFENSIVENESS DEFINE | SHARE | COOPERATE

CAUSES SO THAT THE

RIGIDITY REDUCES CONFLICT-RESOLUTION PROCESS BUILD RAPPORT

WHICH BLOCKS INCREASES SELECT INFORMATION

BUILD TRUST
COMMUNICATION | ACCEPTANCE
FIND OPTIONS
MAKING POSSIBLE
GUIDE NEGOTIATION
JOINT PROBLEM SOLVING

WHERE

INTERESTS | APPROACHES | ISSUES

CAN BE CLEARLY

DEFINED | UNDERSTOOD

GENERATING

EVALUATIVE CRITERIA | CREATIVE OPTIONS

CAN BE CLEARLY

CONSTRUCTIVE BARGAINING

LEADS TO

FORMAL SETTLEMENT

SOURCE: History 30: Canadian Studies Curriculum Guide — Assessment of Skills /Abilities. Available at:http://www.sasked.gov.sk.ca/docs/
history30/images/conf.gif.

MODULE 1 What Skills Are Needed for Corporate Governance Dispute Resolution? VOLUME 3 7
CONFLICT RESOLUTION SKILLS LADDER

UNSKILLED INDIVIDUAL SKILLED INDIVIDUAL

Can negotiate a
win-win solution

> Inﬂexible 6 > Flexible
> Personal needs dominate > Open-minded
> Tries to use power to dominate (through > Assertive to look after personal interests
aggression) or withdraw to engage sympathy

Can generate
various solutions

> Limited to “�?ght or ﬂight�? options 5 > Generates a variety of options
> Focuses exclusively on own interests > Finds options that include both parties’ interests
> Argues for a position (which can be disguised
as interests)

Can empathize/take
perspective

> Unaware of others’ feelings 4 > Accurately reads others’ emotions
> Cannot read feelings accurately > Responds sensitively a appropriately
> Cannot “hear�? the other person’s interests > Listens to others’ interests
> Sees the other as “bad guy�? > Knows the difference between empathy and
> Believes empathy means agreement agreement

Can identify and
express own interests

> Only expresses their position (advocated 3 > Knows the difference between positions and
solution) interests
> Expresses own interests in terms of wants/
needs/fears/concerns

Can verbally
express own thoughts
and feelings

> Cannot verbalize own thoughts and feelings 2 > Has a large feelings vocabulary
> Unaware of own thoughts and feelings > Can identify own thoughts and feelings
(blames others) > Can experience emotion without losing control

Can contain/manage
strong emotions

> Cannot contain/manage emotion 1 > Can experience emotion without losing control
> Yells, screams, �?ghts, dissolves into tears,
withdraws

CONFLICT

SOURCE: Adapted from: M. Trinder and E. Wertheim, E. (2005). “Training Teachers in Building Empathy and Compassion in Young People�? in M.
Kostanski (Ed.), Proceedings of the Victorian Branch Australian Psychological Society Annual Conference. Available at: http://www.latrobe.edu.au/
psy/research/eris/.

8 VOLUME 3 What Skills Are Needed for Corporate Governance Dispute Resolution? MODULE 1
Throughout a dispute cycle, certain interpersonal skills
FOCUS
and expertise can help board directors engage and manage
tensions. These typically include:
Directors’ Interpersonal Conﬂict
Management Skills Communicating Effectively
Effective communications among directors, with senior
Interpersonal skills are all the behaviors and
feelings that inﬂuence interactions. Directors’
management and external constituencies, is essential
job descriptions should include a section on for productive board work. Effective communications
interpersonal skills. These should include: facilitates dialogue, engagement, and reduces
obstacles toward solutions. Further, it helps prevent
Communicating effectively
misunderstanding and narrows the disagreement’s
Active listening con�?nes. “The leader must be able to share knowledge
Assertive expression and ideas to transmit a sense of urgency and enthusiasm
to others,�? said Gilert Amelio, President and CEO of
Instilling trust and con�?dence National Semiconductor Corporation. “If a leader can’t
Respecting cultural sensitivities get a message across clearly and motivate others to act
on it, then having a message doesn’t even matter.�?
Building consensus

Managing emotions Communicating well starts with active listening. Good
communicators are good listeners; being attentive and
Disagreeing constructively
receptive to others’ views helps to ensure collaborative,
Learning agility two-way communications. Active listening helps
Self-motivation
directors collect facts and information, assess situations
accurately, and feel that they are being heard. Active
listening involves rephrasing statements in a constructive
manner and requires reading non-verbal cues, such
as eye contact, voice tone, and facial expressions to
INTERPERSONAL SKILLS understand intentions. Such skills as active listening and
open-ended questioning (versus closed yes/no questions)
may seem easy. In fact, the appropriate application of
these skills requires careful observation, good judgment,
LEADERSHIP NETWORKING
Self Con�?dence
and excellent timing. Re-phrasing statements in a
Monitoring
Decision-Making Network Building constructive manner is not just using the right words or
Delegation Effective phrases but also includes engaging others to determine
Motivating Others Communication
a common vision.

Communicating well also involves assertive expression.
TEAMWORK Directors need to clearly articulate their views so that
Monitoring all parties understand their points and are unlikely to
Groupwork
Decision-Making
misconstrue statements and opinions. This requires
Delegation a good vocabulary that enhances one’s diplomacy in
Collaboration articulating thoughts and debating with those holding
contrary views.

SOURCE: University of Sydney. Available at: http://www.sydney.edu.au. Communicating well, furthermore, includes being aware
of tone and body language and what it may communicate

MODULE 1 What Skills Are Needed for Corporate Governance Dispute Resolution? VOLUME 3 9
to others. According to a study conducted by Albert One of the biggest mistakes in executive communications
Mehrabian in 1971,5 face-to-face communications is to take for granted how others receive what is being
can be broken down to three elements: nonverbal, communicated. People exposed to the same information
tone, and words. Words only make up for 7% of the can end up with completely different ideas and
communication while nonverbal cues 55% and tone understandings. This is why the process of perception —
38%. This suggests that what an individual says is only how individuals receive, organize, interpret, and retain
a small fraction of what people hear. In the context of information transmitted to them from another person —
the boardroom, the root of most misunderstandings and can be a key obstacle. The communications process is
continuing disagreements is based on the following four also complicated by the tendency of people to �?ll in the
fatal assumptions:6 gaps — the process of closure — where information is
missing with information consistent with what they
Participants understand what has been communicated already know, even if that information is neither relevant
nor correct.
Participants agree with what has been communicated
Instilling Trust and Con�?dence
Participants care about what has been communicated It is common for people that work together, such as
board members, to have a degree of trust and a degree
Constituents know how to act according to what has of distrust about each other, simultaneously. Impartial
been communicated board practices, such as ensuring that directors have fair

FOCUS GLOSSARY

Blocks to Effective Communications Communications Frames
The following attitudes constitute obstacles Choosing the right words is imperative to be
to effective communications. They can divert an effective communicator. Words are deeply
meetings from their objectives, create frustration, imbedded with images, emotions, and associations
fuel resentment, and lead to open, unconstructive accumulated from individual and collective life
disagreement. These include: experiences, creating “frames.�? Through these
frames, people sift and process information, make
Interrupting judgments, and draw inferences about the world
around them. Frames shape how we understand,
Arguing
interpret, and communicate.
Being condescending
Mastering the right lexicon based on words’
Lecturing unique frames can turn unpersuasive messages
into persuasive ones, deepen engagement with
Being moralistic key stakeholders, and strengthen trust in the
process. Knowing how people ‘hear’ what we
Preaching
‘say’ helps to ensure that messages are more
Being judgmental clearly conveyed while narrowing the potential
for misunderstanding, argues communications
Outdoing others expert Frank Lunz. This demands that messages
are credible, simple, brief, consistent, visual, and
Monopolizing conversations
inspirational.
SOURCE: Frank Luntz, Words that Work: It’s Not What You Say,
It’s What People Hear. New York: Hyperion Press, 2007.

10 VOLUME 3 What Skills Are Needed for Corporate Governance Dispute Resolution? MODULE 1
opportunities to present their views, are most effective When the board’s composition includes talented directors
in developing trust and ultimately, consensus. Regardless with varied technical, ethnical, social, and cultural
of their position on the board, directors engaged in backgrounds, the board is more likely to question
managing and resolving disputes must instill trust and assumptions and to weigh various consequences, leading
con�?dence and be perceived as fair and impartial in the ultimately to more far-sighted decisions. Diversity on
dispute resolution process — no matter how informal the board is an asset. Indicators of the board’s diversity
that process may be. Part of that trust, one lead director remind individuals that differences of opinion are likely,
explains is “the con�?dence on the part of the other board and this expectation increases innovative thinking
members, and management that the message delivered and the capacity to handle conﬂict. As a consequence,
won’t be �?ltered by the messenger’s biases.�? As the corporate governance disputes may be deepened by
journalist Edward R. Murrow wrote: “To be persuasive, cultural differences.
we must be believable; to be believable, we must be
credible; to be credible, we must be truthful.�? Whether dealing with internal or external disputes,
cultural skills are heavily dependent on observation
This set of skills requires knowing how to relate to others, skills and sensitivity to colleagues’ perceptions of respect.
to read people, and to �?nd the basis for mutual respect, During board meetings, for example, some directors
camaraderie, and, when needed, team-building. may be time-conscious, ef�?cient, and task-oriented.
For them, time-management is a feature of professional
Respecting Cultural Sensitivities practice. Other directors may place higher value on board
Culture is a set of learned beliefs and behaviors that hospitality and relationships.7 From this perspective,
shape the ways in which individuals and groups view strong emphasis on board tasks and ef�?ciency is
and experience the world. Historical-political factors uncultured and disrespectful.
rooted in conﬂicts outside the boardroom can lead to
stubbornness, blame, and rigidity in discussions. The most dif�?cult problems to overcome are not about
behaviors, such as whether to shake hands, but, instead,
Each person — including directors — brings to their about those cultural issues related to shared and enduring
social encounters unique worldviews, local perspectives, values and beliefs associated with a particular group or
and behaviors shaped by the culture of their origin, which community. Board directors should be cognizant that
are learned in childhood and evolve through various cultural differences may become obstacles to agreement
af�?liations (e.g., religion, ethnicity, class, and voluntary when one party fears that the other will seek to impose
and professional organizations). values or beliefs as a form of domination. A minority

QUOTE

Culture Frames
“Culture is inextricably linked to the way people communicate because communication is largely dependent
on perception. Our culture forms our frame of reference through which we interpret events, feelings,
thoughts, and information. Hence our interpretation of reality is determined by the way we view the world,
our beliefs and values. Culture forms the backdrop… of any interaction between people.�?

SHARANYA RAO
ASSOCIATE DIRECTOR OF PROGRAMS, ENVISION EMI INC.

SOURCE: Sharanya Rao, “The Cultural Vacuum in Online Dispute Resolution.�? Available at: http://www.odr.info/unforum2004/rao.htm.

MODULE 1 What Skills Are Needed for Corporate Governance Dispute Resolution? VOLUME 3 11
person often fears dominance by a high-status group, Prioritizing options using a cost/bene�?t assessment
and any sign of cultural superiority (or disrespect for
minority values) is a potential threat.8 Agreements that monitor results, with contingencies

Building Consensus Consensus-building can occur outside board meetings
Chairmen and lead directors especially need to facilitate in retreats and executive sessions. The chairman, lead
discussions to encourage directors to “sign on�? to director, or board member who acts as a peacemaker,
standards of excellence in board practice and abide by may need to work behind the scenes and organize private
their common agreement. Boardroom debate is essential meetings to �?nd common ground. This requires time
but not an end itself. The chairman must ensure that and commitment. Helping all parties converge towards
issues get resolved and decisions are reached to allow a solution demands effective leadership, exerting one’s
the company to act. Decision-making should occur formal and informal authority.
through consensus, a voluntary agreement following
the deliberation and synthesis of different propositions. Managing Emotions
Generally, consensual decisions are less divisive than Emotions are intrinsic to conﬂict although not readily
voting, which require directors to take opposing “yes�? apparent — especially in the boardroom. In conﬂict,
or “no�? positions. However, the process tends to take a emotions are frequently translated into something more
longer time than voting. acceptable, such as making judgmental statements (“you
are mistaken�?), attributing intentions to others (“you
Consensus-building should not be confused with refused to disclose this information to me�?), or serving
“groupthink,�? where directors follow the general trend up solutions (“this is what needs to be done�?). Directors
of thought without questioning decisions. Consensus- need to be aware of any biases. Strong analytical
building is about helping directors who hold opposing skills and the ability to isolate emotional issues from
positions at the outset to come to a mutually bene�?cial substantive ones are essential in any business role, but are
and sometimes innovative agreement. As the poet Ralph particularly critical in resolving disputes. Directors with
Waldo Emerson once wrote: “Do not go where the path strong interpersonal skills will �?nd it easier to uncover
may lead; go instead where there is no path and leave sources of internal or external disputes, particularly when
a trail.�? related to others’ behavior. One should separate personal
issues, personality traits, and emotions from corporate
Skills contributing to consensus-building include: governance issues.

Open-ended questioning Yet, in many cases, the solution to a conﬂict will be
dif�?cult without acknowledgement of the feelings in play.
Respectful, effective communications This doesn’t mean that directors should be “emotional�?
but that solutions to disputes require communicating
Active listening feelings professionally before refocusing disputants on
their �?duciary responsibility to act in the best interests
Bringing issues to the surface of the corporation and its shareholders. R. Fisher and
D. Shapiro share the following �?ve tips for positively
Analyzing to deepen understanding and �?nd patterns inﬂuencing the emotional climate during a conﬂict:9
for organizing the information
Show appreciation for all parties. This can be done by
Describing common concerns demonstrating an understanding for others’ positions,
recognizing the value of what they think, feel, or do.
Generating alternative solutions This does not mean that we have to agree with their
position.

12 VOLUME 3 What Skills Are Needed for Corporate Governance Dispute Resolution? MODULE 1
PRACTICE

Managing Conﬂict through De-escalation Techniques

De-escalating Disagreements:

Listen attentively, show interest, and use open-ended questions.

Manage time with balanced opportunities for opposing parties to express views.

Minimize interruptions, blocking.

Avoid the polarization of opinions. Elicit diverse perspectives from impartial directors.

De-escalating Avoidance:

Ensure that all board members have opportunities to communicate concerns within the board meeting.

Ask open-ended (“What are your thoughts about...?�?) questions of directors that act concerned yet seem
reluctant to participate.

De-escalating Contentious Behavior:

Stay calm, and be aware of body language and tone.

State clearly practical and strategic objectives. Re-focus the discussion on constructive ideas and practical
suggestions.

Inventory document concerns. Request fact-�?nding questions.

Take a break, or re-schedule discussions.

Agree to disagree, or to address more dif�?cult topics with the help of a respected third-party expert at a
later date.

De-escalating Accusations:

Stop personal attacks. Re-focus deliberations on the company’s best interests and corporate governance
procedures.

Help reformulate ideas or statements. (Speak on behalf of self, using “I�? statements. Identify concerns.
Recognize uncertainty.)

Take a break, or re-schedule discussion, as necessary.

Determine an appropriate time and place to enforce board procedures and practices.

De-escalating Bullying:

Review board norms and practices at the meeting’s beginning.

Determine an appropriate time and place to approach the aggressive party separately. Take appropriate
action to prevent a repeat of aggressive behavior.

MODULE 1 What Skills Are Needed for Corporate Governance Dispute Resolution? VOLUME 3 13
Create a bond. This can be done by sharing information con�?dence using facts, examples, comparisons, and risk
about common interests, asking about personal assessments. The company secretary is a vital resource for
aspects. guidance regarding procedural matters, regulations, and
precedents. Skills required to challenge a majority view
Respect the parties’ autonomy. People like to make include:
independent decisions. Give others the space to express
their views. People who talk too much, for example, Offer a concise statement of concern and proposal
can threaten the others’ autonomy.
Offer factual support
Acknowledge the other party’s status. Status helps clarify
one’s position vis-à-vis the others. Provide clear examples

Highlight the other party’s role. Board directors each Demonstrate active listening
play an important role. Each role must have substance,
and the directors must be respected for their roles. Respond with constructive feedback

Disagreeing Constructively Preparations may also include talking with the chairman
At times, a board director has a serious concern about a in advance of the meeting to avoid surprises. If the board
board decision or the standards upon which the decision does not respond to the informed concern, with evidence
was made. Constructive dissent is the ability to challenge of risk, a director may lobby others after the meeting, ask
the majority view in a useful way. This skill can help prevent for an expert informant’s assistance, seek a mediator, or,
or limit “groupthink,�? the excessive group cohesion that if warranted, resign from the board.
precludes dissent and sound decision-making. The risk
to an individual who challenges “groupthink�? is that the To properly and usefully apply interpersonal skills,
majority will be critical and try to silence or pressure directors must have:
the “outlier�? to cooperate. Disagreeing constructively
requires courage and effective assertion. Various methods The appropriate industry or technical skills and
are used to pressure someone into agreement, including understand their roles and responsibilities. A mastery of
discounting expertise or using statements such as, “be the issues facilitates disputants’ ability to avoid obstacles
a team player.�? Directors sometimes compromise their resulting from poor preparation and confusion over
values and professional standards to maintain friendly, terminology and other substantive matters.
cohesive relations within the dominant group. The easiest
response is to fall silent, hoping that another director will The willingness to devote enough time to planning and
take a leadership role in addressing the issue. follow-up meetings outside the boardroom, to address
those issues that may threaten board relations. Studies
A clear understanding of corporate governance show that the amount of time directors devote to board
responsibilities (and liabilities) will strengthen a director’s matters is on the rise. One study shows that the time
resolve in challenging the board’s majority opinion. The directors dedicate on average to their directorship in the
company secretary’s documentation of dissent during United States went from 156 hours in 2001 to more
board meetings provides procedural support for directors than 200 hours in 2007.10 This number considerably
who dissent, as there is a record of the topic, the risks increases during crises and disputes.
identi�?ed, and the board’s responses.
Directors should also be aware of the obstacles that may
Constructive dissent is most effective when proposed prevent effective dispute management and resolution.
with careful preparation. A director is more likely to “Disputants may stick to unrealistic reference points,
gain serious attention when presenting information with may be subject to ‘anchoring effects,’ self-serving biases,

14 VOLUME 3 What Skills Are Needed for Corporate Governance Dispute Resolution? MODULE 1
FOCUS and ‘reactive devaluation.’�?11 Some of the most common
obstacles include:

Assessing the Board’s Anchoring effects. This common human tendency
Interpersonal Skills refers to a reliance on an “anchor,�? one trait or piece
of information when making decisions. Placing too
Board retreats provide opportunities to assess
individual and collective interpersonal skills and
much importance on an “anchor�? tends to cause
expertise that improve governance practices errors in accurately predicting the utility of a future
and help manage disputes. The set of questions outcome. “Knowledgeable people are less susceptible
below can be used as a guideline to assess to basic anchoring effects; anchoring appears to operate
those skills: unintentionally and unconsciously.�?12
Are the board directors effective communi-
cators? Self-serving biases. There is a human tendency to
make systematic errors in judgment, knowledge, and
What are their respective strengths and
reasoning, biases that result partly from information-
weaknesses?
processing shortcuts. Self-serving biases, or illusory
Are board discussions focused yet suf�?ciently superiority, refer to tendencies to claim more respon-
open to allow a broad range of viewpoints? sibility for successes than failures and to evaluate
Are there opportunities for individual board ambiguous information in a way bene�?cial to personal
members to make presentations and lead interests.
discussions, particularly those relevant to
their committee responsibilities and areas of Reactive devaluation. Reactive devaluation happens
expertise?
when individuals try to create a mutually bene�?cial deal
Does the chairman balance the extroverts but �?nd reasons to devalue the other party’s offer once
and introverts to ensure open participation in the negotiation begins. The devaluation of seemingly
board deliberations? reasonable offers creates a barrier to further negotiation
Do board directors relate well to one another and settlement. “Research on reactive devaluation has
and senior management? consistently and convincingly shown that negotiators
devalue objectively identical offers when they are made
If not, what are the problems and their
sources?
by the other party rather than by one’s own party.�?13

Are there social, cultural, political, economic,
or personal reasons creating tensions among
board members and senior management?

Have tensions among directors obstructed
the board’s ability to function? If so, why?
What steps has the board taken to defuse
personal animosities among board directors?

Does the process that the chairman or
lead director use to consider issues provide
opportunities for reﬂection, analysis, debate,
and consensus-building?

MODULE 1 What Skills Are Needed for Corporate Governance Dispute Resolution? VOLUME 3 15
THIRD-PARTY DISPUTE RESOLUTION SKILLS “When impartial third parties intervene in a conﬂict
situation, new relational structures and possibilities for
Third parties may act as consultants, helping one side moderating the conﬂict are created,�? writes Paul Wehr,
or both sides analyze the dispute and plan an effective a professor at the Conﬂict Research Consortium, of the
response. Alternatively, they may act as facilitators, University of Colorado. “Introduction of a mediator, for
arranging the forum, setting agendas, and guiding example, changes both the physical and social structure
productive discussions. More active roles for third parties of a conﬂict. New groups and sets of transactions appear
may be either mediation or arbitration. with the third party. The presence of an observer tends to
put contenders on better if not their best behavior. More
There are many cases when the board should rely on accurate communication is facilitated by intermediaries.
third-party experts to help resolve corporate governance The issues, interests, and needs of the contenders become
disputes. These include when: clearer with the help of such third parties. There may
even be someone besides one’s adversary to blame, as
Disputes can no longer be managed within the intermediaries sometimes divert blame toward themselves
boardroom as a technique for transforming stalemate into resolution.
Most importantly, third parties bring additional minds
Tensions rise with dissident shareholders and skills for problem-solving to the conﬂict. The
contenders are no longer on their own.�?14
Local advocacy groups threaten the company’s strategic
development Seeking third-party help can be especially effective in
preventing disputes and managing dif�?cult corporate
Former senior executives sue the directors changes, such as mergers and acquisitions, which are a

EXAMPLE

Lawsuits Increase Cost of Mergers and Acquisitions
United States: Securities Class Action Services
“The mergers-and-acquisitions market is heating up again,�? the Wall Street Journal reports in January 2011,
“but a new raft of lawsuits claiming shareholders are being shortchanged threatens to complicate and increase
the cost of the transactions.�? Studies show that investors are �?ling an ever-increasing number of lawsuits
against corporations embarking on deals. According to Maryland-based Securities Class Action Services, the
number of lawsuits �?led in state and federal courts has increased from 36 in 2008 to 191 in 2009 to 216 in
the �?rst 10 months of 2010. The Journal notes that these so-called “strike�? suits “rarely, if ever, scuttle deals.
They occasionally lead to bene�?ts for shareholders.�? Legal analysts say they have increased in recent years
partly because the practice has proven to be lucrative for plaintiffs’ lawyers who are able to zero in on which
companies are eager to be rid of litigation and settle quickly.

COMMENT
Investors are holding boards more accountable for their actions through class action lawsuits. Lucrative
compensation for plaintiffs’ attorneys also explains the surge in these cases. Boards must become more skilled at
resolving these disputes outside the courtrooms. The tensions these cases create for directors also underscores
the need for boards to have effective dispute resolution procedures.

SOURCE: Searcey Jones, “First, the Merger; Then the Lawsuit.�? Wall Street Journal, January 10, 2011. Available at: http://www..wsj.com.

16 VOLUME 3 What Skills Are Needed for Corporate Governance Dispute Resolution? MODULE 1
fertile terrain for disputes. Studies show that the number When selecting third-party expertise to help manage
of shareholder-led lawsuits is on the rise, increasing corporate governance disputes, boards need to review
merger and acquisition costs and causing deals to start individual experts based on their needs and a set of
on the wrong foot. commonly agreed criteria including:

The ability to draw on a third party when necessary Dispute resolution processes and styles
demonstrates the board’s maturity and understanding
of the dynamics of disputes. Various institutions, �?rms, Ethics, credibility, and trustworthiness
and consultants can offer dispute resolution services. A
third party can help facilitate strategic discussions, advise Dispute resolution expertise and skills
on ADR processes, or �?nd effective solutions through
mediation and arbitration. Corporate governance knowledge and exposure to
directors and senior executives
TO REVIEW CORPORATE GOVERNANCE DISPUTE
RESOLUTION SERVICE PROVIDERS, SEE VOLUME 2 Mediation quali�?cations, experience, and background —
MODULE 3.
while some jurisdictions prescribe no generalized quali�?-
cations for mediators, in some speci�?c contexts mediators
require quali�?cations prescribed by legislation.
FOCUS

Selecting Mediators: Process Versus PRACTICE
Content
Two kinds of mediator’s expertise were compared,
Selecting a Mediator
which might affect disputants’ judgment of
mediators and their recommendations — process When selecting a mediator to help manage
expertise and content expertise: corporate governance disputes, boards need to
review the following:
The mediator’s particular content expertise about
the details of the dispute appeared to be irrelevant if Mediation style or model offered, and
the mediator was considered to be an expert in the whether it suits the case
process of conﬂict resolution. When mediators were
seen as process experts, disputants viewed them as Professional af�?liation, certi�?cation, and its
more credible and were more favorably disposed value
toward engaging their services. These judgments
Training and education
extended to the mediators’ recommendations.
Those recommendations offered by process expert Professional background
mediators were viewed as higher quality and were
judged more favorably. Experience practicing mediation

When the mediator was perceived as lacking Experience in the substantive area of dispute
process expertise, disputants’ perceptions of how
Conﬂict of interest
well the mediator understood the particular details
of the dispute increased their evaluations of the Willingness to allow, and possibly encourage,
mediator and the mediator’s recommendation. mediation participants to seek creative
solutions
J. A. ARNOLD
PROFESSOR CALIFORNIA STATE UNIVERSITY Availability and fees
SOURCE: J. A. Arnold, “Inﬂuence of Third Party Expertise on
Disputants’ Reactions to Mediation.�? Psychological Reports,
October 2007, 101(2):407-18.

MODULE 1 What Skills Are Needed for Corporate Governance Dispute Resolution? VOLUME 3 17
PRACTICE

Evaluating Mediation Skills

MANAGE THE START-UP

Evidence of pre-planning was strong. First remarks (or formal opening statement were thorough, clear,
Excellent
concise, and set a tone encouraging collaboration.

Some evidence of forethought and preparation. Opening remarks were adequate but could have been
Adequate
more thorough, clear, or concise.

Mediator did not appear to have prepared in advance for the encounter. No opening statement or the
De�?cient explanations were cursory or inaccurate.

GATHER AND COMPREHEND FACTS

Asked neutral, open-ended questions. Summarized and paraphrased parties’ statements. Succeeded in
Excellent
generating information about the most sensitive issues.

Asked the obvious questions. Generally appeared to discover the facts, though not with great depth or
Adequate
precision. Understood obvious aspects of the facts and reasons with both sides.

Asked few, mostly irrelevant, or overly directive questions. Appeared at a loss as to what to ask in follow-
up questions. Disorganized or haphazard questioning, �?lled with gaps and untimely changes in direction.
De�?cient Was easily overwhelmed with new, complex information or confused by data. Missed important aspects of
facts or reasons of one side or the other.

UNDERSTAND UNDERLYING POSITIONS AND INTERESTS

Encouraged disputants to focus on concerns and interests. Demonstrated an in-depth understanding of
Excellent the scope, intensity, and contentiousness of the situation, and of the problems and interests not explicitly
stated by parties. Clari�?ed and reframed the issues and assisted parties in identifying priorities.

Listened to disputants describe concerns and interests. Understood obvious aspects of the underlying
Adequate
reasons or interests of both sides. Some success at clarifying and reframing the issues.

Avoided discussion of underlying concerns and interests. Missed important aspects of reasons or interests
De�?cient of one side or the other.

EXPRESS EMPATHY VERBALLY

Conveyed interest and respect to the parties. Questions were neutral and open-ended; listened
Excellent respectfully. Helped parties improve their understanding of each other’s concerns. Conveyed conspicuous
sensitivity to cultural and other misunderstandings and addressed them effectively.

Listened to others and did not antagonize them. Conveyed some appreciation of parties’ priorities.
Adequate
Conveyed some sensitivity to cultural and other misunderstandings.

Came into the discussion abruptly to challenge others. Dismissed others’ warnings. Saw others’ problems
De�?cient as of their own making and did not want to be bothered. Displayed insensitivity to cultural and other
misunderstandings.

18 VOLUME 3 What Skills Are Needed for Corporate Governance Dispute Resolution? MODULE 1
EXPRESS EMPATHY NONVERBALLY

Manner conveyed interest and respect to the parties. Non-verbal communication (gestures, body language,
Excellent voice/tone, eye contact) was appropriate throughout. Manner conveyed conspicuous sensitivity to cultural
misunderstandings and addressed them effectively.

Manner conveyed some appreciation of parties’ priorities. Non-verbal communication (gestures, body
Adequate language, voice/tone, eye contact) was generally appropriate, but not consistent. Manner conveyed some
sensitivity to cultural misunderstandings.

Appeared to see others’ problems as of their own making and did not want to be bothered. Non-verbal
De�?cient communication (gestures, body language, voice/tone, eye contact) was inappropriate. Manner displayed
insensitivity to cultural misunderstandings.

CONVEY IMPARTIALITY

Manner of introductions and initial explanations showed equal respect for all disputants. Listened to both
Excellent sides. Asked objective questions, conveyed neutral atmosphere. Demonstrated that he or she was keeping an
open mind. Verbal and non-verbal communication did not favor either party.

Generally showed respect for all disputants but questions and non-verbal communication sometimes showed
Adequate he or she was more comfortable with one party than the other. Maintained a balance, but showed a better
understanding of one party’s goals and beliefs than the others.

Asked misleading, loaded, or unfair questions exhibiting bias. Engaged in oppressive questioning to the
De�?cient
disadvantage of one of the parties.

MANAGE THE PERSONALITIES

Had effective techniques for redirecting parties’ focus away from sullen or otherwise unproductive
colloquies. If humor was used, the use was appropriate to both the situation and parties’ cultural and other
Excellent
perceptions. Managed all client/representative relationships effectively. Used effective techniques to deal
with manipulative, domineering, and/or destructive behavior.

Generally recognized signs that discussion had turned sour and took action to try to redirect it. Not always
Adequate
effective at lightening the atmosphere. Did not allow bullying by clients or representatives.

Made little or no effort to provide perspective on the parties’ problems or to engineer lighter moments.
De�?cient Allowed clients or representatives to control process in ways counterproductive to resolution. Use of humor
was culturally or otherwise inappropriate.

ASSIST PARTIES IN GENERATING OPTIONS

Assisted the parties in developing their own options and evaluating alternative solutions for themselves.
Excellent Demonstrated commitment to allowing full play to parties’ own values. Vigorously pursued avenues of
collaboration between the parties.

Made some attempt to get parties to think about their dispute on a deeper level. Showed parties how some
Adequate of their proposals and compromises interrelated with ideas of other parties. Allowed collaborative problem
solving, but did not stimulate it.

Made little effort to let parties have control over their fate. Ideas on collaboration-building were ineffective
De�?cient
and unworkable. Blocked efforts at seeking collaborative solutions.

MODULE 1 What Skills Are Needed for Corporate Governance Dispute Resolution? VOLUME 3 19
PRACTICE

Evaluating Mediation Skills (continued)

GENERATE OPTIONS

If and when the mediator generated options directly, those options responsive to parties’ concerns, timely,
and put forth only after making strong efforts to focus on and stimulate the parties’ collaborative problem-
Excellent solving. An option was never presented with such force that parties would be likely to interpret it as the
only one.

If options were generated directly by the mediator, this was only after allowing for collaborative problem-
Adequate solving, and options put forth were responsive to parties’ most obvious concerns. Showed parties how some
proposals and compromises interrelated with ideas of other party.

Tried to come up with solutions individually, without letting parties have control over their fate. Ideas on
De�?cient substance were ineffective and unworkable. Prematurely tried to come up with solutions, pushing parties
toward compromises prior to establishing essential facts.

ASSIST PARTIES IN GENERATING AGREEMENTS

Emphasized areas of agreement. Clari�?ed and framed points of agreement. Assisted parties in evaluating
alternative solutions. Showed tenacity throughout mediation. Packaged and linked issues to illustrate mutual
Excellent
gains from agreements. Clearly conveyed limitations to possible agreement and consequences of non-
agreement for each party.

Choices of what to present and manner of presentation did not compromise goals of resolution. May not
Adequate have effectively helped parties get at some tough issues, thus sidestepping putting self and others in dif�?cult
situations at the cost of missing possible opportunities for joint gains.

Failed to allow full opportunity for parties to �?nd their own solutions prior to indicating any evaluation of the
De�?cient case. Presentations not well related to goals of resolution. Was dif�?cult to understand or unclear in expression.
Appeared ﬂustered and uncomfortable most of the time; little or no con�?dence expressed.

GENERATE AGREEMENTS

Asked questions to highlight unacceptable and unworkable positions. Consistent use of reality testing.
Excellent Effectively helped parties to move past apparent impasses. If substantive suggestions by the mediator were
necessary, the suggestions demonstrated.

Choice of when to press for action did not compromise primary goal of party self-determination. Generally
demonstrated understanding of information the parties offered. Avoided advising parties on some tough
Adequate
issues even when no reasonable hope remained that the parties could achieve results without this help. Had
signi�?cant dif�?culty moving the parties past apparent impasses.

Did not initiate suggestions even when no grounds remained for believing that (within a reasonable time in
the context of the case) parties could yet make mutually acceptable suggestions without direct intervention.
De�?cient
Suggestions were premature or questionable (factually or legally). Readily withdrew when challenged or
questioned. Little or no con�?dence expressed.

20 VOLUME 3 What Skills Are Needed for Corporate Governance Dispute Resolution? MODULE 1
MOVE THE PARTIES TOWARD AN IMPROVED RELATIONSHIP

Encouraged and facilitated constructive interactions directly between the parties. Established atmosphere in
which anger and tension were expressed constructively. Emphasized areas of improved mutual understanding.
Excellent Progress of discussion demonstrated that mediator had helped improve the way the parties viewed each
other. Helped the parties to understand the limitations of possible immediate agreements and consequences
of a super�?cial approach for each party.

Provided some opportunity for parties to interact constructively. Choices of what to present and manner of
presentation did not compromise goals of relationship-building. Avoided asking some signi�?cant questions,
Adequate
thus sidestepping putting self and others in dif�?cult situations at the cost of missing possible opportunities
for improved understanding between the parties.

Failed to lead parties toward greater mutual understanding. Did not initiate help; was inert rather than
De�?cient actively listening. Presentations not well-related to goals of relationship-building. Little or no con�?dence in
the parties’ ability to interact constructively, or to improve their future relationship, expressed.

MANAGE THE INTERACTION AND CONCLUSION

Made all decisions about managing the meeting, including caucusing, order of presentation, etc., consistent
Excellent with rationale for progress toward resolution. Concluding statement accurately conveyed necessary
information regarding compliance and follow-up in language appropriate to parties’ culture and education.

Controlled process, but decisions did not reﬂect a strategy for resolution. Did not dominate, but was not
Adequate overwhelmed by factual or legal complexities. Concluding statement was adequately expressed and did not
contain obvious gaps or inaccuracies.

Encouraged discussion of issues or proposals with little relevance to potential agreements. Decisions
De�?cient on procedure and presentation were unjusti�?ed. Was confused or overwhelmed by factual or legal
complexities.

SOURCE: Adapted from Christopher Honeyman, et al., Performance-Based Assessment: a Methodology, for Use in Selecting, Training and Evaluating
Mediators. Washington DC.: National Institute for Dispute Resolution,1995. Available at: http://www.convenor.com/madison/quality.htm.

MODULE 1 What Skills Are Needed for Corporate Governance Dispute Resolution? VOLUME 3 21
Quali�?cations usually revolve around knowledge of
FOCUS
the theory and practice of conﬂict, negotiation and
mediation, mediations skills, and attitudes appropriate
for mediation. There are three factors of relevance:
What Does a Mediator Do?
experience in practice of mediation, experience in
the substantive area of the dispute, and personal life Bring parties together
experiences. Establish communication and set an
atmosphere for negotiation
It is not always the case that a dispute resolution expert
Help negotiate agendas and clarify issues to
can personally be identi�?ed or agreed upon in advance.
be addressed
This is especially true when mediation procedures
are derived from standard dispute resolution clauses Help parties obtain data they need to make
embedded in such contracts as shareholder agreements. decisions
Typically these clauses stipulate the choice of mediator Facilitate joint sessions and call caucuses
in advance rather than allow the parties themselves to
Clarify interests, priorities and alternatives to
choose a mediator previously known to them. There
an agreement
is a qualitative difference between clauses that give the
appointing body the right to impose the mediator as it Help parties explore ideas for creative
may choose and clauses that permit an appointing body solutions
to suggest a mediator for the parties to accept or reject. Identify overlapping interests or areas of
Standard form contracts may choose either approach. potential agreement
In shareholder agreements, the parties’ willingness to
Help parties agree on criteria to evaluate
mediate at all may depend on the con�?dence invested in
solutions
the nominating body, speci�?cally whether that body is a
professional organization that effectively guarantees that Record agreements as they develop
the mediator is a practicing professional operating under Facilitates communication in the mediation
that body’s ethical standards. process

Encourages the exchange of information
Mediation Processes and Styles
Based on their objectives, needs, and the issues to be Helps the parties to understand each
other’s views
resolved, boards can select various ADR processes,
which range from simple facilitation of retreats to formal Promotes venting or emotional expression in
arbitration of cross-border shareholder disputes. To a safe environment
choose the best approach suited to them, directors should
Shifts the focus from the past to the future
be aware of all the processes available to them and third-
party experts should provide guidance on selecting the Sometimes, suggests proposed solutions
right approach. (evaluative style)

TO REVIEW STANDARD ALTERNATIVE DISPUTE
RESOLUTION PROCESSES AND THEIR RESPECTIVE
BENEFITS, SEE VOLUME 1 MODULE 3.

Mediation is the most common and most ﬂexible process SOURCE: John Barkai, “Using Alternative Dispute Resolution
for resolving corporate governance disputes and does not Techniques In Construction Disputes.�? Papers from the 3rd
International Symposium on Infrastructure Management and
preclude the use of other processes, such as arbitration or Financing, Kyoto University, Kyoto Japan.August 31, 2003.
court litigation. Available at: http://ssrn.com/abstract=1435381.

22 VOLUME 3 What Skills Are Needed for Corporate Governance Dispute Resolution? MODULE 1
As discussed by author Christine Leick15 there are help parties explore options. The mediator helps �?nd
different mediation styles to choose from: a voluntary resolution of a dispute. Parties should be
given the opportunity to consider all proposed options.
“Facilitative�? mediation. Webster’s Dictionary It is acceptable for the mediator to suggest options in
de�?nes “facilitation�? as “to make easier,�? and it is response to parties’ requests, but not to coerce the
certainly the desire of every mediator to make the parties to accept any particular option. The parties
process easier for the parties. Facilitative mediation have the primary responsibility for the resolution of a
may be de�?ned as a forum in which a neutral third dispute and the shaping of a settlement agreement. A
party facilitates communications between parties to mediator shall not require a party to stay in mediation
promote settlement. A mediator may not impose his against the party’s will.
or her own judgment of the parties’ issues. The “facili-
tative�? mediator typically exercises a strong inﬂuence The purely “evaluative�? mediator typically responds
over the mediation process, but does not attempt to to the case’s facts and the parties’ discussions and/or
control the outcome. He or she focuses on priorities arguments by suggesting how he or she believes that
and agendas, factual information, discussion of needs one or more matters could be resolved.
and options, and typically produces written reports.
“Transformative�? Mediation. Webster’s Dictionary
“Directive�? mediation. An extremely facilitative de�?nes “transformative�? as “to change in character
mediator may not intervene between the parties or condition.�? Transformative mediation typically
much at all. Thus the word “directive�? can be used to involves the least amount of intervention by the
describe a type of facilitative mediation in which the mediator. In fact, practitioners of this approach, created
mediator is more involved in giving legal information by Baruch Bush and Joe Folger, would not describe
(but not advice) and directing the process. A directive transformative mediation as a style. Rather, they refer
mediator may appear less concerned about the parties’ to it as a framework. If the above styles are laid out on
relationships and more concerned about making a continuum from the least amount of intervention
progress toward settlement. The directive mediator to the most intervention, the transformative style
focuses the parties on reaching agreement much would precede the facilitative style. Whereas other
more quickly than the typical facilitative mediator. forms of mediation are based upon traditional conﬂict
Mediators are likely to be more directive when they theories, such as competing rights or meeting needs
are mediating under a deadline, such as an upcoming with limited resources, transformative mediation is
trial date. grounded in relational theory that views conﬂict as
a crisis in human interaction. The goal of the purely
“Evaluative�? Mediation. Webster’s Dictionary de�?nes “transformative�? mediator is to help people change
the word “evaluate�? as follows: “to determine or the quality of their conﬂict interaction. He or she
�?x the value of, to determine the signi�?cance or listens to the parties’ conversations, looking for
worth of, usually by careful appraisal and study.�? A opportunities to empower each party to move from
mediator should recognize that mediation is based weakness to strength. In addition, he or she focuses
on the principle of self-determination by the parties. on the movement from full self-absorption toward
It requires that the mediation process rely upon the responsiveness to the others’ needs. The parties control
parties’ abilities to reach a voluntary, un-coerced the process and the outcome. Thus, the transformative
agreement. This approach permits the mediator to mediator is much less active than the “facilitative�? or
evaluate and assess both the facts and the law and then “evaluative�? mediator.
provide not only an evaluation, but also settlement
suggestions. The mediator may provide information While the control over process and outcome, afforded
about the process, raise issues, offer opinions about the to the parties by a purely facilitative mediator, may be
case’s strengths and weaknesses, draft proposals, and very attractive to certain clients, others may feel that they

MODULE 1 What Skills Are Needed for Corporate Governance Dispute Resolution? VOLUME 3 23
are not receiving enough assistance from their mediator. else fails. If they are used early in the process, or to the
Facilitative mediation will not meet all the parties’ needs exclusion of other techniques, the parties are deprived of
unless it also includes transformative and evaluative the opportunity to discuss their needs, explore settlement
techniques. options, and reach agreement without the mediator’s
judgment. In addition, if an evaluative style must be
Transformative mediation may be the most spiritual adopted, it will be more effective after the parties have
form of mediation, and the truest generator of client become comfortable with the mediator and are con�?dent
self-determination. But facilitative skills are needed to in the mediator’s impartiality. It is best used when the
keep the parties on track, organize information, and parties’ lawyers are present, since they can assist their
memorialize agreements. clients in “evaluating�? the mediator’s analysis, effectively
responding to the mediator’s recommendations, and
Evaluation and suggestion can often lead to settlement. achieving �?nal agreement. An evaluative mediation
However, these techniques should be used only if all session is more like a settlement conference (with the
neutral third party acting as a private “judge�?) than it is
like true facilitative mediation.
QUOTE
A generation of ADR professionals has been trained
largely in an approach that emphasizes problem-solving
Approaches to Mediation
and self-determination. Often referred to by mediation
“There is no one single approach that is teachers among themselves as the “American model,�? this
appropriate or effective for a mediator to use all approach may be potentially inappropriate, for example,
of the time in every case. Many conﬂicts require
in a collectivist culture.
various different interventions over the course of
the mediation of a dispute. Effective mediators
must use different styles of intervention based In thinking about the skills and qualities of directors
on the needs of the parties, as disputants often and a dispute resolution professional, the disputants’
need more than process assistance from a cultures within the wider corporate environment should
mediator. They frequently need understanding, be considered. In some cultures, disputants expect a third
engagement, creativity, strength, wisdom,
party to serve as a source of wisdom and be assertive in
strategic thinking, confrontation, patience,
directing them toward a solution. This expectation may be
encouragement, humor, courage and a host of
other qualities that are not simply about process, derived from a combination of age, social, or professional
including advice about substance. status, or such other factors as the level of responsibility
within a religion. If a third party is not acceptable to the
“Our approach depends on the case and the
format requested by the parties, but generally board or other parties involved, an alternative would be
we are merits-based mediators. When requested, to identify a mediator who demonstrates appropriate
and where the parties and the process would be intercultural expertise or or has received special training
best served, we will assist on a more evaluative in intercultural disputes. Such training is now offered by
level. We believe that persistence, a not-too-large an increasing variety of institutions.
ego, and good humor are all good characteristics
of a facilitator/mediator of complex, multi-
interest disputes. In complex cases such as we If such an evaluative mediator is not acceptable to all
generally mediate, parties expect the mediator parties involved, an alternative is to insist on a mediator
to be familiar with the issues under discussion who can demonstrate that he or she has received and
and for the mediator to be actively engaged in absorbed special training in intercultural disputes. In
negotiations.�? this case, the qualities of the ADR professional and the
PRESS, POTER & DOZIER, LLC ADR process in relation to a national culture should be
SOURCE: http://www.presspotterlaw.com/Analytical-Mediation. considered, as well as the professional, ethnic, industrial,
shtml.
and other cultures in which the dispute arises. There is an

24 VOLUME 3 What Skills Are Needed for Corporate Governance Dispute Resolution? MODULE 1
increasing need for mediators to be culturally adaptable, If the mediator is expected to serve as an evaluator,
since the “culture of the corporate boardroom�? may both corporate professional gravitas and substantive
be sharply different from the professional, indigenous, knowledge can be extremely helpful. The proof of this is
local, regional, or national culture of one or more parties the prevalence of former high-level corporate of�?cers and
with whom the board �?nds itself in a dispute. Corporate former civil or appellate court judges among the mediator
governance issues can include issues in which key rosters of �?rms that are known for evaluative mediation.
stakeholders in the company’s future share few cultural But often, a more facilitative mediation style is warranted,
assumptions with the company’s management; any perhaps because the most advantageous settlement of the
mediator who hopes to be helpful in that situation must dispute cannot be essentially expressed in a number. For
be sensitive to both cultures. the reasons described above, a mediator having every
desirable quality is no more likely to be found than is a
In corporate governance cases, the type of mediation to perfect human being. So trade-offs are necessary. When
be sought will depend on the: the trade-off in a facilitative mediator for additional
substantive knowledge, or for experience serving at a
Board and the parties’ conﬂict management style high level in a corporation, is some compromise on the
level of empathy, investigative skill, or one of the other
Issues involved
qualities described above, the company is likely to �?nd it
Cultural setting ultimately to be a bad bargain.

Personalities involved “Transformative�? mediators are less frequently used in
a high-level corporate setting, at least under that name.
If the settlement is likely to be something like “party A Paradoxically, however, a mediator with transformative
will pay party B 10-million Euros,�? evaluative mediation skills can be extraordinarily helpful as the “internal
may be required. However, if the settlement is likely to board conﬂict specialist�? because this, among all kinds of
involve continuing relationships which need to move mediators, is most appropriate to helping others develop
into a new phase, or an apology, a facilitative mediator’s constructive long-term relationships that are critically
style is more likely to help the parties make progress. important within the board itself. This suggests that, as

PRACTICE

Inviting an Opening Statement from Each Party: Styles and Approaches
The approach selected by the mediator to invite parties to each make an opening statement can inﬂuence the
tone and style of the discussions that follow. Options include:
Fact-based approach: “Tell me the history and facts in this case as you see them.�?
Positional approach: “Tell me what you are here for, what would you like to achieve in the mediation.�?
Narrative approach: “Tell me what happened and what effect it had on you.�?
Problem-solving approach: “Tell me what decisions need to be made today.�?’
Procedural approach: “Tell me �?rst how you thinking we should go about resolving the problems that we are
dealing with.�?
Interest-based approach: “Tell me what your concerns are today.�?
SOURCE: http://www.mediate.com/articles/bryson.cfm.

MODULE 1 What Skills Are Needed for Corporate Governance Dispute Resolution? VOLUME 3 25
these principles become better known, the relatively rare ADR professionals routinely describe themselves as
person who has both the self-effacing qualities of a true “professional neutrals.�? The word “neutral�? is heavily
transformative mediator and extensive corporate board advertised by the �?eld as one of its practitioners’ key
or high-level management experience should be in great characteristics. Yet, neutrality is an approximation.
demand. With the best of intentions, ADR professionals, and all
humans, are vulnerable to biases, not all of which they
Ethics, Credibility, and Trustworthiness are fully aware:
ADR professionals must be able to command the
disputants’ trust and con�?dence. They must be Personal biases. Biases in favor of or against a
considered by all the parties involved as independent particular point of view or party are called personal
and impartial. A reputation for strong ethics and an biases. They are the most obvious type. The
empathetic manner helps the ADR professional in paradox arises from the fact that virtually all ADR
creating the right environment to support ADR. professionals pride themselves on avoiding personal
biases.
One of the toughest issues to consider is the concept of
fairness, the fulcrum on which a successful ADR outcome It is common, however, for a party to perceive a bias,
rests. As Lord Nicholls of Birkenhead opined: “Features based on a mediator’s questions or other actions that
which are important when assessing fairness differ in the mediator is unaware convey bias. The principal
each case. And, sometimes, different minds can reach problem with a perceived bias is that parties �?nd it
different conclusions on what fairness requires. Then dif�?cult to have an open, straightforward discussion
fairness, like beauty, lies in the eye of the beholder.�? The with a mediator whom they suspect is biased; they
disputants’ perceptions of fairness are inﬂuenced by the may “shut down,�? thus preventing the mediator from
way in which the board engages an ADR expert. These correcting what may be a mistaken impression.
perceptions also result from “the impact on clients of
mediators’ informal decision-making and the informal If bias is suspected, directors should discuss it with
qualities of treatment they receive are critical factors in other board directors, and consider raising the
establishing whether or not the process is perceived as concern straightforwardly but respectfully with the
fair by those participating in mediation. Fairness must mediator. The air can be cleared more easily than
be seen in order to qualify as such.�? seems apparent at �?rst.

QUOTE

Building Trust and Con�?dence
“Gaining the trust and con�?dence of the parties is the most important element in mediator success. The mediator’s
skills are also important, but less often cited as reasons for mediator success than the mediator’s con�?dence-
building attributes. Finally, and of considerable importance, there is no single model of the successful mediator.
Different mediators succeeded on the basis of different combinations of attributes and skills.�?

STEPHEN B. GOLDBERG
MEDIATOR AND PROFESSOR OF LAW AT NORTHWESTERN UNIVERSITY

MARGARET L. SHAW
MEDIATOR WITH JAMS AND TEACHER AT NEW YORK UNIVERSITY LAW SCHOOL

SOURCE: Stephen B. Goldberg and Margaret L. Shaw, “The Secrets of Successful (and Unsuccessful) Mediators.�? Dispute Resolution Alert. Winter
2008. Available at: http://www.jamsadr.com/�?les/Uploads/Documents/DRA/DRA-2008-Winter.pdf.

26 VOLUME 3 What Skills Are Needed for Corporate Governance Dispute Resolution? MODULE 1
Situational Bias. Less obviously, mediators and the ADR professional is a “repeat player�? with strong
other ADR professionals are vulnerable to what has links to the CEO or another corporate professional.
been called “situational�? bias.16 Situational biases Parties certainly need to consider these limitations
arise from a mediator’s connections to and possible in selecting an ADR professional and discussing
obligations towards persons or parties not directly con�?dential matters. ADR professionals should be
involved in the dispute. For example, the obligation willing to discuss any potential limitations that they
not to embarrass the corporation may be keenly felt have. A refusal to take such concerns seriously can be
by a mediator appointed by the board, especially if considered a warning sign.

EXAMPLE

Avoiding Conﬂicts of Interest
USA: AAA
“No person shall serve as an evaluator in any dispute in which that person has any �?nancial or personal interest
in the result of the early neutral evaluation, except by the written consent of all parties. Prior to accepting an
appointment, the prospective evaluator shall disclose any circumstance likely to create a presumption of bias or
prevent a prompt meeting with the parties.�?
SOURCE: AAA, Early Neutral Evaluation. Getting An Expert’s Assessment: Practical Guidelines and Steps for Getting Started. 2005. Available at:
http://www.aaauonline.org/upload/223188376_Early%20Neutral%20Evaluation.pdf.

FOCUS

Codes of Conduct
Mediators typically abide by a professional code of conduct that mirrors the underlying principles of mediation.
The most common aspects of this code include:

A commitment that requires participants to be informed about the mediation process.

The need to adopt a neutral stance is provided to all parties to the mediation, revealing any potential conﬂicts
of interest.

The requirement for a mediator to conduct the mediation in an impartial manner.

Within the bounds of the legal framework under which the mediation is undertaken, any information gained
by the mediators should be treated as con�?dential.

Mediators should be mindful of the psychological and physical well-being of all the mediations participants.

Mediators should not offer legal advice; rather, they should direct participants to appropriate sources for the
provision of any advice they might need.

Mediators should seek to maintain their skills by engaging in ongoing training in the mediation process.

Mediators should practice only in those �?elds in which they have expertise gained by their own experience
or training.
SOURCE: Wikipedia, Mediator Codes of Conduct. Available at: http://en.wikipedia.org/wiki/Mediation#Choice_of_mediator.

MODULE 1 What Skills Are Needed for Corporate Governance Dispute Resolution? VOLUME 3 27
Structural Bias. Most obscure is a class of biases that between empathy and assertiveness, and between the
has been described as structural.17 Ideally, both parties interests of principals and agents.19
can expect to be treated equally. But in practice, if
there are sharp differences in power among parties, the To succeed in handling the procedural, psychological,
more powerful party may �?nd itself constrained (to a substantive, and interpersonal demands of these tensions
degree) by the need to defend its ideas and proposals and the inherent dynamics of dispute resolution,
in the face of a mediator’s questioning, thus playing Creighton University Professor Bernard Mayer writes
more within the weaker party’s frame of reference. that a third party must have “a way of thinking, a set
of values, an array of analytical and interpersonal skills,
A vulnerable party may distrust the mediator and �?nd and a clear focus.�?20 Corporate governance adds its own
the entire process biased against the group’s interests. complexities to the process.
Seeking agreement among contending parties, inevitably,
leads the mediator to look for accommodations that are Third parties handling dispute resolution must be skillful
workable for both sides, and such accommodations are communicators to establish trust among the disputants,
more likely to appeal to the moderates than to those on
the extremes.
FOCUS
These situational and structural biases must be seen in
perspective. Other problems and, in many cases, even
worse biases become attached to litigation and other Preserving and Augmenting “Face�?
dispute resolution methods. Experienced, sophisticated A natural question — never far from the mind of
parties take into account the inherent limitations of a CEO or chairman when faced with a dispute
all. ADR processes the personal limitations of even the within or involving the board — is how to “save
face,�? and perhaps, too, how to help other board
best professional, and then designs strategies to �?t the
directors do so. One’s dignity and reputation,
particular situation. however, may not only need to be saved, but can
also be augmented by adroit handling of conﬂict.
Dispute Resolution Skills and Expertise In this context, the CEO and/or chairman must
conspicuously maintain operating control.
Boards must make sure that a mediator under
consideration is not completely lacking in any of Given the unpredictable environment often
the requisite skills. Third parties called on to resolve surrounding an emerging dispute, the best single
corporate governance disputes need many of the broad action that a CEO can take is to persuade the
board to adopt appropriate standing principles
professional negotiation and mediation skills, but
in advance, at a time when no immediate
with different emphases, plus additional capabilities dispute threatens to inﬂame passions and distort
unique to dealing with corporate governance issues. judgment.
Their training, acquired skills, and expertise must
Making it clear to all concerned that the conﬂict
meet the multi-faceted demands of a process requiring
specialist is acting on the CEO’s behalf goes a
“reconciliation of differences, apology, and forgiveness long way toward ensuring cooperation elsewhere
of past harm, and the establishment of a cooperative in the organization, while preserving the CEO‘s
relationship between groups, replacing the adversarial right to amend or reject any conclusions or
or competitive relationship that used to exist.�?18 Experts recommendations that the conﬂict specialist may
should nevertheless be cognizant that the stakes in make. Whether the conﬂict specialist has direct
access to the board is also at the CEO’s discretion.
corporate governance disputes are often higher and
Describing the conﬂict specialist’s role as one that
involve strong, well-rounded personalities. Resolving is delegated by the CEO also makes clear that the
corporate governance disputes typically involves conﬂict specialist is not there to undermine the
smoothing over tensions. These tensions are rooted in CEO’s authority, but to execute it.
three areas: between creating and distributing value,

28 VOLUME 3 What Skills Are Needed for Corporate Governance Dispute Resolution? MODULE 1
maintain a position of neutrality, and effectively negotiate to perform the most common and essential tasks of a
a solution, all the while explaining complex issues and the mediator.�? Although dated, these qualities are relevant
ADR process in ways that all parties understand. “There for third parties involved in corporate governance
are two important skills in effective communication: disputes.
assertive behavior, i.e., clearly expressing what you feel and
saying what you want; and active listening, i.e., listening Investigation. Effectiveness in identifying and seeking
in an understanding, non-judgmental and supportive out pertinent information
way.�?21 These skills are essential in conducting the “three
Empathy. Conspicuous awareness and consideration
conversations�? typical in the dispute resolution process:
of others’ needs
“the ‘What happened?’ Conversation, the Feelings
Conversation, and the Identity Conversation.�?22 Impartiality. Effectively maintaining a neutral stance
between the parties and avoiding undisclosed conﬂicts
In the 1990s, the Hewlett Foundation and the National of interest or bias
Institute for Dispute Resolution produced Performance-
Based Assessment: A Methodology for Use in Selecting, Generating options. Pursuit of collaborative solutions
Training and Evaluating Mediators.23 The report and generation of ideas and proposals consistent with
proposed general measures of competence for mediators case facts and workable for opposing parties
and a methodology for performance-based assessments
as predictors of success. The qualities listed below are Generating agreements. Effectiveness in moving
those the report considered “likely to be needed most parties toward �?nality and in “closing�? agreement

PRACTICE

Framing the Issues
When trying to frame an issue with accuracy as people see it and without bias, several attempts are made until
parties agree with the description. Here are some guidelines for effective framing:
Always frame using neutral language. Use objective and blame-free language. For example, “We are here
discussing the failure of party A to pay their membership�? (blaming). “Let us begin our discussions about
non-payment of membership dues�? (neutral and factual).
Move participants from positions to interests.
Defuse hostilities.
Try to clarify the issue from a neutral, third-party perspective.
Deal with one issue at a time.
Get agreement that both parties want to resolve the issue.
Be short and concise.
Frame, don’t solve.

Once the issue has been framed to both parties’ satisfaction in a clear, and neutral manner, resolution becomes
much easier. As discussion progresses and both opinions and positions change, it is appropriate to reframe the
issue to ensure everyone continues to focus on the same points.
SOURCE: International Federation of University Women. Workshop on Conﬂict Resolution: Participant Workbook. Geneva, Switzerland: IFUW,
2001. Available at: http://www.ifuw.org/training/pdf/conﬂict-participant-2001.pdf.

MODULE 1 What Skills Are Needed for Corporate Governance Dispute Resolution? VOLUME 3 29
Mediator’s Core Skills

Alertness Mediators need to concentrate on developing the parties’ trust and con�?dence, especially in
FOCUS

the initial phase of mediation when introductions are made and they need to hear the parties’
statements carefully. He or she needs to be alert to statements during the mediation. The
mediator must also respond periodically to parties’ concerns; he or she can only achieve this by
being alert and listening carefully.

Patience Mediation is focused on achieving a win-win solution for disputants. A mediator should be patient
and Tact and deal tactfully with each party. The mediation proceedings should focus on an outcome
acceptable to both parties. Confrontations between the parties should be avoided. Mediation
is a process which may take a long time and, therefore, may terminate with an inconclusive
ending. Joint and separate sessions may take longer than expected; therefore, mediation should
not be rushed to achieve a successful outcome but rather work with parties to help them resolve
a dispute. A mediator is expected to entertain parties’ concerns equally and should not convey
the impression that he or she has any interest beyond their role as the mediator.

Credibility A mediator should have impeccable professional integrity and good reputation. His or her
professional reputation is their most valuable asset. The mediator’s credibility will be determined
not only by his or her competency in the art of mediation, but also by their neutrality and
ability to understand parties’ concerns and help them further their ability to maneuver through
challenging aspects, such as ethical issues.

Objectivity He or she should be objective and willing to determine material facts surrounding a dispute,
and which requires patience and self-discipline.
Self-Control

Adaptability The mediation process is focused on evolving consensus between parties on how to best resolve
and a dispute — rather than being adversarial (e.g., litigation) or competitive (e.g., arbitration). A
Demeanor
mediator has to adapt his or her demeanor to suit the role. He or she should be understanding,
trustworthy, and have a conciliatory approach.

Initiative The mediator should be able to help parties understand their positions better and prepare them
for trade-offs when necessary. Mediators have to provide options or work with parties to present
their options to each other. The negotiation part of mediation can only lead parties to amicable
settlement if the mediator takes suitable initiatives to help parties bridge their gap.

Subject In general, mediators are generalists and do not work full-time as mediators (this is true for
Matter mediators in jurisdictions where mediation is not a full-time profession). Having a subject matter
Expertise
expertise can be problematic as mediators may focus on issues that are not relevant to mediation
or restrict parties in resolving a dispute. However, his or her understanding of the rights and
duties of a company’s stakeholders, and the nature of corporate governance related disputes can
be helpful in resolving such disputes. Having boardroom experience is an additional quali�?cation
that can help him or her better understand board dynamics in resolving disputes involving board
members and senior managers.

SOURCE: IFC Advisory Services. Pakistan ADR and Corporate Governance Projects. 2010

30 VOLUME 3 What Skills Are Needed for Corporate Governance Dispute Resolution? MODULE 1
Managing the interaction. Effectiveness in developing
FOCUS
strategy, managing the process, and coping with
conﬂicts between clients and representatives
Desired Characteristics in a Corporate
Substantive knowledge. Adequate competence in the
Governance Mediator
issues and type of dispute to facilitate communication,
Experience help parties develop options, and alert parties to
relevant legal information
Board experience as a director or as an advisor,
counselor, or corporate of�?cial who has regularly
attended board and committee meetings Corporate Governance Knowledge
and Exposure
Knowledge of corporate governance legal
It can be extremely valuable to have signi�?cant
requirements and best practices, as well as
implementation of governance practices substantive knowledge as to the underlying problems in
a dispute. ADR experts should understand how boards
Knowledge and skill in the use of negotiation operate and other corporate governance matters so that
and “peacemaker�? techniques, including me-
they can be sensitive to the issues and quickly understand
diation techniques
the parties’ positions. For example, if the CEO foresees
Ability to understand and analyze complex that some board members are likely to resist a strategy or
business issues particular tactics (or concessions) which the negotiation

Personal traits

Listens well FOCUS
Asks questions in a way that elicits the desired
information and does not put the respondent
on the defensive Substantive Knowledge Required of
Mediators
Is not judgmental in dealing with people and
situations Substantive knowledge can be speci�?ed at several
levels. There is a distinction between the degree
Is patient of knowledge expected of an “expert�? and that
which can be reasonably required of a mediator.
Relates well with other people without regard
A mediator needs enough knowledge about the
to status, background or culture
parties and the dispute to:
Gains trust quickly and easily
Facilitate communication
Is a consensus builder
Help the parties develop options
Communicates clearly and thoughtfully
Empathize
Is diplomatic and tactful
Alert parties to the existence of legal information
relevant to their decision to settle

Explain what options are open to the parties
for resolving the dispute if no agreement is
reached
SOURCE: National Institute for Dispute Resolution, Performance-
Based Assessment:A Methodology, for Use in Selecting, Training,
and Evaluating Mediators. Washington, D.C.: National Institute
for Dispute Resolution, 1995. Available at: http://www.convenor.
com/madison/method.pdf.

MODULE 1 What Skills Are Needed for Corporate Governance Dispute Resolution? VOLUME 3 31
will probably call for, choosing a third-party expert who This arrangement creates its own tensions and conﬂicts.
has high-level management and/or board experience can Add to that the inevitable problems that arise between
add reputational weight to discussions. the management (running the business) and governance
(ensuring that the business is well run) functions, and
ADR professionals must understand corporate a complex array of aligned and competing interests and
governance laws, regulations, codes, and rules governing agendas emerges, ones with crosscurrents that ﬂuctuate
a board’s actions and behavior. Disputes on the board relentlessly given economic, social, and political dynamics.
must always be resolved in accordance with directors’ Under stress, directors may behave very differently than
�?duciary duties. While knowledge of corporate law and when their company is performing well and shareholders
the legal system is important, it is not absolutely essential are highly supportive. The challenge for corporate
for ADR professionals to be legal experts. They should governance is “to channel the self-interest of managers,
nevertheless understand the legal aspects of a case as directors, and the advisers upon whom [the board] relies
presented by the parties. into alignment with the corporate, shareholder, and
public interest.�?24 Hence, governance is conducted as a
Understanding the Board’s Role social process of group interchange and inﬂuence.
ADR professionals must understand the processes
unique to a board and its directors and how those will TO REVIEW SITUATIONS LEADING TO INTERNAL
OR EXTERNAL CORPORATE GOVERNANCE
inﬂuence dispute resolution approaches. They must also DISPUTES, SEE VOLUME 1 MODULE 1.
understand the laws, regulations, and best practices that
shape board decision-making. Addressing and defusing these tensions demands
patterns of interaction and decision-making among
Understanding corporate governance requires directors and between the board and both management
understanding the concept of “stewardship�? of capital and stakeholders. ADR professionals engaged to resolve
assets and the “stewards’ �? roles, speci�?cally those of a corporate governance dispute must ascertain these
board directors and shareholders. At the core is the patterns and include them in their approaches to forge
separation of ownership and control. Directors are resolutions. These disputes could be red ﬂags signaling
�?duciaries, entrusted by the owners of capital to manage deeper problems, including the extent to which the
the assets in the shareholders’ best interests. Shareholders board is dysfunctional. Attempts to impose new ways of
actively inﬂuence boards to deliver performance and discussion, debate, and interaction may obstruct dispute
increase share value. resolution given the power of inertia (“old habits die
hard�?) in how the board operates collectively and its
directors individually.
QUOTE
Corporate governance best practice stresses that board
decision-making be consensual, with all the directors
Striving First for Understanding feeling that each can participate equally in discussions and
“Before we strive for settlement; before we strive decisions (strategic, tactical, and operational). Decisions
for solutions; before we strive for empowerment, emerge from a convergence of different perspectives
recognition, or transformation; before any of informed by each director’s specialized skills, expertise,
these, we would be well served to strive �?rst for insights, attitude, and experience.
understanding.�?

J. ANDERSON LITTLE James Surowiecki, author of The Wisdom of Crowds,
SUPERIOR COURT MEDIATOR outlines the conditions necessary for establishing a
SOURCE: J. Anderson Little, Making Money Talk: How to “wise�? group. These conditions include: diverse opinion,
Mediate Insured Claims and Other Monetary Disputes. New
York: American Bar Association, 2007. independent opinion, the ability of group members to
develop and use task-speci�?c individual knowledge in

32 VOLUME 3 What Skills Are Needed for Corporate Governance Dispute Resolution? MODULE 1
contributing to decision making, and the ability of the con�?dence, mastery of knowledge, and authority to be
group to aggregate individual knowledge and judgment perceived as an “equal�? with the directors, command
into a group decision.25 These criteria should be among attention and respect, and engender trust and con�?dence
those that the ADR professionals assesses in examining in their ideas and actions.
the strengths and weaknesses of board deliberations to
determine which ADR approaches are most promising. As with any group, boards can be dominated by the
A SWOT analysis is one tool for structuring this chairman and/or other directors who are loathe to
assessment. dissent or independent thinking. A director may argue
solely for the goal of having the board agree with their
ADR professionals’ efforts must ensure that all directors decision, breeding acquiesce and disinterest from other
feel engaged and have ownership of the dispute(s) and its directors (“social loa�?ng�?). The director’s topics and his/
(their) successful resolution. Equally, they need to project her language may be disrespectful and personal. Some

FOCUS FOCUS

Articles of Association Board Charter
The provisions vary from country to country, but A board charter’s purpose is to:
usually address:
Improve and systemize the board’s role and
Maximum authorized share capital powers

Shareowners’ rights Enhance the transparency of its governance

Share transfers Demonstrate the company’s commitment to
good corporate governance practices.
Alteration of capital
A charter typically includes:
General assemblies
Board responsibilities
Shareowner votes
Board composition
Borrowing powers
Director selection
Appointment/powers/duties of directors and
the CEO Board leadership
Disquali�?cation of directors Director remuneration
Board proceedings Board meeting procedures
Appointment/powers/duties of the corporate Board performance
secretary
Committees
Issuance of dividends and company reserves
Board relationships
Dispute resolution
Dispute resolution
Accounts and audits

Special provisions associated with winding up

SOURCE: Forum, Corporate Governance Board Leadership SOURCE: Forum, Corporate Governance Board Leadership
Training Resources Kit. Washington, DC: IFC, 2008. Training Resources Kit. Washington, DC: IFC, 2008.

MODULE 1 What Skills Are Needed for Corporate Governance Dispute Resolution? VOLUME 3 33
directors may be disinterested and rubber-stamp the Laws, regulations, codes, and best practices determine how
chairman’s requests. Deliberations may be mechanistic corporate governance may be conducted by a board. An
rituals deeply engrained in a groupthink process. ADR professional should familiarize themselves with the
Relationships outside the boardroom may compromise board’s speci�?c corporate governance process, reviewing
the way directors look at issues, throwing support such relevant documents as the articles of association (the
behind one view in hopes that this will lead to or expand company’s constitution), the board charter, the code of
business ties. Numerous studies of human traits suggest ethics, and policies and procedures. Particularly relevant
that individuals have a tendency to overestimate their is the section in any of these documents that speaks to
talents, be excessively optimistic by discounting risks, corporate governance dispute resolution. Increasingly,
and be biased in how they process information, tending stock exchanges, institutional investors, and others are
to �?nd more merit in data that supports their viewpoint. requiring boards to have ADR provisions.
These are all considerations for the ADR professional in
their analysis to determine how they extract the facts of a Finding experts with the appropriate set of skills and
dispute and work with the disputants to reach agreement. experience to handle the complexity of corporate
governance issues and disputes may nevertheless prove
Core Concepts of Corporate Governance dif�?cult in some markets. Corporate governance
ADR professionals need to master the core concepts of consultants or experts may lack the appropriate dispute
corporate governance and have a basis through observance resolution skills while dispute resolution experts or
of boardrooms for how they work with directors in mediators may have little understanding of corporate
handling disputes.
governance matters and exposure to directors and senior
executives.
The foundation of trust among shareowners, directors,
and managers consists of four corporate governance
To be better prepared to mediate corporate governance
pillars:
cases, dispute resolution experts should seek training to
strengthen their skills and understanding of corporate
Transparency. Directors should clarify to shareowners
governance issues. This includes:
and other key stakeholders why every material decision
has been made.
Understanding the corporate governance framework
Accountability. Directors should be held accountable and best practices
for their decisions and actions to shareowners, and, in
Understanding the board’s role
certain cases, key stakeholders, submitting themselves
to rigorous scrutiny.
Being familiar with corporate governance disputes

Fairness. All shareowners should receive equal, just, Having experience dealing with directors and senior
and unbiased consideration by the directors and executives
management.
Dealing with the pressure of high pro�?le cases
Responsibility. Directors should carry out their duties
with honestly, probity, and integrity. TO REVIEW A SAMPLE CORPORATE GOVERNANCE
DISPUTE RESOLUTION TRAINING FOR DISPUTE
These pillars provide the foundation for the Principles RESOLUTION EXPERTS, SEE VOLUME 3 MODULE 3.

of Corporate Governance developed by the Organization
of Economic Co-operation and Development. ADR No dispute resolution professional is perfect. A sense
professionals should be well-versed in the OECD’s of realism is essential: corporate governance dispute
Principles. resolution is very dif�?cult work, and no two ADR
professionals have exactly the same combination of skills.

34 VOLUME 3 What Skills Are Needed for Corporate Governance Dispute Resolution? MODULE 1
In some cases the best solution could be to hire a team of
experts to cover all the skills and attributes required for
the resolution of complex multi-layered and sometimes
publicized disputes, or with dealing with cross-border
disputes involving more than two parties.

Endnotes
1 Nadya Malenko. “Communication and Decision-Making in Corporate Boards.�? November 17, 2010. Available at: http://ssrn.com/abstract=1712431.

2 M. A. Rahim and T. V. Bonoma, “Managing Organizational Conﬂict: A Model for Diagnosis and Intervention.�? Psychological Reports, 1979, 44, 1323-1344.

3 M. Afzalur Rahim, “Functional and Dysfunctional Strategies for Managing Conﬂict.�? IACM 23rd Annual Conference Paper. Available: http://ssrn.com/abstract=1612886.

4 Ron Kraybill, Style Matters: The Kraybill Conﬂict Style Inventory. 2006. Available at: http://www.consciouschange.org/Community/5-StylesofConﬂict.htm.

5 Albert Mehrabian, Silent Messages (First edition). Belmont, CA: Wadsworth, 1971.

6 Ron Crossland, “The Four Fatal Assumptions of Executive Communication.�? Exchange Morning Post, June 25, 2008. Available at: http://www.exchangemagazine.com.

7 B. E. Barnes, Culture, Conﬂict, and Mediation in the Asian Paci�?c. New York: University Press of America, 2007.

8 Jeswald W. Salacuse, “Implications for Practitioners�? in Guy Oliver and Jeffery Z. Rubin, eds. Culture and Negotiation. Thousand Oaks, CA: Sage Publications, 1993.

9 R. Fisher and D. Shapiro, Beyond Reason. Using Emotions as You Negotiate. New York: Viking, 2005. 10 Tenth Annual Board Effectiveness Study (2006-2007) conducted by
Heidrick & Struggle and the Center for Effective Organizations at the University of Southern California’s Marshall School of Business.

11 Jin Ho Verdonschot, “Delivering Objective Criteria: Sources of Law and the Relative Value of Neutral Information for Dispute Resolution.�? January 5, 2009. Tilburg
University Legal Studies Working Paper No. 001/2009. Available at: http://ssrn.com/abstract=1323285.

12 T. D. Wilson, C. E. Houston, K. M. Etling, and N. Brekke, “A New Look at Anchoring Effects: Basic Anchoring and its Antecedents.�? Journal of Experimental Psychology.
1996. pp. 387-402.

13 Jeremy Ginges and Deepak K. Malhotra, “Beyond Reactive Devaluation: Implementation Concerns and Fixed-Pie Perceptions Involving the Geneva Accords.�? February
2005. Available at: http://ssrn.com/abstract=735065.

14 Paul Wehr, “Third Party Intervention.�? Conﬂict Research Consortium, University of Colorado. Available at: http://www.colorado.edu/conﬂict/peace/example/
wehryyyy.htm.

15 Christine Leick, “Mediation Styles — Explanation and Thoughts.�? Available at: http://www.drsmn.com/services/processes_mediation_styles.asp.

16 Christopher Honeyman, “Understanding Mediators,�? which is Chapter 67 in The Negotiator’s Fieldbook (ed. A. K. Schneider and C. Honeyman). Washington, D.C.:
American Bar Association, 2006.

17 See previous footnote.

18 International Online Training Program On Intractable Conﬂict. Available at: http://www.colorado.edu/conﬂict/peace/glossary.htm.

19 Michael L. Mof�?tt and Robert C. Bordone, eds., Handbook of Dispute Resolution. San Francisco, CA: Jossey-Bass, 2005.

20 Bernard Mayer, The Dynamics of Conﬂict Resolution. San Francisco, CA: Jossey-Bass, 2005.

21 IFUW

22 Douglas Stone, Bruce Patton, and Sheila Heen, Dif�?cult Conversations. New York: Viking/Penguin, 1999. As quoted at: http://www.pon.harvard.edu/glossary/?cid=9.

23 The full report is available at: http://www.convenor.com/madison/method.pdf.

24 Ira Millstein, Oversight Hearing on Accounting and Investor Protection Issues Raised by Enron and other Public Companies, U.S. Senate Committee on Banking, Housing Urban
Affairs. February 27, 2002. Available at: http://banking.senate.gov/02_02hrg/022702/millstn.htm.

25 New York: Random House, 2004.

MODULE 1 What Skills Are Needed for Corporate Governance Dispute Resolution? VOLUME 3 35
VOLUME 3 : TRAINING
MODULE 2 : Dispute Resolution Training for Directors 3.2

The board should ensure that it has the right mix of expertise and
capabilities to resolve corporate governance disputes effectively.
In considering the board’s role in preventing and resolving
corporate governance disputes, all directors should receive
basic training in dispute resolution. In-depth training should be
provided where needed, perhaps to the committee chairman
or individual board members whom the board recognizes will
assume peacemaker roles.

THIS MODULE PROVIDES
A standard course in corporate governance dispute resolution
for directors. The course should be adapted and tailored to local
needs and target audiences. This module provides:
Course outline
Training notes
Table of contents
PowerPoint presentation
MODULE 2
DISPUTE RESOLUTION TRAINING FOR DIRECTORS

COURSE OUTLINE Target Audience
Executive and non-executive board directors of listed
Although less common for well-governed companies, companies
most companies experience corporate governance
Financial institutions
disputes or conﬂicts. Left unresolved, these tensions
could paralyze the board, harm the company’s Family �?rms
performance, and deter investors. Implementing
effective dispute resolution processes for preventing and Small and medium-sized enterprises
resolving corporate governance disputes is thus essential State-owned enterprises
if the company is to succeed over the long term. Just
as boards have crisis management plans, so, too, should
they have developed and adopted dispute resolution Objectives
strategies, policies, and processes. By the end of the course, participants will understand:

What corporate governance disputes are and how they
differ from other types of disputes;
PRACTICE
Who is involved in such disputes and how they can
affect all types of companies;
Course Delivery
The importance of effectively and ef�?ciently
preventing and resolving corporate governance
240 MINUTES/4 HOURS disputes;

The course can be run independently or in The potential negative impact and cost, and the risks
conjunction with other corporate governance associated with corporate governance disputes;
leadership courses.

The course can be shortened, expanded, or The bene�?ts of ADR processes and techniques, and
adjusted to meet participants’ needs. the limits of court litigation;

Trainers should be familiar with corporate
governance issues and ADR processes.
The board’s role in properly preventing and addressing
corporate governance disputes; and,

How to apply dispute resolution skills in practice
through a role play exercise.

FOR ROLE PLAYS TO BE
USED WITH THIS COURSE, SEE
VOLUME 3 ANNEXES 4-7.

MODULE 2 Dispute Resolution Training for Directors VOLUME 3 37
PRACTICE

Training Notes
Corporate Governance Training for Dispute Resolution Experts

TOOLKIT
TIME TOPIC COURSE ACTIVITY
REFERENCES

Introduction: Show slide S1 (Title Page). Vol. 3 An. 1
Learning
> Welcome the participants, introduce yourself, and ask participants to
10 MINUTES Objectives
introduce themselves brieﬂy.
> Elicit groundrules (timekeeping, cell phones, etc.).

Show slide S2 (Objectives).
> State course objectives.
> Present the training notes and shape participants’ expectations of
what they will achieve during training.
> Emphasize that participants’ experiences; insights will be sought
throughout the course.
> Stress that the course is about resolving corporate governance
disputes, not providing corporate governance substance.

Quiz: Show slide S3 (Quiz: Questions). Vol. 1 Mod. 2
Warm-up
> Review both examples and ask participants whether the facts are
5 MINUTES Discussion
true or false.

Show slide S4 (Quiz: Responses).
> Emphasize the costs to companies and shareholders of prolonged
CG disputes.

Presentation: Show slide S5 (What Are CG Disputes?). Vol. 1 Mod. 1
CG Disputes
> Explain the nature of CG disputes.
15 MINUTES
> Differentiate CG disputes from other disputes.
> Stress that not all disagreements are disputes. The board must have
robust debate.

Show slide S6 (Who Are the Parties to a CG Dispute?).
> List the various parties.
> Explain the differences between internal and external parties to a
dispute.

Show slide S7 (Internal and External Disputes).
> Provide examples of internal and external CG disputes, but focus on
examples relevant to the audience.

Show slide S8 (What Types of Companies Are Affected?).
> Stress that all types of companies can be affected.

38 VOLUME 3 Dispute Resolution Training for Directors MODULE 2
TOOLKIT
TIME TOPIC COURSE ACTIVITY
REFERENCES

Group Activity: Show slide S9 (Exercise: Thinking About CG Disputes). Vol. 1 Mod. 1
CG Disputes
> Divide participants into three groups to brainstorm for 10 minutes
25 MINUTES CG disputes that are:
Most common in their country or region
Most costly in their country or region
Most likely in their company
> One person from each group reports back. Allow two minutes for
each report.
> Add examples to those presented by each group.

Show slide S10 (Common CG Disputes in Brazil).
> Summarize the discussion using Brazil as an example.

Show slide S11 (What Is the Impact of CG Disputes?). Vol. 1 Mod. 2
> Review the potential negative impact of CG disputes.
> Emphasize the various ways CG disputes affect the company.

Discussion: Show slide S12 (What Are the Three Dimensions to a Dispute?). Vol. 1 Mod. 3
Dispute
> Elicit from participants examples for each dimension.
10 MINUTES Dimensions
> Initiate a discussion on why all the dispute’s dimensions must be
considered.

Presentation: Show slide S13 (What Are the Limits of Court Litigation?). Vol. 1 Mod. 3
Limits of Court
> Ensure that participants understand litigation’s implications and
5 MINUTES Litigation
consequences.
> Note that courts can only address the legal dimension of disputes.

Presentation: Show slide S14 (How Can ADR Help?). Vol. 1 Mod. 3
Bene�?ts of ADR
> Note that there are various de�?nitions of ADR — ADR can even be
20 MINUTES referred to as “appropriate�? dispute resolution.

Show slide S15 (Dispute Resolution Mechanisms).
> Note the continuum of time, costs, and the parties’ level of control
as criteria for differentiating ADR processes.

Show slide S16 (Key Steps in Mediation).
> Present key steps for third-party dispute resolution.

Show slide S17 (What Are the Bene�?ts of ADR?).
> Emphasize that win-win solutions can be tailored to the parties’
speci�?c needs and preserve business relations.

Show slide S18 (When Are ADR Processes Successful?).
> Stress that a successful settlement depends on:
Parties being willing to participate
Issues being negotiable
Agreements being reasonable and implementable

MODULE 2 Dispute Resolution Training for Directors VOLUME 3 39
PRACTICE

TOOLKIT
TIME TOPIC COURSE ACTIVITY
REFERENCES

Coffee Break Show slide S19 (Coffee Break).
> If you haven’t done so before the course, distribute the role play
20 MINUTES background materials.

Presentation: Show slide S20 (What Is the Board’s Role?). Vol. 2 Mod. 1
Board’s Role
> Focus participants’ attention on the board’s “duty of care,�?
5 MINUTES which includes:
Resolving disputes effectively and ef�?ciently in the company’s
best interest
Preserving business relationships
Ensuring adequate risk management

Show slide S21 (Board Approaches to CG Disputes).
> Emphasize that boards should have in place dispute resolution
policies and procedures before they arise. CG disputes before
they arise.

Presentation: Show slide S22 (How to Develop a CG DR Strategy?). Vol. 2 Mod. 1
CG DR Strategy
> Brieﬂy present each step.
10 MINUTES
Show slide S23 (How to Assess Past CG Disputes?).
> Select an example from a participant to illustrate questions from
the slide.
> Note that reﬂecting on experience can inform strategy
development and implementation.

Show slide S24 (Where to Incorporate CG DR Provisions?).
> Talk to the slide’s speci�?c options.
> Ask participants if they plan to amend their corporate documents
to include CG DR provisions.

Presentation: Show slide S25 (Who Can Serve as a CG DR Peacemaker?). Vol. 2 Mod. 1
CG DR Skills Vol. 2 Mod. 3
> Note that “peacemaker�? is a generic term.
5 MINUTES
> Distinguish internal and external peacemakers.
> Ask participants what type of peacemaker do they prefer
and why.

Show slide S26 (CG Dispute Resolution Skills). Vol. 3 Mod. 1
> Brieﬂy present the skills required for good CG DR.
> Ask participants if their boards have good peacemakers.
> Ask participants if they were ever required to play the role of
peacemaker.

40 VOLUME 3 Dispute Resolution Training for Directors MODULE 2
TOOLKIT
TIME TOPIC COURSE ACTIVITY
REFERENCES

Presentation: Show slide S27 (Steps to Prevent Boardroom Disputes?). Vol. 2 Mod. 1
CG Dispute
> Outline the steps the board can take to prevent or resolve CG
10 MINUTES Prevention
disputes.
> Provide practical examples.
Vol. 3 Mod. 1
Show slide S28 (DR Skills for the Boardroom)
> Present practical skills that can be used to improve board dynamics.
> Provide examples and/or demonstrate some of the skills.

Role Play: Show slide S29 (Role Play). Vol. 3 An. 3
Introduction
20 MINUTES > Note that participants will now practice CG DR.
and Preparation
> Distribute role play background materials. (If possible, distribute
background materials before the course or at the coffee break.)

Show slide S30 (Role Play Objectives).
> State learning objectives.
> Explain the various steps of the role play.

Show slide S31 (Case Presentation). Vol. 3 An. 4-7
> Summarize information available in the background materials.
> Outline the dispute.

Show slide S32 (Roles). Vol. 3 An. 4-7
> Introduce each role brieﬂy.
> Divide participants into as many groups as there are roles.
> Distribute con�?dential role play instructions for each role.
> Ask for a volunteer role player from each group.
> Give each group 10 minutes to review the task and coach their role
player.
> Ask participants if they have any questions.

Role Play: Show slide S33 (Role Play: Phase 1). Vol. 3 An. 3
Phase 1
> Reconvene the groups and ask participants to form a �?shbowl or
30 MINUTES
take their seats.

Show slide S34 (Phase 1 Instructions). Vol. 3 An. 4-7
> Set the stage for Phase 1 and ask role players to interact according
to their respective con�?dential instructions.
> Invite the other participants to observe.
> Limit your role to organizing the role play. Do not intervene during
the role play.
> Be mindful of time and conclude Phase 1 of the role play by
thanking the role players. Ask participants to applaud the role
players.
> Do not do a de-brief at this stage of the role play.

MODULE 2 Dispute Resolution Training for Directors VOLUME 3 41
PRACTICE

TOOLKIT
TIME TOPIC COURSE ACTIVITY
REFERENCES

Role Play: Show slide S35 (Role Play: Phase 2). Vol. 1 Mod. 3
Phase 2
30 MINUTES > Invite participants to continue with Phase 2 of the role play.
> Ask participant playing the peacemaker’s role to be mindful of the
key steps for third-party dispute resolution.

Show slide S36 (Phase 2 Instructions). Vol. 3 An. 3
> Set the stage for Phase 2 and ask role players to interact according
to their respective con�?dential instructions.
> Limit your role to organizing the role play. Do not intervene during
the role play.
> Be mindful of time and conclude Phase 2 of the role play by
thanking the role player. Encourage participants to applaud the role
players’ work

Processing: Show slide S37 (Role Play De-brie�?ng). Vol. 3 An. 3
Role play
10 MINUTES > Ask role players for feedback.
de-brief
How did it feel?
> Ask participants for feedback on the role play:
Could the dispute have taken a different turn?
Was the peacemaker of any help?
Could there have been different solutions?
Could the dispute have been prevented?

Discussion: Show slide S38 (Questions and Feedback). Vol. 3 An. 1
Questions,
> Ask participants to summarize the session’s main points.
10 MINUTES Feedback
> Take any questions and link back to the learning objectives.
> Seek feedback. Distribute course evaluation forms.
> Closure.

42 VOLUME 3 Dispute Resolution Training for Directors MODULE 2
P O W E R P O I N T P R E S E N TAT I O N

Corporate Governance Dispute Resolution Training for Board Directors
Table of Contents

Slide Details Slide Details

S1 Title Page S20 What Is the Board’s Role?

S2 Objectives S21 Board Approaches to CG Disputes

S3 Quiz: Questions S22 How to Assess Past CG Disputes?

S4 Quiz: Responses
S23 How to Develop a CG DR Strategy?

S5 What Are CG Disputes?
S24 Where to Incorporate CG DR Provisions?

S6 Who Are the Parties to a CG Dispute?
S25 Who Can Serve as a CG DR Peacemaker?
S7 Internal and External Disputes
S26 CG Dispute Resolution Skills
S8 What Types of Companies Are Affected?
S27 Steps to Prevent Boardroom Disputes
S9 Exercise: Thinking about CG Disputes
S28 DR Skills for the Boardroom
S10 Common CG Disputes in Brazil
S29 Role Play
S11 What Is the Impact of a CG Dispute?
S30 Role Play Objectives
S12 What Are the Three Dimensions to a
Dispute?
S31 Case Presentation: Techno Ltd.
S13 What Are the Limits of Court Litigation?
S32 Roles: Techno Ltd.

S14 How Can ADR Help?
S33 Role Play: Phase 1

S15 Dispute Resolution Mechanisms
S34 Phase 1 Instructions: Techno Ltd.

S16 Key Steps in Mediation
S35 Role Play: Phase 2

S17 What Are the Bene�?ts of ADR? S36 Phase 2 Instructions: Techno Ltd.

S18 When Are ADR Processes Successful? S37 Role Play De-brie�?ng

S19 Coffee Break S38 Questions and Feedback

MODULE 2 Dispute Resolution Training for Directors VOLUME 3 43
POWERPOINT PRESENTATION

S1 | Title Page

Resolving Corporate
Governance Disputes
TRAINING FOR BOARD DIRECTORS

TO REVIEW ADULT LEARNING
GUIDELINES, SEE VOLUME 3
ANNEX 1.

Objectives S2 | Objectives

44 VOLUME 3 Dispute Resolution Training for Directors MODULE 2
S3 | Quiz: Questions
Quiz : Questions
Canada: In 2005, the former president and CEO of Environmental Management Solutions Inc.
(EMS), upon his termination, unleashed several lawsuits against the company and its board.
These costs, along with the associated costs of defending against a dissident shareholder
requisition, led by the former CEO, resulted in restructuring charges and other items in the
amount of $2.5 million over 12 months, ending December 31, 2005.
TRUE OR FALSE?

Germany: In 2005, several shareholders opposed the merger of Deutsche Telekom and
T-Online. T-Online asked the regional court of Darmstadt to allow the merger despite objections
from dissident shareholders. The court ruled against the merger. T-Online appealed the
decision. In June 2006, the Federal Court of Justice cleared the way for the merger. Yet,
Deutsche Telekom’s problems didn’t end there. Minority shareholders contested the merger’s
share-exchange ratio. In March 2009, a court ruled that the German Telecom giant must
reimburse former T-Online shareholders. The cost could total $252 million.
TRUE OR FALSE?

S4 | Quiz: Responses
Quiz : Responses
FALSE
According to the EMS annual report, the
direct costs amounted to $5.3 million over
12 months, ending December 31, 2005.

TRUE
The cost could be $252 million, but
T-Online shareholders still consider the
share-exchange ratio too low.

MODULE 2 Dispute Resolution Training for Directors VOLUME 3 45
POWERPOINT PRESENTATION

S5 | What Are CG Disputes?
What Are CG Disputes?
Involve corporate authority and its exercise
Involve the board s actions or its failure or refusal to act
Require the board’s attention, regardless of whether the
board or individual directors are a direct party to the
dispute, to resolve the dispute
Are NOT issues arising as part of doing business

➣ Corporate governance is the system by which companies
are directed and controlled….�?
SIR ADRIAN CADBURY

Who Are the Parties to a CG Dispute?
S6 | Who Are the Parties to a
CG Dispute?

Shareholders vs. the company or its board
The board vs. the CEO or senior management
Board directors vs. board directors
Board vs. employees’ representatives
Board vs. communities, social activists, or other
stakeholders

➣ CG disputes can involve internal and external
constituencies

46 VOLUME 3 Dispute Resolution Training for Directors MODULE 2
S7 | Internal and External
Internal and External Disputes Disputes
Internal External
New strategies and major Mergers and acquisitions
transactions Takeover processes
Crisis situations Share and bond valuation
Board processes Lack of disclosure
Board composition and Nomination and discharge of
succession planning board directors
Potential conﬂicts of interest Remuneration/bonuses
Personality clashes Sustainability and Corporate
Performance issues Social Responsibility (CSR)

S8 | What Types of Companies
What Types of Companies Are Affected?
Are Affected?

Small companies
Joint venture companies
Family �?rms
State-owned companies
Listed companies

➣ All types of companies are affected

MODULE 2 Dispute Resolution Training for Directors VOLUME 3 47
POWERPOINT PRESENTATION

S9 | Exercise: Thinking About
Exercise: Thinking About CG Disputes CG Disputes

Split into three groups to brainstorm about:
Most common CG disputes in your country or region
Most costly CG disputes in your country or region
Most likely CG disputes in your company or organization

➣ One person from each group will report back

S10 | Common CG Disputes
Common CG Disputes in Brazil
in Brazil
SOURCE: Braz lian nsti ute of Corporate Governance (IBCG).

0 10 20 30 40 50 60 70 80 90 100

48 VOLUME 3 Dispute Resolution Training for Directors MODULE 2
S11 | What Is the Impact of a
What Is the Impact of a CG Dispute?
CG Dispute?
Diverts board resources
Disrupts board work
Obstructs company operations
Delays major strategic decisions
Undermines company’s reputation
Reduces market share
Weakens stakeholder trust and deters investors
Diverts company �?nancial and human resources
Impairs growth and corporate results
Entails high litigation, operational, and governance costs
Triggers breakdown in shareholder relations

S12 | What Are the Three
What Are the Three Dimensions Dimensions to a Dispute?
to a Dispute?
e.g., Listing Rules and
Regulations
e.g., Loss of Control

LEGAL
e.g., Access
to Capital

PERSONAL BUSINESS

MODULE 2 Dispute Resolution Training for Directors VOLUME 3 49
POWERPOINT PRESENTATION

S13 | What Are the Limits of
What Are the Limits of Court Litigation? Court Litigation?
Involves slow, cumbersome process
Delays important decisions
Lacks tailored solutions
Results in high costs
Entails weak enforcement (where the rule of law is weak)
Creates legal uncertainties (especially for cross-border
disputes)
Results in a legal vacuum (CG is often principle-based and
embedded in soft law)
➣ Courts can only address the legal dimension of the dispute

S14 | How Can ADR Help?
How Can ADR Help?

➣ “ADR is an amicable dispute resolution procedure
based on the goodwill of the parties and the
assistance of a neutral third party. It covers various
techniques including mediation.�?
INTERNATIONAL CHAMBER OF COMMERCE

50 VOLUME 3 Dispute Resolution Training for Directors MODULE 2
S15 | Dispute Resolution
Dispute Resolution Mechanisms Mechanisms

Comparing Dispute Resolution Mechanisms

INFORMAL SELF-DIRECTED FORMAL REGULATED
ADR

INFORMAL FORMAL
NON-BINDING BINDING
NEGOTIATION MEDIATION/ MEDIATION/ COURT
ARBITRATION ARBITRATION
FACILITATION FACILITATION

FAST PROCESS COST-EFFECTIVE LENGTHY PROCESS EXPENSIVE
Business Dimension of the Dispute Legal Dimension of the Dispute

SOURCE: Adapted from Lukasz Rozdeiczer and Alejandro Alvarez. Alternative Dispute Resolution Manual:
Implementing Commercial Mediation. Washington, DC: IFC, 2006.

S16 | Key Steps in Mediation
Key Steps in Mediation
PREPARE
Clarify process: Agree to mediation’s terms
Ensure commitment to problem solving
Explore issues

ENGAGE
Agree on communication rules
Facilitate exchange of perspectives
Caucus with parties as needed
Build common ground
Explore possible solutions
AGREE
Review, clarify, and formalize terms of agreement

MODULE 2 Dispute Resolution Training for Directors VOLUME 3 51
POWERPOINT PRESENTATION

S17 | What Are the Bene�?ts
What Are the Bene�?ts of ADR? of ADR?

Cost Con�?dentiality
Speed Control
Flexibility Low risk
Predictability Expertise
Non-binding Perspective
Quality

➣ Win-win solutions can be tailored to the parties’ speci�?c
needs and help preserve business relations

S18 | When Are ADR Processes
When Are ADR Processes Successful?
Successful?
When parties are:
Identi�?able and willing to participate
Interdependent — need each other’s assistance
Capable of exerting inﬂuence or leverage
Sharing common issues and interests
Needing resolution urgently
Able to settle without major psychological barriers
Willing to settle
Authorized to decide
Willing to compromise
➣ To ensure a successful settlement, issues must be negotiable.
Agreements must be reasonable and implementable.

52 VOLUME 3 Dispute Resolution Training for Directors MODULE 2
S19 | Coffee Break
Coffee Break

S20 | What Is the Board’s Role?
What Is the Board’s Role?
Exercise the duty of care
Recognize that internal and external disputes may arise
Understand the risk/threat posed by CG disputes
Resolve disputes expeditiously and effectively
Prevent internal and external disputes
Adopt CG DR strategies and processes

➣ “It is part of the duty of care of the board to ensure disputes are
resolved quickly in order to maintain relationships that business
people, particularly management, spend their lives building.�?
MERVYN KING, SC

MODULE 2 Dispute Resolution Training for Directors VOLUME 3 53
POWERPOINT PRESENTATION

S21 | Board Approaches to
Board Approaches to CG Disputes CG Disputes
Ad Hoc Preventative
Board dominant value: Harmony Board dominant value: Consensus
Perception of dispute: Unlikely Perception of dispute: Likely
1 Disagreement arises 1 Disagreement arises
2 Disagreement turns into dispute 2 Disagreement is addressed
3 Directors become defensive and 3 Board applies dispute resolution
positions harden techniques
4 Dispute is “patched�? 4 Disagreement is resolved
5 New disagreement arises 5 New disagreement arises
6 Board tensions escalate and 6 Board dispute resolution skills
dispute develops rapidly improve
7 Negative resentment builds up 7 Positive reinforcement emerges

S22 | How to Assess Past
How to Assess Past CG Disputes?
CG Disputes?

What was the nature of the dispute?
How did the board react?
What was management’s role?
What are the company’s general practices in terms of
dispute resolution?
What were the dispute’s costs?
How did the dispute get settled?
What policies and procedures should be improved?
What types of disputes may arise?

54 VOLUME 3 Dispute Resolution Training for Directors MODULE 2
S23 | How to Develop a CG DR
How to Develop a CG DR Strategy? Strategy?

S24 | Where to Incorporate CG
Where to Incorporate CG DR Provisions?
DR Provisions?

s
s
s

MODULE 2 Dispute Resolution Training for Directors VOLUME 3 55
POWERPOINT PRESENTATION

S25 | Who Can Serve as a CG
Who Can Serve as a CG DR Peacemaker? DR Peacemaker?

PEACEMAKER CHARACTERISTICS

Internal Peacemaker Con�?dentiality
Chairman Insider knowledge
Independent director Authority
Corporate secretary CG expertise
Ombudsman

External Peacemaker Independence
Negotiator Neutrality
Mediator Flexibility
Consultant ADR skills and expertise
Standing neutral

S26 | CG Dispute Resolution Skills
CG Dispute Resolution Skills
DR Skills CG Skills

Impartial, independent No vested interests
Diligent, discrete Knowledge of CG framework
Responsible, patient Knowledge of CG best practices
Trusted Respected
Active listener Strategic
Non judgmental Leadership
Consensus builder Board experience
Understanding of the dynamics Understanding of issues in
of disputes and resolution dispute
approaches

56 VOLUME 3 Dispute Resolution Training for Directors MODULE 2
S27 | Steps to Prevent Boardroom
Steps to Prevent Boardroom Disputes Disputes

ﬂ

S28 | DR Skills for the Boardroom
DR Skills for the Boardroom

➔ t
➔ e
➔ s
➔
➔ s
➔
➔
➔
➔ s

MODULE 2 Dispute Resolution Training for Directors VOLUME 3 57
POWERPOINT PRESENTATION

S29 | Role Play
Role Play

TO REVIEW ROLE PLAY
TRAINING TECHNIQUES, SEE
29
VOLUME 3 ANNEX 3.

S30 | Role Play Objectives
Role Play Objectives

Understanding CG disputes from different perspectives
Learning to build common ground
Exploring new, creative win-win solutions

TO REVIEW ROLE PLAY
TRAINING TECHNIQUES,
30
SEE VOLUME 3 ANNEX 3.

58 VOLUME 3 Dispute Resolution Training for Directors MODULE 2
S31 | Case Presentation:
Case Presentation: Techno Ltd. Techno Ltd.
Techno Limited is a newly listed company founded by its chairman,
Paul, a majority shareholder
Before listing, Paul instituted good CG practices for Techno Ltd. and the
family foundation
Paul’s daughter, Rosemary, must sell her Techno Ltd. shares to settle
her divorce; the foundation also wants to sell shares, believing the price
has peaked
Both sales 5.5% of total shares may push down the share price. If
the price drops to $1.47, the bank can terminate its $175 million credit
line to the company
➣ How can the board avoid large sales of shares by Rosemary and the
foundation that will likely drive down the share price and trigger the debt
covenant?

FOR TECHNO LTD. AND OTHER
ROLE PLAY EXERCISES, SEE
31
VOLUME 3 ANNEXES 4-7.

S32 | Roles: Techno Ltd.
Roles: Techno Ltd.
Paul: Founder. Chairman. “Larger than life.�? Dominant. Backs good CG
practices. Hand picked independent directors. Seeks retirement. Wants
succession strategy. Empathetic to Rosemary but doesn’t want any solution to
cost.
Rosemary: Paul’s daughter. Director and CEO. Effective but poor people
management skills. Impatient to settle divorce but needs funds available only by
selling her Techno Ltd. shares.
John: Independent director. Takes his position seriously. Regularly challenges
family or directors’ perspectives. Wants to prevent share decline and avoid
instability as senior management changes.
J.Alfred: ADR professional. Expertise in mediating family, company corporate
governance issues. No position other than to achieve a workable solution.

FOR TECHNO LTD. AND OTHER
ROLE PLAY EXERCISES, SEE
32
VOLUME 3 ANNEXES 4-7..

MODULE 2 Dispute Resolution Training for Directors VOLUME 3 59
POWERPOINT PRESENTATION

S33 | Role Play: Phase 1
Role Play: Phase 1

TO REVIEW ROLE PLAY
TRAINING TECHNIQUES,
33
SEE VOLUME 3 ANNEX 3.

S34 | Phase 1 Instructions:
Phase 1 Instructions: Techno Ltd.
Techno Ltd.

Paul, Rosemary, and John each meet individually with the
ADR professional to discuss their positions.

10 MINUTES

for each meeting

FOR TECHNO LTD. AND OTHER
ROLE PLAY EXERCISES, SEE
34
VOLUME 3 ANNEXES 4-7.

60 VOLUME 3 Dispute Resolution Training for Directors MODULE 2
S35 | Role Play: Phase 2
Role Play: Phase 2

TO REVIEW ROLE PLAY
TRAINING TECHNIQUES, SEE
35 VOLUME 3 ANNEX 3.

S36 | Phase 2 Instructions:
Phase 2 Instructions: Techno Ltd. Techno Ltd.

Chairman (Paul) convenes a meeting with the CEO
(Rosemary), the independent director (John), and the ADR
professional (J. Alfred)
With the help of J. Alfred, all parties together craft a
common solution to be considered at the next board
meeting

30 MINUTES

FOR TECHNO LTD. AND OTHER
ROLE PLAY EXERCISES, SEE
36
VOLUME 3 ANNEXES 4-7.

MODULE 2 Dispute Resolution Training for Directors VOLUME 3 61
POWERPOINT PRESENTATION

S37 | Role Play De-brie�?ng
Role Play De-brie�?ng

Other possible/better solutions?
What may happen if no solution is reached?
What could be the role of independent directors?
Dispute resolution policies for family �?rms?
Bene�?ts, drawbacks in using external
peacemakers?
Could a dispute have been prevented?

S38 | Questions and Feedback
Questions and Feedback

62 VOLUME 3 Dispute Resolution Training for Directors MODULE 2
VOLUME 3 : TRAINING
MODULE 3 : Corporate Governance Training for
Dispute Resolution Experts
3.3

Conﬂicts and disputes affecting the governance of companies,
family �?rms, �?nancial institutions, and state-owned enterprises
are widespread in developed and developing countries alike. To
effectively meet the increasing demand for corporate governance
dispute resolution services, ADR experts need to familiarize
themselves with the subject of corporate governance and
understand how such disputes may differ from other disputes.
Corporate governance dispute resolution experts can play a
signi�?cant role in advising boards, facilitating strategic and
sensitive discussions, training directors, and resolving corporate
governance disputes.

THIS MODULE PROVIDES
A standard course in corporate governance dispute resolution
for dispute resolution experts. The course should be adapted and
tailored to local needs and target audiences. It includes:
Course outline
Training notes
Table of contents
PowerPoint presentation
MODULE 3
CORPORATE GOVERNANCE TRAINING FOR DISPUTE
RESOLUTION EXPERTS

COURSE OUTLINE To effectively meet the increasing demand for corporate
governance dispute resolution services, ADR experts
Conﬂicts and disputes affecting the governance of need to familiarize themselves with corporate governance
companies, family �?rms, �?nancial institutions, and issues and understand how such disputes may differ
state-owned companies remain widespread in developed from other disputes.
and developing countries alike. Left unresolved, these
disputes can paralyze the board, destroy business Target Audience
relations, deter investors, and prove costly. ADR skills Mediators, negotiators, arbitrators
and processes can help prevent and effectively deal with
Lawyers
corporate governance disputes. The board’s role is to
ensure that disputes are prevented or resolved effectively. Conﬂict resolution experts and researchers
This includes seeking third-party expertise to:
Change management consultants
Advise on ADR processes and dispute resolution
Human resource consultants
strategies
Meeting facilitators
Facilitate board retreats and conversations among
parties to the dispute
Objectives
Train directors to apply dispute resolution skills By the end of the course, participants will understand:
Mediate or arbitrate corporate governance disputes Corporate governance’s purpose and importance

Corporate governance disputes — what they are, how
they differ from other commercial disputes, and how
PRACTICE
they affect companies and their stakeholders

Who is involved in corporate governance disputes and
Course Delivery their roles in achieving a resolution

Prevention and resolution of corporate governance
disputes
240 MINUTES/4 HOURS
Dispute resolution experts’ roles and services
The course can be run independently or in Board’s role in properly preventing and addressing
conjunction with other mediation or ADR corporate governance disputes
courses.

The course can be shortened, expanded, or
Dealing with corporate governance disputes through
adjusted to meet the participants’ needs. a role play exercise

Trainers should be familiar with corporate FOR ROLE PLAYS TO BE USED IN
governance issues and ADR processes. CONJUNCTION WITH THIS COURSE, SEE
VOLUME 3 ANNEXES 4-7.

MODULE 3 Corporate Governance Training for Dispute Resolution Experts VOLUME 3 63
PRACTICE

Training Notes
Corporate Governance Training for Dispute Resolution Experts

TOOLKIT
TIME TOPIC COURSE ACTIVITY
REFERENCES

Show slide S2 (Objectives).
> State course objectives.
> Present the training notes and shape participants’ expectations of
what they will achieve during training.
> Emphasize that participants’ experiences and insights will be sought
throughout the course.
> Stress that the course is about resolving corporate governance
disputes, not learning dispute resolution skills and processes.

Quiz: Show slide S3 (Quiz: Questions). Vol. 1 Mod. 2
Warm-up
> Review both examples.
5 MINUTES Discussion
> Ask participants whether the facts are true or false.

Show slide S4 (Quiz: Responses).
> Explain the difference between “debate�? and “dispute.�?
> Emphasize the costs to companies and shareholders of prolonged
corporate governance disputes. Cite an example.

Presentation: Show slide S5 (What Is Corporate Governance?). Vol. 1 Mod. 1
Corporate
> De�?ne corporate governance.
15 MINUTES Governance
Overview > Explain how managers, shareholders, and the board relate to each
other.
> Check if participants understand the differences between managers
and directors.

Show slide S6 (What Are the Main Competing Tensions?).
> Explain the natural tensions between managers, shareholders, and
directors.
> Ask participants to provide examples.
> Note that corporate governance is a fertile terrain for disputes.

Show slide S7 (What Are the Pillars of Good CG?).
> Carefully explain the principles of:
Transparency
Accountability
Fairness
Responsibility
> Ask participants to provide examples.

64 VOLUME 3 Corporate Governance Training for Dispute Resolution Experts MODULE 3
TOOLKIT
TIME TOPIC COURSE ACTIVITY
REFERENCES

Show slide S8 (Why Is CG Important?). Vol. 3 An. 9
> Review the business case for CG.
> Indicate that these �?ndings have been con�?rmed by many academic
studies. (Provide a reading list for interested participants.)
> Invite participants to ask questions and share experiences.

Presentation: Show slide S9 (What Are CG Disputes?). Vol. 1 Mod. 1
CG Disputes
> Explain the nature of CG disputes.
15 MINUTES
> Differentiate CG disputes from other disputes.
> Stress that not all disagreements are disputes — the board must
have robust debate.

Show slide S10 (Who Are the Parties to a CG Dispute?).
> List the various parties.
> Explain the differences between internal and external constituencies.

Show slide S11 (Who Are the Other Stakeholders?).
> List the various stakeholders who may be involved in CG disputes.
> Use the example of “employees�? to distinguish CG disputes from
commercial ones.

Show slide S12 (What Types of Companies Are Affected?).
> Stress that all types of companies are affected.

Group Activity: Show slide S13 (Exercise: Thinking about CG Disputes). Vol. 1 Mod. 3
CG Disputes
> Divide participants into three groups to brainstorm for 10 minutes
25 MINUTES about:
Typical boardroom disputes
Typical shareholder disputes
Typical CG disputes in family �?rms
> Ask one person from each group to report back. Allow two
minutes for each report.
> Add examples to those that each group presents.
> Ask participants if they have ever facilitated, mediated or
resolved such disputes. If so, what have they learned from those
experiences?

Show slide S14 (Internal and External Disputes).
> Distinguish internal and external disputes, and provide examples
for each.

Show slide S15 (Issues in Family-Firm Disputes).
> Review the main issues that emerge in family-�?rm disputes.
> Ask participants for examples.

Show slide S16 (Common CG Disputes in Brazil).
> Summarize the discussion using Brazil as an example.

MODULE 3 Corporate Governance Training for Dispute Resolution Experts VOLUME 3 65
PRACTICE

TOOLKIT
TIME TOPIC COURSE ACTIVITY
REFERENCES

Presentation: Show slide S17 (What Is the Impact of a CG Dispute?). Vol. 1 Mod. 2
Impact of CG
> Review potential impact of CG disputes.
5 MINUTES Disputes
> Note importance of overall impact of CG disputes on a company
and its stakeholders — beyond the parties directly involved in the
dispute.

Presentation: Show slide S18 (What Should Be the Board’s Role?). Vol. 2 Mod. 1
Board’s Role
> Focus participants’ attention on the board’s “duty of care,�? which
5 MINUTES includes:
Ensuring disputes are resolved effectively and ef�?ciently in the
company’s best interests
Preserving business relationships
Providing for adequate risk management
> Note that understanding the board’s role is important for dispute
resolution (DR) experts working on CG disputes.

Coffee Break Show slide S19 (Coffee Break).

20 MINUTES

Discussion: Show slide S20 (How Can DR Experts Help?). Vol. 1 Mod. 3
Role of CG DR Vol. 2 Mod. 2
> Ask participants what type of services could DR experts provide to
5 MINUTES Experts help prevent and resolve CG disputes.
> Draw participants’ attention to the following functions:
Advising
Facilitating
Resolving
Training

Presentation: Show slide S21 (Advising on the Use of ADR Processes). Vol. 1 Mod. 3
CG DR
> Brieﬂy present the spectrum of ADR processes.
10 MINUTES Consulting
Services > Emphasize that boards need guidance on understanding and
selecting appropriate ADR processes for their circumstances.

Show slide S22 (Advising on CG DR Strategies). Vol. 2 Mod. 1
> Indicate the steps that a board must go through to develop
effective dispute prevention and resolution strategies.
> Note that a board may need to hire external experts to help discuss
and design such strategies.

Show slide S23 (Facilitating Board Discussions).
> Explain that DR experts can be invited to facilitate board retreats,
discussions about strategy or evaluation sessions.
> Using the questions on the slide as examples, outline how DR
experts can help boards assess ways to address disputes and
surface issues related to the board’s conﬂict-management style.

66 VOLUME 3 Corporate Governance Training for Dispute Resolution Experts MODULE 3
TOOLKIT
TIME TOPIC COURSE ACTIVITY
REFERENCES

Presentation: Show Slide S24 (Training Board Directors). Vol. 3 Mod. 2
CG DR Training Vol. 2 Mod. 1
> Note that directors need to better understand the importance and
Services dynamics of disputes.
5 MINUTES
> Using the slide’s list, explain how a DR expert can train directors to
better use DR skills in the boardroom.

Discussion: Show slide S25 (Resolving CG Disputes: Skills). Vol. 3 Mod. 1
CG DR Services
> Ask participants about the skills required for good CG DR.
20 MINUTES Stress that CG DR requires a broad set of interpersonal skills and
expertise. Note that the combination of required skills depends on
the nature of the dispute and the parties involved.
> Discuss the importance of CG knowledge vs. DR skills.

Show slide S26 (What Makes CG Disputes Special?). Vol. 1 Mod. 1
> Draw participants’ attention to what differentiates CG disputes
from other types of commercial disputes.
> Discuss the implications for CG DR experts.

Show Slide S27 (What Issues May Arise?).
> Discuss with participants the particular issues that may arise when
mediating or facilitating a corporate governance dispute. Use the
questions listed on the slide for guidance.
> Invite participants to think about how best to address these issues.

Role Play: Show slide S28 (Role Play). Vol. 3 An. 3
Introduction
> Note that participants will practice CG DR.
20 MINUTES and Preparation
> Distribute role play background materials. (If possible, distribute
background materials before the course or during the coffee break.)

Show slide S29 (Role Play Objectives).
> State learning objectives.
> Explain the steps of the role play.

Show slide S30 (Case Presentation). Vol. 3 An. 4-5
> Summarize key points in the background materials. Note that each
role player will have con�?dential instructions.
> Outline the dispute.

Show slide S31 (Roles).
> Introduce each role brieﬂy.
> Divide participants into as many groups as there are roles.
> Distribute con�?dential instructions for each role.
> Ask for a volunteer role player from each group.
> Give each group 10 minutes to review the task and coach their role
player.
> Ask participants if they have any questions before the role play
begins.

MODULE 3 Corporate Governance Training for Dispute Resolution Experts VOLUME 3 67
PRACTICE

TOOLKIT
TIME TOPIC COURSE ACTIVITY
REFERENCES

Case Study: Show slide S32 (Role Play: Phase 1). Vol. 3 An. 3
Phase 1
> Reconvene the groups and ask participants to form a �?shbowl or
30 MINUTES take their seats.

Show slide S33 (Phase 1 Instructions). Vol. 3 An. 4-5
> Set the stage for Phase 1 and ask the role players to perform
according to their respective con�?dential instructions.
> Invite the rest of the participants to observe.
> Limit your role to organizing the role play. Do not intervene during
the role play.
> Be mindful of the time and conclude Phase 1 by thanking the role
players. Ask participants to applaud the role players.
> Do not provide a de-brief at this stage.

Role Play: Show slide S34 (Role Play: Phase 2). Vol. 3 An. 4-5
Phase 2
> Invite participants to continue with Phase 2 of the role play.
30 MINUTES
> Ask the participant playing the peacemaker role to be mindful of the
key steps for third-party dispute resolution.

Show slide S35 (Phase 2 Instructions).
> Set the stage for Phase 2 and ask role players to interact according
to their respective con�?dential instructions.
> Limit your role to organizing the role play. Do not intervene during
the role play.
> Be mindful of the time and conclude Phase 2 of the role play
by thanking the role players. Ask participants to applaud the role
players.

Processing: Show slide S36 (Role Play De-brie�?ng). Vol. 3 An. 2
Role play
> Ask role players for feedback on the role play:
de-brief
10 MINUTES How did it feel?
> Ask participants for feedback on the role play:
Could the dispute have taken a different turn?
Was the peacemaker of any help?
Were there any issues the peacemaker needed especially to watch
out for (e.g. power imbalance; authority of the parties; strong
emotions)?
Could there have been different solutions?
Could the dispute have been prevented?

Discussion: Show slide S37 (Questions and Feedback). Vol. 3 An. 1
Questions,
> Ask participants to summarize the session’s main points.
Feedback
10 MINUTES
> Take questions. Link the discussion back to the learning objectives.
> Seek feedback. Distribute course evaluation forms.
> Closure.

68 VOLUME 3 Corporate Governance Training for Dispute Resolution Experts MODULE 3
P O W E R P O I N T P R E S E N TAT I O N

Corporate Governance Training for Dispute Resolution Experts
Table of Contents

Slide Details Slide Details

S1 Title Page S19 Coffee Break

S2 Objectives S20 How Can DR Experts Help?

S3 Quiz: Questions S21 Advising on the Use of ADR Processes

S22 Advising on CG DR Strategies
S4 Quiz: Responses

S23 Facilitating Board Discussions
S5 What is Corporate Governance?

S24 Training Board Directors
S6 What Are the Main Competing Tensions?

S25 Resolving CG Disputes: Skills
S7 What Are the Pillars of Good CG?

S26 What Makes CG Disputes Special?
S8 Why is CG Important?
S27 What Issues May Arise?
S9 What Are CG Disputes?
S28 Role Play
S10 Who Are the Parties to a CG Dispute?
S29 Role Play Objectives
S11 Who Are the Other Stakeholders?
S30 Case Presentation: MHU
S12 What Types of Companies Are Affected?
S31 Roles: MHU

S13 Exercise: Thinking about CG Disputes
S32 Roles Play: Phase 1

S14 Internal and External Disputes
S33 Phase 1 Instructions: MHU

S15 Issues in Family-Firm Disputes
S34 Role Play: Phase 2

S16 Common CG Disputes in Brazil S35 Phase 2 Instructions: MHU

S17 What Is the Impact of a CG Dispute? S36 Role Play De-brie�?ng

S18 What Should Be the Board’s Role? S37 Questions and Feedback

MODULE 3 Corporate Governance Training for Dispute Resolution Experts VOLUME 3 69
POWERPOINT PRESENTATION

S1 | Title Page

Resolving Corporate
Governance Disputes
TRAINING FOR DISPUTE RESOLUTION EXPERTS

TO REVIEW ADULT LEARNING
GUIDELINES, SEE VOLUME 3
ANNEX 1.

Objectives
S2 | Objectives

Understand corporate governance (CG), its role, and its
importance
Review various types of disputes and the parties involved
Explore how dispute resolution (DR) experts can help
prevent and resolve CG disputes
Practice resolving a CG dispute

70 VOLUME 3 Corporate Governance Training for Dispute Resolution Experts MODULE 3
S3 | Quiz: Questions
Quiz : Questions
Former General Motors chairman Alfred Sloan summed up an executive
meeting as follows: “Gentlemen, I take it we are all in complete agreement on
the decision here.�? As everyone nodded their heads he added, “I propose we
postpone further discussion… to give ourselves time to develop disagreement.�?
TRUE OR FALSE?

In 2005, the former president and CEO of Environmental Management
Solutions Inc. (EMS), upon his termination, led several lawsuits against the
company and its board. These litigation costs, along with the associated costs
of defending against a dissident shareholder requisition led by the former CEO,
resulted in restructuring and other charges of $2.5 million over 12 months,
ending December 31, 2005.
TRUE OR FALSE?

S4 | Quiz: Responses
Quiz : Responses
TRUE
Boards should discuss and debate strategic
decisions. Disagreements are not disputes but
left unspoken, they may evolve into destructive
disputes.

FALSE
According to EMS’s annual report, the direct costs
amounted to $5.3 million over 12 months ending
December 31, 2005.

MODULE 3 Corporate Governance Training for Dispute Resolution Experts VOLUME 3 71
POWERPOINT PRESENTATION

S5 | What is Corporate
What Is Corporate Governance? Governance?

“Corporate governance
is the system by which
companies are directed
and controlled….�?
SIR ADRIAN CADBURY

S6 | What Are the Main Competing
What Are the Main Competing Tensions?
Tensions?

“If management is about
running business,
governance is about seeing
that it is run properly. All
companies need governing
as well as managing.�?
PROF. BOB TRICKER, 1984

72 VOLUME 3 Corporate Governance Training for Dispute Resolution Experts MODULE 3
S7 | What Are the Pillars of
What Are the Pillars of Good CG? Good CG?
Transparency: Ensure timely, proper disclosure of
nancial and non nancial information and any material
matters involving the company
Accountability: Provide proper strategic guidance,
effective monitoring, and accountability to the company
and its shareholders
Fairness: Respect shareholders’ rights; ensure equitable
treatment of all shareholders
Responsibility: Engage the company’s stakeholders;
respect stakeholders’ rights

S8 | Why is CG Important?
Why Is CG Important?
Mitigates risk
Reduces vulnerability to nancial crises
Improves corporate performance
Reduces the cost of capital
Attracts and retains investors
Builds better companies, better societies

“An effective system of corporate governance must strive to channel
the self-interest of managers, directors, and the advisors upon whom
they rely into alignment with the corporate, shareholder, and public
interests.�?
IRA MILLSTEIN

MODULE 3 Corporate Governance Training for Dispute Resolution Experts VOLUME 3 73
POWERPOINT PRESENTATION

S9 | What Are CG Disputes?
What Are CG Disputes?

Involve corporate authority and its exercise
Involve the board’s actions or its failure or refusal to act
Require the board’s attention, regardless of whether the
board or individual directors are a direct party to the
dispute, to resolve the dispute
Are NOT issues arising as part of doing business

Not every disagreement is a dispute. Discourse and debate are at
the heart of the board’s work. Diverse views and perspectives bring
more information into the decision-making process, challenge
assumptions, and sharpen the focus of deliberations.

S10 | Who Are the Parties to a
Who Are the Parties to a CG Dispute?
CG Dispute?

Shareholders vs. board or a board director
Board vs. CEO or senior management
Board director(s) vs. board director(s)
Board or board director(s) vs. employees’ representative(s)
Board vs. communities, social activists, or other
stakeholders
CG disputes can involve internal and external
constituencies

74 VOLUME 3 Corporate Governance Training for Dispute Resolution Experts MODULE 3
S11 | Who Are the Other
Who Are the Other Stakeholders?
Stakeholders?

Contractual relationships
Employees
Contractors and suppliers
Providers of capital
Business partners, regulators, accountants, auditors, etc.

No contractual relationships
Communities
NGOs
Analysts, investor associations, pressure groups
Media and other “reputational�? agents

S12 | What Types of Companies
What Types of Companies Are Affected? Are Affected?

Small companies
Joint venture companies
Family rms
State owned companies
Listed companies
Cooperatives

All types of companies are affected

MODULE 3 Corporate Governance Training for Dispute Resolution Experts VOLUME 3 75
POWERPOINT PRESENTATION

S13 | Exercise: Thinking about
Exercise: Thinking about CG Disputes CG Disputes

Split into three groups to brainstorm about typical:
Boardroom disputes
Shareholder disputes
CG disputes in family rm
One person from each group will report back

10 MINUTES

S14 | Internal and External
Internal and External Disputes Disputes
Internal External
New strategies and major Mergers and acquisitions
transactions Takeover processes
Crisis situations Share and bond valuation
Board processes Lack of disclosure
Board composition and Nomination and discharge of
succession planning board directors
Con icts of interest Remuneration/bonuses
Personality clashes Sustainability and Corporate
Performance issues Social Responsibility (CSR)

76 VOLUME 3 Corporate Governance Training for Dispute Resolution Experts MODULE 3
S15 | Issues in Family-Firm Disputes
Issues in Family Firm Disputes

Governance and control
Succession/generational issues
Personal goals con icting with company objectives
Key board and management roles
Personal perspectives and grievances

“Con icts within family rms have a special character. In most
cases, what is involved is not merely a difference of opinion
about business policy but issues within the family and its history.�?
JOZEF LIEVENS

S16 | Common CG Disputes in Brazil
Common CG Disputes in Brazil
SOURCE: Brazilian Institute of Corporate Governance (IBCG).

0 10 20 30 40 50 60 70 80 90 100

MODULE 3 Corporate Governance Training for Dispute Resolution Experts VOLUME 3 77
POWERPOINT PRESENTATION

S17 | What Is the Impact of a CG
What Is the Impact of a CG Dispute? Dispute?
Diverts board resources
Disrupts board work
Obstructs company operations
Delays major strategic decisions
Undermines company’s reputation
Reduces market share
Weakens stakeholder trust and deters investors
Diverts company nancial and human resources
Impairs growth and harms corporate results
Entails high litigation, operational, and governance costs
Triggers breakdown in shareholder relations

S18 | What Should Be the Board’s
What Should Be the Board’s Role? Role?
Exercise “duty of care�?
Recognize that internal and external disputes may arise
Understand the risks/threats posed by CG disputes
Ensure expeditious, effective dispute resolution
Prevent internal and external disputes
Understand when to seek external expertise
Adopt appropriate CG dispute resolution strategies and processes

“The board’s role is to provide entrepreneurial leadership
of the company within a framework of prudent and
effective controls….�?
UNITED KINGDOM COMBINED CODE(2006)

78 VOLUME 3 Corporate Governance Training for Dispute Resolution Experts MODULE 3
S19 | Coffee Break
Coffee Break

S20 | How Can DR Experts Help?
How Can DR Experts Help?

Advise on the use of ADR processes
Advise on developing CG dispute resolution strategies
Facilitate board retreats and stakeholder meetings
Mediate CG disputes
Train directors on preventing and managing CG disputes

“It is part of the duty of care of the board to ensure disputes are
resolved quickly in order to maintain relationships that business
people, particularly management, spend their lives building.�?
MERVYN KING, SC

MODULE 3 Corporate Governance Training for Dispute Resolution Experts VOLUME 3 79
POWERPOINT PRESENTATION

S21 | Advising on the Use of ADR
Advising on the Use of ADR Processes Processes

Comparing Dispute Resolution Mechanisms

INFORMAL | SELF-DIRECTED FORMAL | REGULATED
ADR

INFORMAL FORMAL
NON-BINDING BINDING
NEGOTIATION MEDIATION/ MEDIATION/ COURT
ARBITRATION ARBITRATION
FACILITATION FACILITATION

FAST PROCESS | COST-EFFECTIVE LENGTHY PROCESS | EXPENSIVE
Business Dimension of the Dispute Legal Dimension of the Dispute

SOURCE: Adapted from Lukasz Rozdeiczer and Alejandro Alvarez. Alternative Dispute Resolution Manual:
Implementing Commercial Mediation. Washington, DC: IFC, 2006.

S22 | Advising on CG DR Strategies
Advising on CG DR Strategies

Step 1: Plan Ahead
Step 2: Assess past and present disputes
Step 3: Anticipate potential disputes
Step 4: Adopt CG DR policies
Step 5: Decide who will manage the CG DR process
Step 6: Identify who will serve as an internal or external peacemaker
Step 7: Incorporate CG DR provisions in corporate documents
Step 8: Review the effectiveness of CG DR policies
Step 9: Remain prepared for litigation

80 VOLUME 3 Corporate Governance Training for Dispute Resolution Experts MODULE 3
S23 | Facilitating Board Discussions
Facilitating Board Discussions
What was the nature of the dispute?
How did the board react?
What was management’s role?
What are the company’s general practices for dispute
resolution?
What were the dispute’s costs?
How was the dispute settled?
What policies and procedures should be improved?
What disputes may arise?

S24 | Training Board Directors
Training Board Directors

Listen actively ➔ show genuine interest
Use open questions ➔ encourage speakers to share
Clarify reasons ➔ con rm goal and objectives
Be aware of body language ➔ be friendly and open
Speak on behalf of yourself ➔ use “I�? statements
Focus on constructive ideas ➔ ask for practical suggestions
Stay calm ➔ respect different views; reschedule discussions
Avoid misunderstanding ➔ paraphrase ideas or statements
Allow others to save face ➔ help reformulate statements

MODULE 3 Corporate Governance Training for Dispute Resolution Experts VOLUME 3 81
POWERPOINT PRESENTATION

S25 | Resolving CG Disputes: Skills
Resolving CG Disputes: Skills
DR Skills CG Skills

S26 | What Makes CG Disputes
What Makes CG Disputes Special?
Special?

Complex issues
High stakes
Huge consequences
Intimidating personalities
Signi cant pressures
“Con ict resolution professionals are uniquely quali ed to serve
corporate boards in the constructive management of boardroom
con ict and to use the energy of con ict to improve, uplift, and advance
the company as it seeks to reach its maximum potential.�?
RICHARD REUBEN

82 VOLUME 3 Corporate Governance Training for Dispute Resolution Experts MODULE 3
S27 | What Issues May Arise?
What Issues May Arise?
Do the parties at the table have the appropriate level
authority to decide?
Are there any power imbalances among the parties?
Is there any ambiguity regarding the parties personal and
professional identity?
Are there any status issues to be aware of?
Are there any strong emotions that need to be channeled?
Are there any external parties or stakeholders who may
in uence the decision making?

S28 | Role Play
Role Play

TO REVIEW ROLE PLAY
TRAINING TECHNIQUES, SEE
28
VOLUME 3 ANNEX 3.

MODULE 3 Corporate Governance Training for Dispute Resolution Experts VOLUME 3 83
POWERPOINT PRESENTATION

S29 | Role Play Objectives
Role Play Objectives

Understand and resolve a dispute involving board
members
Help refocus the board’s attention on strategic issues
Review the bene ts of using a DR expert in the eld of
corporate governance

S30 | Case Presentation: MHU
Case Presentation: MHU
Max Henry University (MHU) is a private university facing nancial
dif culties
President and one board director dispute donation’s terms
In exchange for his donation, the director expected the university’s
library to be named after his parents
President argues she never made such a commitment; the
library will be named after another donor
Furious, the director threatens to take back his donation
and sue both the university and its president

How can a damaging lawsuit be avoided while refocusing the
board’s attention on strategic issues?

FOR MHU AND OTHER ROLE
PLAY EXERCISES, SEE
30
VOLUME 3 ANNEXES 4-7.

84 VOLUME 3 Corporate Governance Training for Dispute Resolution Experts MODULE 3
S31 | Roles: MHU
Roles: MHU
Maria Helena Santiago MHU president and board chairman.
She has been the president for the last 15 years. She is 60, and the
university is her life.
Michael Peruso Board director and donor. A self made man
who works long hours. He is 50 and proud of his daughter’s recent
graduation from MHU.
uan Fernandez Board director and head of the funding
committee. He is 38 and an optimistic fundraiser. He was appointed
to the board six months ago.
Alfonso Lopez Seasoned mediator but not a corporate
governance expert. He is 58 and has mediated 2,000 plus cases.

FOR MHU AND OTHER ROLE
PLAY EXERCISES, SEE
31 VOLUME 3 ANNEXES 4-7.

S32 | Role Play: Phase 1
Role Play: Phase 1

TO REVIEW ROLE PLAY
TRAINING TECHNIQUES, SEE
32
VOLUME 3 ANNEX 3.

MODULE 3 Corporate Governance Training for Dispute Resolution Experts VOLUME 3 85
POWERPOINT PRESENTATION

S33 | Phase 1 Instructions: MHU
Phase 1 Instructions: MHU

Juan calls a meeting with Maria Helena and Michael to discuss the
university’s future funding strategy
He hopes to nd an amicable resolution to the dispute over the
donation
He would at least like to convince Maria Helena and Michael to call in a
professional mediator before resorting to litigation

30 MINUTES

FOR MHU AND OTHER ROLE
PLAY EXERCISES, SEE
33 VOLUME 3 ANNEXES 4-7.

S34 | Role Play: Phase 2
Role Play: Phase 2

TO REVIEW ROLE PLAY
TRAINING TECHNIQUES,
34
SEE VOLUME 3 ANNEX 3.

86 VOLUME 3 Corporate Governance Training for Dispute Resolution Experts MODULE 3
S35 | Phase 2 Instructions: MHU
Phase 2 Instructions: MHU
Alfonso, the professional mediator, has been called in by Juan to help
sort out the dispute over Michael’s donation
Alfonso received a background brie ng from Juan and and brie y met
with Maria Helena and Michael
A meeting has been scheduled to help Maria Helena and Michael nd a
solution
Maria Helena and Michael both agreed that Juan should also
participate in the meeting

30 MINUTES

FOR MHU AND OTHER ROLE
PLAY EXERCISES SEE,
35 VOLUME 3 ANNEXES 4-7.

S36 | Role Play De-brie�?ng
Role Play De brie ng

Other possible/better solutions?
What may happen if no solution is reached?
Speci c issues the external peacemaker needs to
look out for?
Bene ts, drawbacks in using external
peacemakers?
Could the dispute have been prevented?

MODULE 3 Corporate Governance Training for Dispute Resolution Experts VOLUME 3 87
POWERPOINT PRESENTATION

S37 | Questions and Feedback
Questions and Feedback

88 VOLUME 3 Corporate Governance Training for Dispute Resolution Experts MODULE 3
VOLUME 3 : TRAINING
ANNEXES 3.4

1. Basic Adult Learning Guidelines

2. Standard Guidance for Corporate Governance
Dispute Case Study Discussions

3. Role Play Techniques

4. Kardal Fashions Ltd.: A Corporate Governance
Dispute Resolution Role Play

5. NeonSpark Corporation: A Corporate Governance
Dispute Resolution Role Play

6. Techno Ltd.: A Corporate Governance Dispute
Resolution Role Play

7. Max Henry University: A Corporate Governance
Dispute Resolution Role Play

8. Agromash OSJC: A Corporate Governance Dispute
Case Study Exercise

9. Corporate Governance Reading Guide for Dispute
Resolution Experts
ANNEX 1

A N N EX 1 : B A SIC A D U LT LEARNING GUIDELINES
BASIC ADULT LEARNING GUIDELINES

Introduction In working with adult learners, consider the following:
This section surveys techniques that strengthen and
enrich training for resolving corporate governance Knowledge. Adult learners value opportunities to gain
disputes. This guidance moves away from traditional pragmatic knowledge. As leaders, they deepen their
“sage on the stage�? instruction to interactive adult understanding through open questioning, reﬂective
learning, which engages experienced professionals in analysis, and strategic team planning.
constructive problem-solving. Skills. Effective leaders rely upon communication
This approach will : skills such as storytelling, negotiation, and active
listening. Skill-building is enhanced as they practice
Improve understanding of alternatives for preventing new techniques and exchange constructive feedback.
and resolving corporate governance disputes, empha-
sizing their value as alternatives to the courts Attitudes. Adults interpret issues in accordance with
diverse values and beliefs. Principles of action help to
Enhance constructive problem-solving skills foster the respectful mindsets required for constructive
problem-solving.
Increase access to useful resources and professional
networks Effective board members rely upon diverse styles and
strengths as they engage in problem-solving. Through
In reviewing this guidance, think carefully about a variety of learning activities, encourage adult learners
how facilitation builds the trust required for candid to expand and re�?ne their preferred communication
deliberation and innovation in problem-solving. or negotiation skills. For example, recognize and
demonstrate the power of an effective storyteller.
Adult Learners Call upon the analysts to take leadership roles in
Participants in training sessions are accomplished prioritizing essential information. Offer opportunities
professionals, including board directors, senior managers, for strategic planners to incorporate best practices in
mediators, and lawyers. These adult learners bring hard- board procedures. And, offer dynamic leaders — those
earned wisdom to the discussion of corporate governance who volunteer — “trial and error�? opportunities for
practices. adaptive learning.

Adult learners are able to enrich deliberations with Build the con�?dence, knowledge, and skills of adult
concrete examples of good practice, and they are well learners by organizing increasingly challenging activities.
aware of the challenges. They serve as a vital resource A step-by-step sequence of adult learning activities
when testing the local viability of dispute resolution ﬂows logically from familiar to increasingly complex
alternatives. challenges. By engaging in relevant and increasingly
challenging activities, board members:
In this respect, adult learning is fundamentally different
from formal education, where students must achieve Recognize common concerns
academic standards prescribed by instructors and Acknowledge diverse interests
institutions. Assess personal strengths and weaknesses
Improve communication skills
Adult learners are pragmatic. They are concerned about
practical, achievable results given time, resources, and Enhance understandings
other constraints. They look to comparable examples for Develop new professional relationships
“lessons learned�? to minimize the chances for failure. Practice cooperation in leadership roles
Many are leaders with corporate governance expertise. Develop innovative solutions

Annex 1 : Basic Adult Learning Guidelines VOLUME 3 89
ANNEX 1
BASIC ADULT LEARNIN G G U ID EL IN ES : A N N EX 1

Participatory activities, such as case studies, simulations The four pillars of good governance serve as a useful
and role plays, increase the likelihood that adult learners guide for facilitating adult learning that enhances
observe and learn from each other. As professionals, understanding of conciliation. Apply these principles in
they exchange ideas and practice the communication practice.
skills required to gain new understandings from
different perspectives. The recognition of common The Training Process
concerns serves as the basis for joint problem-solving.
Most professionals have signi�?cant family and work
Instructional support materials reinforce learning if
responsibilities, and they don’t want to waste time. To
they are practical and appealing to different modes of
organize pragmatic and fully engaging training sessions,
learning (e.g., including examples, visuals, analysis,
take a systematic approach to planning and delivery.
problem-solving activities).
In preparation, select participants with relevant
quali�?cations and a high level of commitment. Choose
TO REVIEW GUIDANCE FOR CASE STUDY
AND ROLE PLAY TRAINING TECHNIQUES, SEE
a diverse variety of backgrounds, considering ethnic,
VOLUME 3 ANNEXES 2 AND 3 regional, gender, and professional characteristics. Ideally,
to encourage active learner participation, limit the training
group’s size to 20 adults or fewer. Review each applicant’s
Facilitator’s Role questionnaire to become familiar with the names of
The facilitator’s fundamental role is to work with adults selected candidates, their interests, and their expertise.
to facilitate active listening, interactive learning, and
innovation in problem-solving. This may require Next, create an engaging and welcoming training
adapting one’s training style to reduce tendencies to environment — one in which participants will be
present long lectures or dominate discussions. Practicing comfortable discussing their experiences and generating
conciliation skills enables one to better facilitate group questions.
deliberations and explore problem-solving approaches.
Use a checklist to organize:

Training room with good lighting and ventilation
FOUR PILLARS 0F GOOD GOVERNANCE
Tables and chairs that are comfortable and movable
Responsibility Plan ahead, use good judgment, and
Computer laptop, PowerPoint projectors, and screen
ful�?ll commitments.
Flip chart stands, pads of paper, felt tip pens

Fairness Be inclusive, consistent, and impartial Photocopying service
in creating opportunities for adult
learning and leadership.
Others?

A commitment to high-quality instruction is
Transparency Communicate using concepts and demonstrated through the organization of the learning
language that are easily understood. environment. Print orientation materials in advance.
Recognize personal limitations, and
These should include a program description, an
respond constructively to errors.
agenda with session objectives, faculty biographies,
and a participants list. These are visible indicators of
Accountability Develop consensus on group planning, time management, pragmatic focus, and
objectives, monitor progress, and proposed achievements.
adapt, as needed, to achieve results.
In the session, welcome participants and allow time for
personal introductions, limiting these opening statements

90 VOLUME 3 Annex 1 : Basic Adult Learning Guidelines
to three or four sentences. Provide a demonstration of

A N N EX 1 : B A SIC A D U LT LEARNING GUIDELINES
self-management as you brieﬂy introduce yourself. A FOUR-PHASE APPROACH TO LEARNING

Elicit adult learners’ expectations of the training, and
relate these priorities to the agenda topics and session
objectives. Be sure to re-check them throughout the RE
F
Y
program. Include information indicating an interest in

LE
AP

CT
participants’ backgrounds and experiences.

To identify the group’s learning preferences, take a few
minutes to develop a consensus on norms of behavior.

Make a suggestion that involves your own behavior as
the instructor, and provide opportunities for learners to
propose their own norms. These are easily accepted once

RM
R
they are adopted through consensus. Add a few ideas to

AT
EG

O
F
IZE IN
the list, and yet be sensitive to the group’s preferences.
The aim is to build adults’ ownership of the learning
process and environment. Display and revisit the group
norms periodically to add ideas or adapt as needed.
1. Reﬂect Early in the session, raise curiosity by
During the session, facilitate a logical progression of identifying shared interests. Why is the
increasingly challenging activities. Promoting an open, topic important? How have disputes caused
respectful ﬂow of ideas is an essential step in the process. companies to fail or experience poor
Begin by identifying shared concerns, thus motivating performance? What are the potential costs
of litigation? How can ADR resolve conﬂicts
adult learners to share various experiences and approaches
to the bene�?t of shareholders’ interests?
to problem-solving. Motivate learners through positive
examples and the recognition of risks.
A four-phase approach to learning leads from reﬂection
to application. (See adjacent chart.)
2. Inform Introduce new information with concrete
In closing the session, ask participants for key lessons examples. To build understanding, consider
learned, and �?nally, summarize the session’s main points. comparisons, logical categories, causes and
effects, priority ranking, and evaluations.
Link these “take away�? ideas to the learning objectives.
Describe key terms and be prepared with
Ask if there are any �?nal questions, and allow time for sources of additional information.
participants to respond to each other’s closing ideas.
3. Strategize Ask participants to note useful ideas and
Instructor Challenges applications, and take time to prioritize
Addressing others’ disputes presents opportunities options.
and risks. In adult-learning deliberations, as in the
boardroom, disagreements are unavoidable — especially 4. Apply Skill building comes through practice. In
when a group is composed of successful, independent- groups, provide opportunities to apply basic
minded professionals in leadership roles within their negotiation and mediation skills. Encourage
groups to provide each other with feedback.
organizations.

Some adult learners have well-developed social skills. SOURCE: Adapted from D.A. Kolb. 1984. Experiential Learning:
They are able to acknowledge differing perspectives Experience as the Source of Learning and Development. Englewood
Cliffs, NJ: Prentice-Hall. B. and D. McCarthy. 2005. Teaching around
and “disagree without being disagreeable.�? Others can the 4MAT ® Cycle: Thousand Oaks, CA: Corwin Press.
be provocative and challenging. They may interrupt,

Annex 1 : Basic Adult Learning Guidelines VOLUME 3 91
ANNEX 1

criticize, probe the depth of the instructor’s expertise, or
BASIC ADULT LEARNIN G G U ID EL IN ES : A N N EX 1

to act on clear descriptions of techniques used in similar
try to impose quick alternatives. situations.
Adult learners will test each other’s expertise with
challenging “real world�? questions. Don’t be surprised “5Rs�? — Adult Learning Principles
by observations such as: “From my experience, there is The �?ve learning principles — “5Rs�? — provide a solid
a big gap between your ideas and the reality of business and ﬂexible framework for encouraging adult learning
practice.�? Or: “In theory and academia, yes, this may and leadership:
work, but so many forces in business would work
Respect. Create an environment that is welcoming,
against your recommendation.�? Some participants may
safe, and engaging. A well-managed, inclusive, and
not see the value of others’ suggestions, no matter how
respectful tone sets the stage for open deliberations
carefully phrased.
and constructive problem-solving.
At times, if debates among participants are particularly con-
Reason. Adult learners are goal-oriented. To begin,
tentious, take a step back, since you may need to mediate
relate common concerns to the learning objectives.
the discussions. Acknowledge your limitations and draw
A shared understanding of challenges provides the
from the group’s expertise. Problem posing is a technique
rationale for group cooperation and innovation.
that facilitates dispute resolution during training.
Roles. Provide opportunities for diverse adults to
Make skillful use of questions to move the conversation
assume leadership roles. Balance responsibility and
from narrow yes/no positions to the identi�?cation of
authority during participatory group learning.
common interests. Useful training questions include:

From your perspective, what is the situation? (De�?ne Relationships. Encourage professional mentoring,
the problem.) teambuilding, and networking. The consensus on
group norms sets the stage for open and respectful
Why is this important to you? (Exchange perspectives.) communication.

Any suggestions for improving this situation? Rewards. Formulate action steps and celebrate the
(Brainstorm.) transfer of effective dispute resolution practices to
corporate boards.
Which suggestions are acceptable and most useful?
(Prioritize.) These principles are relevant in various corporate
governance situations, from board meetings to the
Do we agree to ? (Establish
conciliation of stakeholder disputes. The aim is to
common ground.)
engage adults as proactive learners and leaders of dispute
What are the next steps? (Implement.) resolution in corporate governance practice.

As suggestions are proposed, note key words without Be positive, and yet realistic, in the expectations of
judgment, providing fairly balanced opportunities adult learners. Ultimately, professionals are responsible
for adult learners to communicate their ideas. You for adapting and implementing strategies that are
may need to clarify proposals by asking questions or meaningful and doable in unique corporate governance
paraphrasing statements. Be respectful of differing settings.
opinions and ideas, using such phrases as: “From what
In summary, adult learning and corporate governance
I understand… Is that correct?�?
are enhanced by the practice of dispute resolution skills.
Be focused and concise when offering guidance. Do not As board members engage in strategic deliberation
try to impose values or solutions! Instead, draw lessons and risk management, respectful communication
from the participant’s own statements, or offer relevant techniques facilitate wise decision-making, constructive
examples. Adult learners appreciate and are better able dissent and the effective resolution of conﬂict.

92 VOLUME 3 Annex 1 : Basic Adult Learning Guidelines
USEFUL RESOURCES Stone, D., B. Patton and S. Heen. 1999. Dif�?cult

A N N EX 1 : B A SIC A D U LT LEARNING GUIDELINES
Conversations: How to Discuss What Matters Most. New
Honey, P. and Alan Mumford. 1986. Using Your Learning York: Viking Penguin.
Styles. London: Peter Honey Publications.
White, J., M.C. McMillen, and A. C. Baker. (2001)
Johnson, D. W., R. T. Johnson, and M. B. Stanne. “Challenging Traditional Models: Toward an Inclusive
2000. Cooperative Learning Methods: A Meta-Analysis. Model of Group Development.�? Journal of Management
Minneapolis: University of Minnesota. Inquiry, 10 (1): 40- 57.
Knowles, M. S. 1980. The Modern Practice of Adult
Education: From Pedagogy to Andragogy. New York: USEFUL WEBSITES
Cambridge. University Press.
American Society of Training and Development (ASTD)
Kolb, D. A. 1984. Experiential Learning: Experience as website — members and non-member access — Resources
the Source of Learning and Development. Englewood to purchase and basic training information online. Also
Cliffs, NJ: Prentice-Hall. has monthly Periodical. www.astd.org.
Kolb, D. A., J. S. Osland, and I. M. Rubin. 1995. Appreciative (positive and constructive) approaches to
Organizational Behavior: An Experiential Approach to learning and change. http://appreciativeinquiry.cwru.edu.
Human Behavior in Organizations. Englewood Cliffs,
NJ: Prentice Hall. Consultative Group to Assist the Poor (CGAP) On Line
Training of Trainers. http://www.cgap.org/direct/training/
Lewin, K. 1948. Resolving Social Conﬂicts; Selected conduct_training.php.
Papers on Group Dynamics. G. W. Lewin (ed.). New
York: Harper & Row. John Dewey Project on Progressive Education, University of
Vermont. http://www.uvm.edu/~dewey/reﬂection_manual/.
Larson, M. J. 2008. Training Skills Guide. Corporate
Governance Board Leadership Training Resources Kit. Udana 68-69: We give a version of this well-known
Washington, DC: Global Corporate Governance Indian tale from the Buddhist canon, but some assert it
Forum, International Finance Corporation. Available is of Jain origin. It does illustrate well the Jain doctrine
at: www.gcgf.org. of Anekanta, the manysidedness of things. http://www.
accesstoinsight.org/tipitaka/kn/ud/ud.6.04.than.html.
Larson, M. J. and X. Tian. 2004. Advancing Women’s
Leadership: Training of Trainers Guide. Washington, Kolb, D.A. 1985. Learning Style Inventory. Boston, MA:
DC: Centre for Economic Development and Population McBer and Co. http://trgmcber.haygroup.com/Products/
Activities. learning/bibliography.htm.

Maxwell, J. C. 2002. Leadership 101. Nashville: Thomas World Bank Glossary — education terms. http://
Nelson, Inc. lnweb18 .worldbank.org/eca /eca .nsf /At tachments/
Education+Glossary/$File/glossary.pdf.
McCarthy, B. and D. McCarthy. 2005. Teaching Around
the 4MAT® Cycle. Thousand Oaks, CA: Corwin Press.

Silberman, M. 1995. 101 Ways To Make Training Active.
San Diego: Pfeiffer & Co.

Sternberg, R. J. and E. L. Grigorenko. “2001. A
Capsule History of Theory and Research on Styles.�?
In Perspectives on Thinking, Learning, and Cognitive
Styles, edited by R. J. S. and L. F. Zhang. Mahwah, NJ:
Lawrence Erlbaum Associates.

Annex 1 : Basic Adult Learning Guidelines VOLUME 3 93
ANNEX 2
STANDARD GUIDANCE FOR CORPORATE GOVERNANCE DISPUTE CASE STUDY DISCUSSIO NS : A N N EX 2

STANDARD GUIDANCE FOR CORPORATE GOVERNANCE DISPUTE CASE STUDY DISCUSSIONS

STANDARD QUESTIONS TOOLKIT REFERENCES

How would you summarize the dispute in a couple of lines? Volume 1 Module 1

Is the dispute an internal or external corporate governance dispute? Volume 1 Module 1

Who are the parties in dispute? Are there two or more parties involved? Volume 1 Module 1

Are there any other stakeholders who might be affected by the dispute? Which ones? Volume 1 Module 2

What could be the impact of the dispute if it escalates? Volume 1 Module 2

What is the business dimension of the dispute? Volume 1 Module 3

What is the legal dimension of the dispute? Volume 1 Module 3

What is the personal dimension of the dispute? Volume 1 Module 3

What is the position of each party? Volume 1 Module 3

Do the parties have any common interests? Volume 1 Module 3

What are the objectives of each party (best expected outcome of the dispute)? Volume 1 Module 3

What are the fears of each party (worst expected outcome of the dispute)? Volume 1 Module 3

What is each party’s best alternative option (BATNA) if the dispute cannot be settled? Volume 1 Module 3

What approaches to resolving the dispute would you advise the parties? Volume 1 Module 3

Should a neutral third party be involved? Volume 2 Module 1

What type of third party should be used? Volume 2 Module 3

What should be his/her pro�?le and skills? Volume 3 Module 1

How would you advise the parties to prevent or more effectively deal with such a dispute? Volume 2 Module 1

94 VOLUME 3 Annex 2 : Standard Guidance for Corporate Governance Dispute Case Study Discussion
ANNEX 3

A N N EX 3 : R OL E PL AY TECHNIQUES
ROLE PLAY TECHNIQUES 3. De-brie�?ng
Stop the role play at an appropriate point. (Avoid
Role Plays serious confrontation.)
A role play is an unrehearsed “acting out�? of a case
issue. It is one of the most interactive and potentially Immediately after the role play, congratulate the
entertaining approaches to learning. There is no script. actors. Use participants actual names while thank-
Instead, the trainer provides a safe environment, sets ing them for their performances. Stepping out of
the stage, and encourages participants to volunteer as role is essential, as there are conﬂicts among actors
characters in hypothetical situations. in most dispute resolution cases.

To engage in problem-solving, participants draw upon Before you ask others for feedback, ask role players
what they have already learned from the training for feedback. Encourage them to reﬂect upon
program, their knowledge of the situation, and their what worked and what might be improved. Do
creativity, imagination, and professional skills. Dramatic this before you or others comment.
performances fully engage the role players and the
Invite observers to provide constructive feedback.
observers.
Allow time for questions and discuss how the role
play relates to the course objectives.
Recommended Steps
1. Preparation In closing, discuss how the role play relates to the
Distribute the case description and the short session objectives. Reintroduce the performers as
descriptions for each role player. participants in training. Be explicit. Say, “You are no
longer performing!�? Use actual names while thanking
If the situation is complex, assign the case for participants for their performances.
review (homework) prior to the session.

Be sensitive to participants’ personalities. To
dramatize ideas with humor, consider asking a GLOSSARY
chairman to act as the CEO, and vice versa. Their
insights (and misperceptions) can be surprising!

Arrange space for the scene so that everyone can The Fishbowl
observe the drama. The �?shbowl is a pair or group activity that
others observe.
Set the stage by explaining the objectives, setting,
and roles. The �?shbowl is so named because everyone
sitting outside the circle observes the role
2. Leadership players in the circle as if they were watching �?sh
Call for volunteers, or ask the group to suggest in a �?shbowl.
volunteers. Distribute role descriptions. A �?shbowl can provide greater understanding
than would otherwise be achieved through a
Performers have a limited amount of time to meet
lecture.
with their groups and prepare for their roles. Each
group should prepare three talking points and The participants in role plays must feel
anticipate questions. comfortable negotiating or communicating
their ideas and experiences before their peers.
Prepare the observers for active listening. Focus
attention on one or two questions.

Start the drama.

Annex 3 : Role Play Techniques VOLUME 3 95
ANNEX 3
ROLE PLAY TEC H N IQU ES : A N N EX 3

PRACTICE

Organizing a Fishbowl
This toolkit uses the �?shbowl in role plays. Attention is focused on the role players, who are engaged in a
conversation. This activity requires adequate space to arrange the chairs so that the participants in the inner circle
can see each other. The trainer introduces the situation; then, the role players act out their assignments.

Organize an inner group of role players and an outer group of observers so that everyone can see. Remind the
role players to speak clearly and with strong voices. Observers (including the trainer) should not interrupt. They
may take notes and then ask questions or add comments after the �?shbowl deliberation. Fishbowl assignments
can be informal or structured:

Informal. Discuss topic by sharing ideas, experiences, and suggestions freely, without documenting results.
Participants are familiar with the topic. Assign a discussion topic that is familiar. For example, �?shbowl
participants may address a general question: “From your experience, how have you utilized mediation
techniques?�?

Structured. Participants receive clear instructions. They choose group leaders, discuss the topic, document ideas,
and prevent results.

The role players may be understandably self-conscious at �?rst, but they will quickly forget the audience as they
engage in their roles. Some �?shbowl
observers may be anxious to ask
questions or contribute ideas. Make
clear before the �?shbowl begins The Fishbowl
that they must refrain from posing
questions or offering remarks until
the appropriate time, which you will
announce. After a suf�?cient length of
time, thank the role players for their
ideas. Manage the time so that the
observers have an opportunity to ask
questions and express ideas.

ROLE
PLAYERS

OBSERVERS

96 VOLUME 3 Annex 3 : Role Play Techniques
A N N EX 4 : R OL E PL AY — KARDAL FASHIONS LTD.
Kardal Fashions Ltd.
A Corporate Governance Dispute
Resolution Role Play

SUMMARY > This case explores a dispute between
the chairman and the new independent director
of a family �?rm, Kardal Fashions Limited (Ltd.).
The company is preparing an initial public offering
(IPO). Progress towards the IPO launch had been
going well until the independent director began
questioning family loans and the chairman’s
purchase of a new plant overseas (without prior
board approval). Worried that these issues may
thwart the planned IPO, he agrees to bring in a
corporate governance dispute resolution expert. In
this role playing exercise, participants consider the
issues in reforming corporate governance policies
and procedures. They examine the founder’s
decisions, the company’s loans to family members,
the directors’ roles, and the new director’s
concerns. They feel pressed to resolve the
dispute quickly so that the IPO can be completed
successfully before an economic downturn occurs.

Annex 4 : Role Play — Kardal Fashions Ltd. VOLUME 3 97
ROLE PLAY — KARDAL FA SH ION S LTD . : A N N EX 4

98 VOLUME 3 Annex 4 : Role Play — Kardal Fashions Ltd.
ROLE PLAY OVERVIEW : KARDAL FASHIONS LTD.

ROLE PLAY BACKGROUND NOTE: FOR DISTRIBUTION TO ALL ROLE PLAYERS AND THE AUDIENCE

A N N EX 4 : R OL E PL AY — KARDAL FASHIONS LTD.
OBJEC TIVES

Understand and resolve a rapidly escalating corporate governance dispute involving multiple
stakeholders.

Explore the role of third-party dispute resolution experts in helping resolve the issues.

THE EXERCISE

Allow 90 minutes for this role play:

20 minutes preparation
90 MINUTES
30 minutes for Phase 1 enactment

30 minutes for Phase 2 enactment

10 minutes for the de-brie�?ng

This role play exercise will involve:

The frustrated, head-strong chairman: Da’ud Hussainy

The con�?dent director: Sherin El Shabrani

The compliant CEO: Akil Bilal

The well-respected expert: Yasmina Fahim

The role play may be held either as one continuous session or broken into as many as three parts:
preparation; Phase 1 enactment; and, Phase 2 enactment and de-brie�?ng.

The role play may be used to train board directors and dispute resolution professionals.

TO REVIEW ROLE PLAY TRAINING TECHNIQUES,
SEE VOLUME 3 ANNEX 3.

THE COMPANY

Da’ud Hussainy founded Kardal Fashions Ltd., a medium-sized, privately owned clothing manufacturer
15 years ago. He is the chairman and the largest shareholder, owning 30% of the company. In his
view, the company’s success resulted largely from his astute business decisions, particularly during
economic downturns.

Anbar, the chairman’s wife, owns 5% of the company. Two sons — Tariq and Rashad — each own
5%. Ashraf, the chairman’s brother, owns 10%. They are all board members but limit their roles to

Annex 4 : Role Play — Kardal Fashions Ltd. VOLUME 3 99
ROLE PLAY OVERVIEW : KARDAL FASHIONS LTD.
ROLE PLAY — KARDAL FA SH ION S LTD . : A N N EX 4

rubber-stamping Da’ud’s decisions. Having no interest in their father’s clothing business, the sons are
restless to pursue their own careers abroad after completing post-graduate degrees in, respectively,
technology sciences and corporate �?nance.

Other private shareholders collectively own 45% of the company. Generally, they have been satis�?ed
with their dividends and the company’s directors. Hence, as passive investors, they have allowed their
investment to grow rather than question the board about the company’s strategy and management.

Since its founding, the company has done well. It employs nearly 300 persons. Yet, the board has
supported Da’ud’s determination that, if the company is to grow faster, it must diversify its customers
by expanding sales in other countries, particularly those with high rates of economic expansion.
The board must also cut costs to remain competitive in a low-margin industry and sharply reduce
production times to meet the increasingly faster pace of fashion changes.

Since Kardal Fashions Ltd. will need more capital than what the existing shareholders can provide, it
will raise funds through an initial public offering (IPO) and list on the local stock market. To achieve this
goal, the board will implement good corporate governance practices to meet the exchange’s listing
requirements and become more attractive to foreign investors. This effort includes appointing an
independent director.

The board also has agreed to implement steps that will improve the company’s �?nancial position to
ensure a good IPO price. The company and senior management have been cutting costs to produce
a good pro�?t. They also have been strengthening the balance sheet. The window of opportunity for
the IPO is closing, however, as an economic downturn seems likely, creating urgency to complete the
offering quickly.

The board supports Da-ud’s long-term view that the manufacturing operations must eventually
move overseas to lower costs, remain competitive in global markets, and expedite the production
process. However, this is not an immediate priority since local labor costs remain competitive and the
government provides incentives.

THE PARTIES

DA’UD HUSSAINY, FOUNDER AND CHAIRMAN OF KARDAL FASHIONS LTD.

He is a head-strong, ambitious person who tightly controls his company. As the patriarch, he is
somewhat intolerant of dissension against his views.

As chairman, he recognizes his obligation to ensure that the company’s best interests are being served.
He has seen how his friends’ family-owned private companies have collapsed from poor governance,
which prevented them from attracting more capital to modernize and expand. Therefore, he advocates
corporate governance best practices as a survival strategy.

As the founder, chairman, and major shareholder of Kardal Fashions Ltd., he has continued to approach
his role as if he and his family entirely own the company. He believes the company’s success is due to
his expertise, decisions, and vision, particularly during tough economic times.

Da’ud is eager to get his company listed as quickly as possible given the likelihood of an economic
downturn. He “hand picked�? Sherin, whose excellent reputation Da’ud believes will help ensure a
successful IPO.

100 VOLUME 3 Annex 4 : Role Play — Kardal Fashions Ltd.
SHERIN EL SHABRANI, INDEPENDENT DIRECTOR OF KARDAL FASHIONS LTD.

A N N EX 4 : R OL E PL AY — KARDAL FASHIONS LTD.
As the only independent director and an accountant pledged to uphold high professional and ethical
standards to maintain her credential, she takes her role seriously. Con�?dent and competent, she is
prepared to challenge family and individual positions. She knows Da’ud well; he has commented often
on her integrity and excellence in her profession.

She is anxious to improve the company’s governance and disclosure practices, including the requirement
that half the directors should be independent.

She is excited about getting the company listed on the stock exchange. Yet this must be well-prepared.
Rushing the process could result in needless mistakes and endanger the IPO’s success. An upcoming
downturn in the economy should not justify any compromise in the thoroughness and rigor that the
IPO process requires.

AKIL BILAL, CEO OF KARDAL FASHIONS, LTD.

Akil Bilal has been the CEO for the last �?ve years. Da’ud chose him for the job when he decided to
split the chairman and CEO positions to follow corporate governance best practices.

Akil is indebted to Da’ud for this opportunity to join a pro�?table, growing company. Launching a
successful IPO and then remaining as the CEO of the listed company would be great achievements.

Akil revers Da’ud and dutifully follows his advice.

THE CONTEX T

Anxious to quickly appoint Sherin as the independent director, Da’ud persuaded her to accept
the position prior to the general assembly. An accountant, Sherin conducted a brief check of the
company before joining the board. There was little time for a more thorough review. Given the
company’s long-term success, she reasoned that there was little cause for concern. From an online
search, she learned from newspaper articles that Kardal Fashions Ltd. had been contemplating a
major bank loan.

Immediately after joining the board, Sherin asked for the most recent �?nancial statements. Sahid, the
CFO, provided her with these reports, but he was not very forthcoming with additional information.
The loan, which is material to the company, is shown in that information. The interest expense in
the income statement is commensurate with the size of the loan Sherin had read about.

At the �?rst board meeting, Sherin asked questions about the loan and complained to the chairman
about unsatisfactory access to the company’s �?nancial information. Surprised and annoyed at her
“inquisition,�? Da’ud con�?rmed the loan’s eight-year existence. To end the discussion, he abruptly
adjourned the meeting.

After probing further, Sherin discovered that the funds were applied to the purchase of a home for
each family board member in the town’s best neighborhood. Loans to private company directors
are legal but require shareholder approval. Sherin could not locate any board resolution approving
the loan.

At the next board meeting, Sherin raised more questions about the loan, insisting that the family
borrowers repay the loan. Corporate governance best practice, she insisted, required the loan’s
dissolution.

Annex 4 : Role Play — Kardal Fashions Ltd. VOLUME 3 101
ROLE PLAY OVERVIEW : KARDAL FASHIONS LTD.

Angered by Sherin’s aggressiveness, Da’ud dismissed her demand by emphatically stating that “this
ROLE PLAY — KARDAL FA SH ION S LTD . : A N N EX 4

was none of her business.�? He also reprimanded her for putting the IPO in jeopardy and then
abruptly ended the board meeting. Sherin and Da’ud have not spoken to each other since then.

Immediately after that board meeting, Da’ud, Anbar, Rashad, and Tariq left for a vacation in South
Asia. By chance, Da’ud saw a property that he believed would be ideal for a new clothing factory. It
was also offered at a price that was purported to be a “bargain�? since it was a forced sale.

Da’ud contacted the CEO and immediately sought advice from Kardal’s property advisor. After
research, the advisor was not convinced that it was a good deal. The price seemed to be about 20
percent above the market price for similar properties. The CEO advised against the purchase, noting
that the purchase could hinder the IPO strategy, which he was working hard to achieve quickly
before an economic downturn sours investors’ appetite for equities.

Despite this advice, Da’ud negotiated a deal and signed a sales contract on behalf of Kardal Fashions
Ltd.

When Sherin heard about the deal, she was incensed. This transaction compounded Sherin’s anxiety
about the loan and the family’s use of company assets as if they were their own. She tried to raise
the matter with Da’ud but she was unable to reach him. The other non-family board members were
becoming concerned.

Word spread throughout the company that Da’ud had bought a new plant to relocate production
abroad. The CEO feared that the workers would strike if these rumors were not “squashed.�? He
noti�?ed Da’hud about his concern.

After returning from vacation, Da’ud found more than 10 voice mails from Sherin requesting him
to urgently meet with her and discuss the use of the company’s assets. His CEO also sent an urgent
note to inform him that the workers were planning to strike in protest of future plans to relocate
jobs abroad and cut costs. Frustrated and upset, Da’ud calls his friend at the Corporate Directors
Association. The friend recommends hiring a corporate governance dispute resolution consultant to
help resolve the issues and clear the way for the IPO.

THE ISSUES

Use of company assets: Sharp differences in views towards proper uses of company assets have
festered since Sherin raised the matter at her �?rst board meeting. The differences between Da’ud
and her relate to:

Dealing in company assets, especially the loan used to purchase several family homes about
eight years ago

Acquisition of property abroad without board approval and against the advice of both the CEO
and the professional property advisor

Proper planning for the IPO:. The IPO’s success could be jeopardized by:

A public dispute between the chairman and the independent director

Negative publicity regarding the use of company assets

Employee strike

Deterioration of the company’s �?nancial position through the property acquisition

102 VOLUME 3 Annex 4 : Role Play — Kardal Fashions Ltd.
Corporate governance practices: Da’ud publicly endorses good corporate governance practices

A N N EX 4 : R OL E PL AY — KARDAL FASHIONS LTD.
and is taking steps to improve the company’s governance policies and practices, but the newly
appointed independent director raises the following weaknesses:

Board directors’ complacency towards the chairman’s actions

One independent board director

Infrequent formal board meetings

Obscure, authoritarian decision-making process

Lack of �?nancial transparency

Possible unlawful dealing with company assets

THE SCENARIO

PHASE 1: TODAY

Da’ud will be meeting with Yasmina, the consultant recommended by the Corporate Directors
Association, after brieﬂy discussing the matter over the phone with her. Upon her insistence, Da’ud
also agreed for her to meet with Sherin later in the afternoon.

PHASE 2: THE NEXT DAY

Yasmina has set up a meeting to help Da’ud and Sherin build common ground and �?nd some joint
solutions to the issues in dispute. Upon Da’ud’s request, the CEO will also be joining the meeting.

Annex 4 : Role Play — Kardal Fashions Ltd. VOLUME 3 103
ROLE PLAY — KARDAL FA SH ION S LTD . : A N N EX 4

104 VOLUME 3 Annex 4 : Role Play — Kardal Fashions Ltd.
A N N EX 4 : R OL E PL AY — KARDAL FASHIONS LTD.
The Frustrated, Head-Strong Chairman: Da’ud Hussainy
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

WHO YOU ARE

You are the founder, patriarch, current chairman, and major shareholder of Kardal Fashions Ltd.
Collectively controlling 55% of the company, your family generally defers to your views and
recommendations. Even the investors on the board rubber-stamp your proposals.

You are a strong, decisive person who is very proud of how you single-handedly built the company
from scratch into a successful venture over the last 15 years. Although you personally own only
30% of the company, you generously continue to handle all matters and deal with the company
as if it were still owned only by you and your family. All the shareholders are satis�?ed with the
company’s performance and do not interfere with your management.

After witnessing your friends’ companies implode from family squabbles, you became a supporter
of good corporate governance practices. You recently spoke at an event on the governance
challenges for family-owned �?rms at the Corporate Directors Association. You also know that good
governance is essential for the IPO and listing the company on the exchange.

You are very keen on managing a successful IPO. Unanimously approved by the board, the new
infusion of capital would help the company grow. Privately, though, you hope you can better
engage your sons in helping to transform the company into a multinational success. This prospect
may entice them to abandon their personal career plans.

YOUR POSITION

Initially, you were happy to have the input of an independent director, particularly since you knew
Sherin and appointed her. However, she has proved to be a problem. She interferes in your family’s
personal matters and questions everything she can put her nose in. She thinks she knows everything
about governance and running a business, even though she has never set up or managed a company.
And now, she’s hysterically calling you about your recent purchase of the manufacturing facility.
Doesn’t she realize how you took time from your vacation to �?nd this opportunity?

You have built the company to what it is today by taking chances. Your judgment has neither let
you nor the company down. In any event, when the company does list, it will invariably want to
purchase the property overseas. Offshore manufacturing is the way of the future. The purchase is
just ahead of the IPO timing that you and the board approved.

Before Sherin’s arrival, things looked great. Now, you wish you had chosen a different independent
director. She seems to be the cause of all your problems. With the coming IPO, asking for her
resignation would look bad. Worse, she could contact the press and ruin your attempt to list the
company.

You especially want to avoid unwarranted publicity around the family loan. Over time, you have
rethought the appropriateness of this loan and would like to repay it soon. But, you do not have
the funds to do so before the IPO is completed.

Annex 4 : Role Play — Kardal Fashions Ltd. VOLUME 3 105
ROLE PLAY OVERVIEW : KARDAL FASHIONS LTD.
ROLE PLAY — KARDAL FA SH ION S LTD . : A N N EX 4

The Frustrated, Head-Strong Chairman: Da’ud Hussainy
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

You must also have to defuse the employees’ discontent. If a strike erupts, the company’s reputation
would suffer. How could this unrest have happened? Has your loyal CEO lost his senses? There
has never been a strike in your company, and you have always ensured that your employees are
compensated above market rates. You have no plans to lay off any workers. All you did is to buy a
property — a strategic necessity for the future and a good deal. You felt you had to move quickly
but would seek the board’s endorsement of the purchase at the next meeting.

Remembering how your friends’ companies collapsed amid family disputes, you feel threatened.
You hope the dispute resolution consultant you hired will be able to advise you on solutions to your
current problems and talk some sense into Sherin.

WHAT’S AT STAKE?

The company’s future and successful IPO: A major dispute with the independent director,
striking employees, and the controversy over the use of company assets — these issues may end
plans to list and destroy investors’ trust in your leadership.

Control: With Sherin’s appointment, you sense that your control over the company has weakened.
She is aggressively challenging your authority and integrity. You are not accustomed to this. You
want her to work with you — not against you.

Your reputation: This situation could tarnish your reputation and patriarchal authority. Most of all,
you would hate to look like a failure in your sons’ eyes.

WHAT WILL YOU DO

PHASE 1: TODAY

You will talk to Yasmina, the ADR consultant. Upset, you will share your frustrations. Explain your
position and try to persuade Yasmina to adopt your views. You will ask her to inﬂuence Sherin
regarding the company’s best interest as you have de�?ned.

You will agree to hold a meeting with Sherin facilitated by the consultant, but you will insist that
Akil join that meeting. He has always been extremely loyal to you. He might help inﬂuence Sherin
positively, but you also want some clear answers from him regarding the employee problems.

PHASE 2: THE NEXT DAY

You feel much better after meeting with Yasmina and venting some of your frustrations. You hope
that Sherin has calmed down and is now willing to work with you on the IPO launch and listing.
You are willing to advance efforts to improve the company’s governance, but, more urgent, you
would like to agree on a message that you and your CEO can deliver to employees to dissipate any
misunderstandings about the property purchase so that a strike can be avoided.

106 VOLUME 3 Annex 4 : Role Play — Kardal Fashions Ltd.
A N N EX 4 : R OL E PL AY — KARDAL FASHIONS LTD.
The Con�?dent Director: Sherin El Shabrani
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

WHO YOU ARE

You were appointed six months ago to Kardal Fashions Ltd.’s board. You were particularly attracted
to the opportunity of participating in a company’s IPO and its listing. You are ambitious and
con�?dent; you abide by your profession’s high ethical and professional standards. You have only
held director positions in non-listed companies.

As a trained accountant and the only independent director of Kardal Fashions Ltd., you take your
role seriously. Given your expertise, professional esteem, and con�?dence, you are prepared to exert
your views and challenge speci�?c family and / or individual perspectives.

While “hand picked�? by the chairman, you are not a “yes�? person. You believe that Da’ud chose
you for your integrity, strength of character, intellect, and personal capacity to earn the respect of
current and future investors. You believe your role is to act in the company’s best interest. You also
believe you are personally accountable for board decisions. You want to help improve governance
practices while supporting the company’s plans for sustainable growth and a successful listing.

Since joining the board, you have had a dif�?cult time. In hindsight, you wished you had researched
the company’s background more thoroughly and discussed your concerns with Da’ud before
accepting the board position.

You trusted Da’ud and were seduced by his support for good governance. You now suspect that
this was all just “trendy window dressing.�? The family loan and the recent purchase of a property
without board approval and against the advice of the CEO — both actions are irresponsible in your
view and violate corporate governance best practice.

What angers you most is that Da’ud hasn’t even bothered to return your calls about these issues
while he was on vacation. This morning, you received a call from Da’ud’s executive assistant to
inform you that he wants you to meet with a consultant, speci�?cally a third party to discuss your
disputes. You are not quite sure what this is about. Does that person even have a “clue�? about
corporate governance and board procedures? If this mediator is to become involved in the latest
issues, how much can or should you disclose? Whose side is the mediator on? You are, of course,
worried that this may actually be about Da’hud trying to negotiate the terms of your resignation.

YOUR POSITION

You did consider resigning but felt it would be a premature decision. You feared your resignation
may be misinterpreted and prevent you from being offered any new director positions. Another
concern: Da’ud may publicly criticize you to cover his own mistakes. He is a powerful man, and
business leaders are very skeptical about having women on boards aside from those with family ties.
You are ready to try your best, but if you cannot get Da’ud and the board to comply with corporate
governance best practices, you will have no choice but to resign. At a minimum, you want:

The family loan to be repaid to the company quickly

A board decision immediately to approve or terminate the purchase of the new property abroad.
You know the CEO is unhappy about this idea, but you feel that the board will allocate suf�?cient
time for him to present his position, using facts to support his statements.

Annex 4 : Role Play — Kardal Fashions Ltd. VOLUME 3 107
ROLE PLAY OVERVIEW : KARDAL FASHIONS LTD.
ROLE PLAY — KARDAL FA SH ION S LTD . : A N N EX 4

The Con�?dent Director: Sherin El Shabrani
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

If Da’ud is willing to agree to these terms, you are willing to remain. But, he must also understand
that this can no longer be a “one man show.�? If the company is to be listed, he must change both
his behavior and his approach to handling company matters and assets. This means that you want
greater clarity between his role as the Chairman and that of the CEO, insisting that the two roles are
truly separated. Further, at least half the board must be composed of independent directors. This
would strengthen your position and demonstrate corporate governance best practices during the IPO
process. Da’ud must also be prepared for greater transparency in board decision-making and more
extensive public disclosures as the listing rules require.

Da’ud must see the IPO as “not an end in itself.�? Meeting the IPO criteria is only the beginning of a
new era for the company. Once listed, scrutiny of the company will be far more comprehensive to
ensure compliance with listing requirements and shareholder safeguards. Otherwise, even if the IPO
is a success, the company’s rating and shareholder value could tumble.

If Da’ud wants to negotiate your resignation, you will not engage in any further discussion at the
meeting with the ADR consultant before consulting your lawyer.

WHAT’S AT STAKE?

Your board position: You may lose you director position if you are forced to resign either because a
workable solution to your governance issues cannot be found or because Da’ud wants you dismissed.

Your reputation: You would like to remain on the board and work hard on behalf of the shareholders
and the company’s best interest, but, most importantly, you have an ethical and professional
reputation that must be preserved. You do not want to be implicated in any wrongdoings.

The IPO and the company’s future: The company has tremendous potential and could grow
into a highly successful listed company but public knowledge of your dispute with Da’ud and any
publicity around the use (or misuse) of company assets could derail those plans. Pressure is building
because there is a limited window of opportunity to launch the IPO before investor concerns about
the economic outlook sour.

WHAT YOU WILL DO

PHASE 1: TODAY

You will meet with Yasmina, but you are suspicious. You will avoid volunteering any information
before you have a clear understanding about the meeting’s focus and her role. You will try to get
as much information as possible on where Da’ud stands since you haven’t spoken directly to him
before his return from vacation. You will mention that you want to meet with Da’ud in person —
sooner rather than later.

PHASE 2: THE NEXT DAY

You have agreed to meet with Da’ud and Akil to build common ground and �?nd some joint solutions
to the issues in dispute. You are more con�?dent about Yasmina and hope that she will help craft a
constructive solution

108 VOLUME 3 Annex 4 : Role Play — Kardal Fashions Ltd.
A N N EX 4 : R OL E PL AY — KARDAL FASHIONS LTD.
The Compliant CEO: Akil Bilal
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

WHO YOU ARE

Da’ud hired you �?ve years ago when he decided to embrace good governance practices and split the
position of chairman and CEO. Neither of his sons was an option then since both had not completed
their studies. From all that you know, neither is interested in the company after they graduate. The
sons take board meetings very lightly and are often absent, much to their father’s regret.

Da’ud has always inspired you. You remain extremely loyal and grateful to him for the opportunity
he gave you to run this company. Some people say Da’ud is “running the show,�? but you don’t
take offence since he is the founder and the only shareholder actively engaged in the company’s
activities. Da’ud is the only one you can look to for guidance.

You don’t feel comfortable around Sherin. She doesn’t know the company’s history. You found her
to be abrasive in how she harassed you and the CFO for �?nancial information immediately after
joining the board. You smelled trouble, but Da’ud seemed very enthusiastic about her. Now, you
see that they are in conﬂict with each other.

Excited about the IPO, you are very glad that the board approved the listing strategy that you had
personally developed under Da’ud’s supervision. This is a tremendous opportunity to grow the
company worldwide and to become the CEO of a listed company. This success will boost your
career, increase your compensation, and elevate your prestige in society.

YOUR POSITION

You are worried about the growing tensions between Da’ud and Sherin. Their conﬂict was inevitable,
but it must be curtailed to protect the IPO.

In your view, the family loan was not a concern since it was approved eight years ago (before
you had joined); these loans, therefore, were not your responsibility. However, Sherin made a
good point when she explained that new investors may care about this, in contrast to the current
investors, who never saw the matter as an important concern. If she could persuade Da’ud to repay
the loan, that would improve the company’s balance sheet and enhance the IPO’s success. You
refrained from making any comment at the board meeting when the subject was tabled. You could
see Da’ud’s anger.

Your main, immediate concerns: stopping purchase of the new property and averting an imminent
strike by the employees. This is not the right time to buy the property. Even if it were a good deal
(which it may not be according to your property advisor), it would have been better to postpone
the transaction until after the IPO. The board could then make a decision that would be recorded
in the minutes. Da’ud did not consider your advice, which disappointed and upset you.

The most pressing issue: employees’ morale. Your company has never had a strike because you
worked hard to create good working conditions and pay above-market compensation. Kardal
Fashions Ltd. is seen as a leader in the textile manufacturing industry for its employee policies. You
must dispel the rumors triggered by the property purchase. A strike would harm the company’s
reputation and delay production. Your customers may decide to seek other manufacturers. All these

Annex 4 : Role Play — Kardal Fashions Ltd. VOLUME 3 109
ROLE PLAY OVERVIEW : KARDAL FASHIONS LTD.
ROLE PLAY — KARDAL FA SH ION S LTD . : A N N EX 4

The Compliant CEO: Akil Bilal
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

consequences would harm the IPO process. You must discuss this matter with Da’ud immediately to
determine how to manage the situation.

WHAT’S AT STAKE?

IPO’s success: The strike, the dispute between the chairman and the independent director over
the loan, and the untimely, unilateral purchase of property — all three matters may jeopardize the
IPO’s success.

Your career and reputation: Although none of these problems are your fault, you could be
blamed for launching an unsuccessful IPO. Not only are you at risk of losing your job but your
dreams of becoming the CEO of a listed company could disappear.

The company’s future and the employee’s welfare: If the company fails to resolve these issues,
it could lose customers and shut down. This would mean permanent job losses and harm the
employees’ futures, for which you feel partly responsible.

WHAT YOU WILL DO

PHASE 1: TODAY

This afternoon, Da’ud informed you that he wants you to meet with him and Sherin tomorrow to
address pending issues. To your surprise, he mentioned that the meeting would be facilitated by
Yasmina, an ADR consultant he hired for that purpose. He also asked you to prepare a letter to all
employees regarding the property’s purchase. He did not provide further details but said the letter
should clearly state that the company’s operations will be not be relocated abroad and that no job
cuts are planned. You will prepare a draft for tomorrow’s meeting.

PHASE 2: THE NEXT DAY

You are nervous about the meeting. You don’t know exactly how tense the situation is between
Da’ud and Sherin, or where they stand with their respective positions. You hear that they each met
with Yasmina, who is apparently a dispute resolution expert. She never contacted you. You will be
extremely cautious about what you say. You are ready to address the strike but you do not want to
position yourself on the loan and the property purchase issues. Even if you agree on the substance
of Sherin’s views, you do not want to upset Da’ud. He could �?re you immediately, and you would
lose the opportunity of becoming the CEO of a listed company. Yet, you do hope that this meeting
will go well so that the IPO can move forward. If the IPO collapses, everyone may blame you.

110 VOLUME 3 Annex 4 : Role Play — Kardal Fashions Ltd.
A N N EX 4 : R OL E PL AY — KARDAL FASHIONS LTD.
The Well-Respected Expert: Yasmina Fahim
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

WHO YOU ARE

You are a corporate lawyer by training. Over the last few years, you have dedicated most of your
time to resolving disputes in family �?rms and consulting boards on succession planning. You had
previously advised companies on IPO preparations.

You believe that most issues and governance disputes that arise in the boardroom, or with
shareholders, do not �?nd a satisfactory outcome in court. Having recently become an accredited
mediator, you favor mediation.

You have no conﬂicts of interest with the company, its vendors, its customers, Da’ud’s family, and
Sherin. You met Sherin once at a lecture of the Corporate Directors Association but have had no
personal or professional interaction with her since.

YOUR POSITION

Da’ud hired you based on the advice of his friend at the Corporate Directors Association. It was not
clear whether he was seeking an advisor or a mediator, but you’re assuming he will need both. In
your �?rst call with him, you clarify that you are a neutral third party. Your objective is to try to help
achieve a workable solution for the chairman, the independent director, and, more broadly, the
company’s best interest. You request a separate meeting with Sherin and underscore to Da’ud that
you will not be negotiating a deal “on behalf of the chairman.�? You emphasize the importance of
being seen as a “neutral�? third party — not “Da’ud’s person.�?

Da’ud agrees to your conditions, but your instincts suggest that he has neither discussed nor clari�?ed
your role with the Sherin: neither has he cleared your involvement with the board. You expect this
to be a very informal mediation process. A formal agreement cannot be reached without the
board‘s endorsement. You see your role as that of a facilitator. In your meetings, you will need to
make sure everyone understands your role, particularly your neutrality.

Believing this to be an interesting case, you sincerely want to help the parties “get back on the right
foot�? in the company’s best interest. You are con�?dent, cheerful, and optimistic by nature. You are
convinced that the process will end in a successful resolution.

Since you are a corporate lawyer and an expert in family governance matters, your biggest challenge
will be to refrain from making any judgments or spelling out a solution. For the process to succeed,
the parties need to own the dispute and its resolution.

WHAT’S AT STAKE?

For you, there is not much at stake beyond the satisfaction of helping resolve a conﬂict among
board members. You also enjoy demonstrating to your husband, another lawyer, that there is
great value in using ADR approaches. This case’s success will enhance your ability to attract other
clients — especially since you were recommended for this assignment by the Corporate Directors
Association.

Annex 4 : Role Play — Kardal Fashions Ltd. VOLUME 3 111
ROLE PLAY OVERVIEW : KARDAL FASHIONS LTD.
ROLE PLAY — KARDAL FA SH ION S LTD . : A N N EX 4

The Well-Respected Expert: Yasmina Fahim
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

WHAT YOU WILL DO

PHASE 1: TODAY

Meet individually with Da’ud and Sherin.

With each party, clarify your role, emphasize your neutrality, and outline both the objectives and
the limits of the process. Establish clear ground rules. Create a non-threatening and con�?dential
forum in which each party can vent and express their concerns. Focus each party’s discussion on
the issues — not their personal views of directors.

Help each party understand what the best and worst outcomes to this dispute could be.

Ensure that they commit to �?nding a constructive solution when they meet together the following
day.

PHASE 2: THE NEXT DAY

You will facilitate a meeting between Da’ud and Sherin. At Da-ud’s request, Akil will join this
meeting. You hadn’t expected this, but since Sherin had no objection, Akil’s participation appears
to be a good idea. However, you wish you could have met him before this meeting. In witnessing
this example of Da’ud’s unilateral decision-making, you are concerned that this may obstruct the
ADR process. Sherin may feel outnumbered in the discussion.

When all parties are present, you begin the meeting by clarifying your role and the ground rules.
You ask them to each make a brief introductory statement and then list their issues (e.g., the family
loan, the property purchase, the strike, and the company’s corporate governance practices). Once
the issues are established, initially help build common ground around those areas in which the three
parties are generally in agreement. From there, work towards agreement on the disputes impeding
a successful IPO.

Without rushing, try to help the parties �?nd common solutions to the issues that the board would
next consider. Start with the potential strike, since it appears to be the most pressing issue.

If time allows, discuss with the parties what needs to change so that the board and the company do
not come to this situation again. Ask if these changes are being addressed as the company works
to comply with the exchange’s listing requirements. Throughout, demonstrate your leadership of
the discussion.

Draw in Akil to show how separation of the roles of chairman and CEO are good corporate
governance practice. Doing so will also show that his position doesn’t become an issue moving
forward or compromises any common ground that you manage to help build between Da’ud and
Sherin.

112 VOLUME 3 Annex 4 : Role Play — Kardal Fashions Ltd.
A N N EX 5 : R OL E PL AY — NEONSPARK CORP.
NeonSpark
Corporation
A Corporate Governance
Dispute Resolution Role Play

SUMMARY > This case explores a dividend
policy dispute in a partially privatized utility
company. Privatized 18 months ago, the
electric utility NeonSpark Corp. is ready to
report a signi�?cant pro�?t for the �?rst time.
The State, which holds one-�?fth of the
company’s shares, wants dividends paid to
shareholders. The CEO wants to reinvest the
after-tax pro�?t into the plant to improve
the ef�?ciency of electricity generation and
expand production. Having no opinion on
whether to pay dividends, the chairman
wants to avoid any adverse publicity.

Annex 5 : Role Play — NeonSpark Corp. VOLUME 3 113
ROLE PLAY — NEON SPA R K C OR P. : A N N EX 5

114 VOLUME 3 Annex 5 : Role Play — NeonSpark Corp.
ROLE PLAY OVERVIEW : NEONSPARK CORP.

ROLE PLAY BACKGROUND NOTE: FOR DISTRIBUTION TO ALL ROLE PLAYERS AND THE AUDIENCE

A N N EX 5 : R OL E PL AY — NEONSPARK CORP.
OBJEC TIVES

Understand and resolve corporate governance disputes involving the State as a shareholder.

Review the bene�?ts of using an external dispute resolution expert to help reconcile differences
among board members on key strategic policy questions.

THE EXERCISE

Allow 90 minutes for this role play:

20 minutes preparation
90 MINUTES
30 minutes for Phase 1 enactment

30 minutes for Phase 2 enactment

10 minutes for the de-brie�?ng

This role play exercise will involve:

The well-connected chairman: George Tolstoi

The ambitious CEO: Vladimir Velikov

The genteel state-appointed board director: Ivan Mendelev

The charismatic neutral facilitator: Igor Kandinski

The role play may be held either as one continuous session or broken into as many as three parts:
preparation; Phase 1 enactment; and, Phase 2 enactment and de-brie�?ng.

The role play may be used for training board directors and dispute resolution professionals.

TO REVIEW ROLE PLAY TRAINING TECHNIQUES,
SEE VOLUME 3 ANNEX 3.

THE COMPANY

NeonSpark Corp, an electricity distributor privatized 18 months ago, is listed on the stock exchange.

The State retains a 20-percent stake in the company.

A foreign investor owns 40 percent of the company.

The remaining shares are dispersed widely among shareholders.

Annex 5 : Role Play — NeonSpark Corp. VOLUME 3 115
ROLE PLAY OVERVIEW : NEONSPARK CORP.
ROLE PLAY — NEON SPA R K C OR P. : A N N EX 5

THE BOARD MEMBERS

GEORGE TOLSTOI, THE WELL-CONNECTED CHAIRMAN

George was appointed chairman of NeonSpark Corp. immediately after its privatization. He is well-
connected.

He is well-versed in good corporate governance policies, having sat on other companies’ boards.
Under his leadership, NeonSpark Corp. recently received an award for being the stock exchange’s
best corporate governance reformer.

He has the company’s reputation and performance at heart; he also wants to maintain good
relations with the State.

VLADIMIR VELIKOV, THE AMBITIOUS CEO

Vladimir was appointed after the privatization to turn the utility around; he did so, and the company
posted its �?rst dividend.

He is considered hard-working, ambitious, and straightforward.

He wants to continue modernizing the power-generating plant so more electricity can be produced
at less cost. Such investments will create jobs and help the economy grow, generating more demand
for electricity.

He wants to ensure that the utility continues to achieve good results, promote his personal career
ambitions, and strengthen state support for his leadership.

IVAN MENDELEV, THE GENTEEL STATE-APPOINTED DIRECTOR

Ivan is a young but senior dedicated civil service employee whose career ahead is very promising.

This is his �?rst experience sitting on a large company’s board; his success will determine much of his
future career. His appointment was dictated by political circumstances.

He believes his role is to advocate the best interests of the State and society while acting in the
company’s best interests.

THE CONTEX T

After major restructuring, the company is expected to record a signi�?cant pro�?t for the �?rst time ever.

Of�?cial results are not available yet to the public, but they are expected to be discussed at the
company’s board meeting in a week from now, along with the next �?scal year’s investment strategy.

Twelve months ago, the parliament adopted a new tax policy that provides for a ﬂat tax rate of 10
percent on all companies’ pro�?ts.

Six months ago, the regulator approved a 30-percent hike in electricity rates.

GDP growth is at 6 percent, inﬂation exceeds 8 percent, and interest rates are about 7 percent.

116 VOLUME 3 Annex 5 : Role Play — NeonSpark Corp.
THE ISSUES

A N N EX 5 : R OL E PL AY — NEONSPARK CORP.
Reinvest pro�?ts to modernize equipment: The CEO believes that to sustain these good results
and become more competitive, major investments are needed to modernize the company’s plant,
including power-generating equipment. Interest rates are high, so rather than borrowing money, he
thinks the dividends should be reinvested into the utility rather than being paid to shareholders.

Increase state revenues: The State representative on the board believes that all shareholders
should receive a dividend. The State is expecting dividends from well-performing, state-owned
enterprises (SOEs) to meet its revenue needs. Much has already been invested in the company;
further investments can be phased in over the coming years.

Avoid negative publicity: NeonSpark Corp. has come a long way. If a dispute around the dividend
policy inﬂates and becomes public it could negatively impact the company’s overall performance.

Maintain good relations with public of�?cials: NeonSpark Corp. is a utility company and main-
taining good relations with regulators and public of�?cials is important.

THE SCENARIO

PHASE 1: TODAY

Aware of the dispute over the dividend policy, the company’s chairman has called a meeting in his
of�?ce today with the CEO and the State representative. The chairman wants to better understand
the issue and the rationale behind each of their positions. He fears that this situation may split the
board and escalate into a public dispute.

PHASE 2: TWO DAYS LATER

Unable to �?nd a workable solution to resolve the dividend policy dispute, and fearing the worst,
the chairman calls on an outside expert, as allowed under board procedures. He hopes the neutral
corporate governance expert will help him craft an appropriate solution and avoid a full-blown
dispute. He is aware that the board must ultimately decide the dividend question, but at least he
wants management, (represented by the CEO), and the State (represented by its designated board
director), to agree on a joint position for the board’s consideration.

Annex 5 : Role Play — NeonSpark Corp. VOLUME 3 117
ROLE PLAY — NEON SPA R K C OR P. : A N N EX 5

118 VOLUME 3 Annex 5 : Role Play — NeonSpark Corp.
A N N EX 5 : R OL E PL AY — NEONSPARK CORP.
The Well-Connected Chairman: George Tolstoi
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

WHO YOU ARE

You have been appointed as the chairman of NeonSpark Corp. immediately after its privatization.

You are tactful, well-educated, highly respected, impressive, and strict.

You want to retain good relations with the foreign investor but also with the State representative
for personal and business reasons.

You are well-versed in good corporate governance policies and have sat on several companies’
boards. You are proud that the company recently received an award for being the exchange’s best
corporate governance reformer.

You are politically well-connected and treasure your relations with important people, including
government leaders.

Your image is important to you; hence, you want to remain the successful chairman of a well-
managed, company with strong performance.

YOUR POSITION

You know that the board must make the best decisions for the company’s interests while considering
its main stakeholders’ expectations.

You have no strong feelings about the dividend policy as long as it makes sense and doesn’t create
any issues.

Of course, if no dividends were to be declared, then a strong case would have to be presented at
the shareholder meeting, even though it seems that the foreign investor would be satis�?ed with
that option. You think the State representative is a bureaucrat who has no idea how to manage a
business, but you don’t want to jeopardize your political connections.

You think the CEO is performing well and has done a good job in restructuring the company, but
he may be too ambitious and is often too outspoken.

WHAT’S AT STAKE?

Avoid public conﬂict: You want to avoid public conﬂict at all costs and prevent any leaking of this
dispute to the press.

Company’s reputation and performance: Public conﬂict would harm the company’s image and
performance and cast a shadow on your own performance as the chairman.

State relations: You want to retain good relations with the State (for personal reasons, but this is
also a utility company) and the foreign investor, given his inﬂuence with a 40-percent ownership.

Annex 5 : Role Play — NeonSpark Corp. VOLUME 3 119
ROLE PLAY — NEON SPA R K C OR P. : A N N EX 5

The Well-Connected Chairman: George Tolstoi
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

WHAT YOU WILL DO

PHASE 1: TODAY

Welcome the CEO and the State representative to your of�?ce. Explain why you called the meeting.
Hear both positions (starting with the CEO). Call it a day if things get too loud or if the discussions
hit a dead end. Invite them back to your of�?ce in two days.

PHASE 2: TWO DAYS LATER

Introduce the neutral expert and sit back. Once a solution is in reach, take over the meeting again,
rephrase the solution, and thank all for their constructive thinking. Ask the CEO to prepare a
proposal for the board’s consideration that reﬂects a mutual agreement over the dividend policy.

120 VOLUME 3 Annex 5 : Role Play — NeonSpark Corp.
A N N EX 5 : R OL E PL AY — NEONSPARK CORP.
The Ambitious CEO: Vladimir Velikov
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

WHO YOU ARE

You were appointed after the privatization to turn around this company, and you did so. The results
are there, and you are proud of them, but much remains to be done.

You are hard-working, ambitious, and straightforward. You have no patience for bureaucrats. You
are a doer. What people see is what they get.

Part of your compensation package is tied to the company’s results. If you don’t perform well, the
board can �?re you.

YOUR POSITION

You believe you work for the company’s best interests and, consequently, all its shareholders —
even though only the foreign investor seems to understand what you are doing.

The best, cheapest, and fastest way to modernize the company is to reinvest its own pro�?ts. No
argument about that — as far as you are concerned.

Modernizing the facilities to continue the pace of improvement and growth cannot be sustained
without further investments.

You think that, if you can make the needed investments, you can create jobs in the mid-term
(instead of having to lay off people) and better serve customers.

You want to persuade the State representative to see things your way. At the board meeting, you
want the directors to agree that the total after-tax pro�?ts should be invested in the plant and new
power-generating equipment.

WHAT’S AT STAKE?

Personal reputation and career: Your reputation and your job, which is tied to the company’s
performance not only this year but for future years. Even the foreign investor has made that clear.

Company’s modernization: It’s true that the company’s results are not only due to your efforts;
tax cuts and increases in electricity prices helped, too. To maintain good results, you need a more
modern, more ef�?cient plant to complete the utility’s restructuring program.

Stats Support: You don’t like dealing with the State, but you need the support of the State
representative and the chairman to lobby for another increase in electricity prices. Further, a small
plant needs to be closed. You’ll need all the support you can muster to avoid issues with the town’s
mayor and prevent social unrest.

Annex 5 : Role Play — NeonSpark Corp. VOLUME 3 121
ROLE PLAY — NEON SPA R K C OR P. : A N N EX 5

The Ambitious CEO: Vladimir Velikov
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

WHAT YOU WILL DO

PHASE 1: TODAY

When invited by your chairman, you will do your best to explain and defend your position.

You are not ready to take any nonsense from the State representative. When he speaks, you may
show your impatience and even interrupt him.

You are happy the chairman decides he will get a neutral expert to look into the dividend policy
dispute.

PHASE 2: TWO DAYS LATER

You will show more restraint before the neutral facilitator (whom you don’t know).

You will show more understanding for the State’s position and be prepared to look into developing
a board proposal that sets out the company’s capex (capital expenditure) needs and cash ﬂows in
the year ahead, which will probably indicate that the company can pay a dividend and continue its
restructuring.

You would agree to have 50 percent of the after-tax pro�?t paid as dividends and the remaining 50
percent reinvested — but the same principle should be reapplied next �?scal year.

You want the State representative to recognize that NeonSpark Corp. and its CEO are doing a
good job.

122 VOLUME 3 Annex 5 : Role Play — NeonSpark Corp.
A N N EX 5 : R OL E PL AY — NEONSPARK CORP.
The Genteel State-Appointed Director: Ivan Mendelev
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

WHO YOU ARE

Having earned a PhD in Engineering, you are a young but senior dedicated civil servant of the
Ministry of Economy and Industry with a brilliant career ahead.

This is your �?rst experience sitting on a large company’s board; you would like it to be a positive
one — much of your future career depends on it.

Your appointment was a political move, and although you don’t have much experience with business
management, you don’t want your opinions to be ruled out.

Since your board appointment, you have been watching the restructuring process with skepticism.

YOUR POSITION

You believe your role is to work in the interests of the State and society, but you also have a legal
duty to act in the company’s best interests.

You are satis�?ed with the expected positive �?nancial results that the company is about to announce,
and you know that the shareholders would welcome a dividend.

You are not a corporate governance expert, but you believe that the State (along with all the other
shareholders) is entitled to get its share of the company’s pro�?ts through dividend payments.

You don’t like the CEO. You think he is arrogant and suspect that he may be working primarily to
appease foreign investors’ interests.

You think the CEO is exaggerating his own achievements. The company’s good results are mostly
due to the tax cuts and the increase in electricity prices.

Although GDP growth rates are good (6 percent), inﬂation is high (above 8 percent). The rise in
electricity prices has been tough on pensioners. Pensions need to be increased, but that can only be
done with higher state revenues.

You think that tremendous amounts of capital have already been invested in the company (which
was part of the deal in selecting the foreign investor), and you are worried that further modernization
would involve buying equipment from abroad and not from national suppliers.

You know that the declaration of dividends is a board decision, but you want management,
represented by the CEO, to support your position at the board meeting.

WHAT’S AT STAKE?

Personal reputation and career: Things have been going great so far; you want it to stay that way.

Appease the chairman: You like the chairman and you want to keep him happy — he is well-
connected.

Annex 5 : Role Play — NeonSpark Corp. VOLUME 3 123
ROLE PLAY — NEON SPA R K C OR P. : A N N EX 5

The Genteel State-Appointed Director: Ivan Mendelev
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

State revenue needs: You need to return some cash to the state budget. (If all well-performing
SOEs skip paying dividends, state revenues will suffer.).

WHAT YOU WILL DO

PHASE 1: TODAY

You will do your best to defend your position.

You will talk primarily to the chairman and avoid eye contact with the CEO. You will ask the CEO to
refrain from interrupting you and to act in a polite manner, if needed.

You can threaten to publicly announce the State’s position if you feel you are not being heard.

PHASE 2: TWO DAYS LATER

You are glad that the chairman has called in a neutral expert — although you �?nd that intimidating.

You are worried about the turn that the discussions have taken, and you don’t want this to become
an open conﬂict. You are open to �?nding a solution but not at any cost.

You could agree to the partial payout of dividends (at least 50 percent of the after-tax pro�?t) and
partial reinvestment of after-tax pro�?t in the company’s modernization — but only if preference
is given to national contractors and suppliers for the modernization of the company’s plant and
equipment.

You would like it recognized that the company’s good performance is also due to the government’s
new tax and energy policies.

124 VOLUME 3 Annex 5 : Role Play — NeonSpark Corp.
A N N EX 5 : R OL E PL AY — NEONSPARK CORP.
The Charismatic Neutral Facilitator: Igor Kandinski
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

WHO YOU ARE

You are a retired judge, a seasoned director, and an experienced mediator.

You are a corporate governance expert served as director on several corporate boards.

You are highly respected and charismatic.

You believe in the bene�?ts of mediation, and you think it should be used to deal with boardroom
disputes — in the company’s best interests.

You are a neutral party to the conﬂict. You do not have any direct or related material or emotional
connections to the company, its board members, and the stock.

YOUR POSITION

You have no position other than to achieve a workable solution for all and you have several ideas to
make this work. You think this is a great opportunity to show off your skills, and demonstrate the
bene�?ts for boards to call on dispute resolution experts such as yourself.

WHAT’S AT STAKE?

Finding a sustainable solution: You want this intervention to be successful and the solution
sustainable.

Demonstrating value of ADR techniques: If this is a success, not only will it reﬂect well on you,
but it will help make the case for the use of ADR techniques in other boardrooms.

Supporting chairman: You need to keep your charismatic personality in check in order not to
overpower the chairman. He needs to look good and feel that he did the right thing by calling you
in and that your involvement doesn’t jeopardize his status of being a good chairman — on the
contrary, it reaf�?rms his wisdom.

WHAT YOU WILL DO

PHASE 1: TODAY

For the sake of the exercise and because of time constraints, you will be provided with all the role
parts. You will also be allowed to discreetly listen to the initial discussion between the chairman,
the State representative, and the CEO.

PHASE 2: TWO DAYS LATER

You made yourself available at short notice to facilitate a dispute over the dividend policy to be adopted
by NeonSpark Corp. You have been provided with the background information. The company’s
Chairman has briefed you on the respective positions of the State representative and the CEO.

Annex 5 : Role Play — NeonSpark Corp. VOLUME 3 125
ROLE PLAY — NEON SPA R K C OR P. : A N N EX 5

The Charismatic Neutral Facilitator: Igor Kandinski
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

You can see that there is room for negotiation. A solution may be found by giving shareholders a
dividend representing part of the company’s after-tax pro�?t while setting some of the after-tax pro�?t
aside for reinvestment, which, in turn, will increase share value. Once a solution’s outlines are in
sight, you will hand over matters to the Chairman and let him take ownership and leadership over
the process.

You will summarize the issues based on the brie�?ng you received from the Chairman.

You will ask the CEO and the State-appointed director whether they agree with your summary and
rephrase as needed.

You will ask the CEO and the State-appointed director to state their willingness to �?nd a good
solution.

You will have both parties agree on their common objectives (e.g., ensure the sustainable
performance of the company and the best returns for all shareholders — including the State).

You will help both parties �?nd a solution that could include but not be limited to having the:

State-appointed director recognize that the CEO is doing a good job

CEO recognize that the State’s tax policy and increase in electricity prices have been very
bene�?cial to NeonSpark Corp.

CEO and the State-appointed director agree to pay 50 percent of the after-tax pro�?t as dividends
and reinvest the remaining 50 percent. This dividend policy could be recommended to the board
for this and next year.

CEO and State-appointed director agree to use local contractors as much as possible. This could
reduce the costs for NeonSpark Corp., support the local job market, and limit job losses due
from NeonSpark Corp. restructuring plans.

CEO and the State-appointed director agree that NeonSpark Corp. has much to gain by
presenting itself as a responsible corporate citizen.

CEO and the State-appointed director agree to show support and understanding for each
other’s position at the next board meeting.

You will hand matters over to theChairman once a good solution is in sight and let him summarize
the agreement that emerged from both parties’ efforts.

126 VOLUME 3 Annex 5 : Role Play — NeonSpark Corp.
A N N EX 6 : R OL E PL AY — TECHNO LTD.
Techno Ltd.
A Corporate Governance
Dispute Resolution Role Play

SUMMARY > This case explores how the personal
problem of the company’s CEO — selling
her shares of Techno Ltd. to pay her divorce
settlement — may affect the share value of
Techno Ltd. and trigger a covenant that could end
the company’s credit facility. This matter draws
out other issues, including the succession plans
of the founder/chairman after his retirement
and one board director’s skepticism of the value
of an external dispute resolution expert. In the
role playing exercise, participants consider how
to solve the disputes using best practices for
alternative dispute resolution.

Annex 6 : Role Play — Techno Ltd. VOLUME 3 127
ROLE PLAY — TEC H N O LTD . : A N N EX 6

128 VOLUME 3 Annex 6 : Role Play — Techno Ltd.
ROLE PLAY OVERVIEW : TECHNO LTD.
ROLE PLAY BACKGROUND NOTE: FOR DISTRIBUTION TO ALL ROLE PLAYERS AND THE AUDIENCE

A N N EX 6 : R OL E PL AY — TECHNO LTD.
OBJEC TIVES

Understand and practice resolving family governance disputes

Review the bene�?ts and limits of using external dispute resolution experts

Discuss the bene�?ts of adopting corporate governance dispute resolution policies

THE EXERCISE

Allow 90 minutes for this role play:

90 MINUTES 20 minutes preparation

30 minutes for Phase 1 enactment

30 minutes for Phase 2 enactment

10 minutes for the de-brie�?ng

This role play exercise will involve:

The dominant chairman: Paul Schmidt

The cash-stranded CEO: Rosemary Schmidt, his daughter

The righteous independent board director: John Doe

The dispute resolution expert: J. Alfred Peacemaker

This role play may be held as one continuous session or broken up into three parts: preparation;
Phase 1 enactment; and Phase 2 enactment and de-brie�?ng.

The role play may be used for training both board directors and dispute resolution professionals.

TO REVIEW ROLE PLAY TRAINING TECHNIQUES,
SEE VOLUME 3 ANNEX 3.

THE COMPANY

Techno Ltd. was founded more than 20 years ago by Paul Schmidt. He is currently the company’s
chairman and major shareholder. Techno Ltd. was recently listed. On listing, the company’s capitalization
was approximately $550 million.

There are 300-million shares on issue. Paul owns 36.5 percent of these, while his daughter Rosemary
owns 3.5 percent, his son Andrew 3 percent, and his wife Susan 2.5 percent. The family’s charitable
foundation (the “Schmidt Foundation�?) owns another 2 percent.

Annex 6 : Role Play — Techno Ltd. VOLUME 3 129
ROLE PLAY OVERVIEW : TECHNO LTD.
ROLE PLAY — TEC H N O LTD . : A N N EX 6

Techno Ltd. buys media for sports events. Its prime revenue comes from selling advertising space
on TV and radio sports shows and around sports stadiums while events take place.

In preparation for its listing, Paul established good corporate governance structures and practices
for the company and the family council. The company is governed by a board of six directors —
three family members, including himself as chairman, his daughter Rosemary as the CEO, and his
son Andrew — and three independent directors. Paul hand-picked each independent director.
The company has several other shareholders who have been happy with the dividends and Paul’s
leadership.

The company is not highly leveraged, but it does have a banking facility of $175 million with
Bank West, which imposed an unusual covenant. This covenant states that the facility becomes
immediately callable if Techno Ltd.’s market capitalization falls below $425 million (i.e., about
US$1.417 per share). This facility is renewable by negotiation every two years.

There are few speci�?c issues that would inﬂuence Techno Ltd.’s share value, other than market
forces. As a result of the �?nancial crisis in 2007-2008, Techno Ltd.’s share price tumbled. Its
competitors’ share prices also fell, as did the broad equity market indices. Techno Ltd.’s shares now
trade at US$1.60, down from a high of $2.50 before the crisis.

THE FAMILY

THE FAMILY COUNCIL

The family council was established prior to the company’s listing. This council was to handle the
family’s affairs, following best practices. It consists only of family members and is privately advised
by a lawyer and an investment banker. The family’s strategy is to gradually reduce its shareholdings
in Techno Ltd.

PAUL, FOUNDER AND CHAIRMAN OF TECHNO LTD.

Paul, 70, eventually wants to retire from active participation in the company and the board. This is
partly why he listed the company. He felt the listing would bring fresh interest to the company and
attract new board members.

Paul’s goal is to ensure that the succession plan is carried out. Until he retires from the chairmanship,
Rosemary will be the CEO and Andrew will lead the family council with the authority to vote
the family’s shareholdings (other than Rosemary’s) in Techno Ltd. at board meetings. After Paul’s
retirement, Rosemary would become chairman.

ROSEMARY, CEO

Rosemary, 42, left her studies early to enter the family business.

Rosemary has recently separated from her husband. He left the family home for another partner,
leaving behind their two children. Rosemary is bitter about her marriage break-up and wants all
her associations with her husband to end quickly. The separation, divorce proceedings, and her
expanded role as a single parent have distracted her attention from managing Techno Ltd.

130 VOLUME 3 Annex 6 : Role Play — Techno Ltd.
Under the divorce settlement, the couple’s assets will be split 50/50. Since Rosemary wants to keep

A N N EX 6 : R OL E PL AY — TECHNO LTD.
the house and the other assets, she must make a cash settlement to her former husband of about
$15 million. To do this, she must sell Techno Ltd. shares to raise those funds. At the current share
price, this would mean she would have to sell almost all her shares.

Rosemary gets along with her brother Andrew but resents his being considered the smarter of the
two. She is also envious of his completion of university studies, which she could not do.

ANDREW, CHAIRMAN OF SCHMIDT FOUNDATION, TECHNO LTD. BOARD DIRECTOR

Andrew, 38, has a business degree and is a very capable manager of the family initiatives. He is a
member of the family council, and chairs the Schmidt Foundation.

The Schmidt Foundation’s endowment is $50 million — a series of earlier gifts from Paul. The
annual income from the endowment’s investments is disbursed to charities. Two percent of the
foundation’s funds is invested in Techno Ltd. shares.

He has no formal role in Techno Ltd.other than that of a director. He and the independent directors,
especially John Doe, share the same views about Techno Ltd.’s future.

He gets along with his sister but resents her being the CEO just because she is the eldest child.

He is currently travelling but believes John Doe represents his and the company’s interests well.
Besides, he wants to stay away from the family tensions and not get involved in his sister’s divorce
matters.

THE CONTEX T

Rosemary needs cash for her divorce settlement and is seeking a quick resolution; selling her shares
is the obvious answer.

The Schmidt Foundation does not wish to buy shares. It is looking at reducing its holdings of Techno
Ltd. shares.

If Rosemary and the Schmidt Foundation sell shares, 5.5 percent (16.5-million shares) of Techno Ltd.
could be offered in a very short period of time.

Paul, with his family and the Schmidt Foundation, own 47.5 percent of Techno Ltd. since the listing;
that share could fall to 42 percent if Rosemary and the Schmidt Foundation sell their holdings (a
total of 5.5% or 16.5-million shares).

A large share sale, and/or an announcement to the market that the CEO has pledged her entire
holding of Techno Ltd. shares as collateral for a third-party loan, would likely depress Techno Ltd.’s
share price, perhaps to the point that triggers the bank to end its lending facility with Techno Ltd.

The company’s debt covenant is in danger of being terminated as the share price trades near the
covenant’s trigger point. The stock market remains volatile. Techno Ltd.’s shares trade at $1.60,
with rumors about the company’s future leading to volatility. The board and the shareholders are
worried the bank covenant will end because of the stock’s performance. They want to stabilize the
share price and prevent any announcement of a director selling shares.

Each 10-percent fall in the Techno Ltd. share price reduces the value of Paul’s holdings alone by
approximately $17.5 million.

Annex 6 : Role Play — Techno Ltd. VOLUME 3 131
ROLE PLAY OVERVIEW : TECHNO LTD.
ROLE PLAY — TEC H N O LTD . : A N N EX 6

Aware of the CEO’s personal need and the danger to the company and his own personal interests
if her shares are sold, Paul called a board meeting. The discussion over these issues became
deadlocked, with the directors’ individual positions becoming more entrenched.

The chairman took the view that the only way to resolve the issues reasonably was to utilize the
services of an independent dispute resolution expert. Although John Doe was reluctant to the idea,
the board agreed to that suggestion.

THE ISSUES

CEO’s immediate cash needs: CEO wants a quick cash settlement for her divorce; a sale of her
shares is an obvious solution.

Retain family control: Paul has his interests in any share transaction, too, and wants to retain the
level of family control at 47.5 percent of total shares and thereby support the share price to prevent
diminution of value of his personal holdings.

Avoid triggering the covenant: The board and the company want to avoid triggering the
termination of the debt covenant. Since they want to keep the share price as high and as stable as
possible, a large sale would undermine their ability to do so.

THE SCENARIO

PHASE 1: TODAY

The expert meets individually with the two family members (Paul and Rosemary) and the independent
director (John) to understand and clarify their issues and individual expectations.

PHASE 2: TWO DAYS LATER

The expert calls a meeting with Paul, Rosemary, and John to �?nd common ground and develop a
solution agreeable to all.

132 VOLUME 3 Annex 6 : Role Play — Techno Ltd.
A N N EX 6 : R OL E PL AY — TECHNO LTD.
The Dominant Chairman: Paul Schmidt
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

WHO YOU ARE

You are the founder, current chairman, and major shareholder of Techno Ltd., owning 36.5 percent
of total shares. You are very proud of your leadership in building the company over 20-plus years.

You are a strong, dominant “larger than life�? personality in the company and your family. However,
you despise conﬂict, especially within your family.

You supported good governance practices within the company and the family, setting up a family
council, for example. This approach helped you to successfully list Techno Ltd.

At 70, you want to retire from active company involvement, including your role as board chairman.
You would also like to sell some of your shares. Only Andrew knows this. This is a recent decision
on your part.

You do not want the solution to Rosemary’s cash needs and concerns over leadership to reduce
your shareholdings’ value.

YOUR POSITION

You empathize with Rosemary’s position. You never liked her husband, particularly since he made
no effort to �?t in with the family or participate in the family’s business. He blamed the company,
you, and your family for their hold on Rosemary. You grudgingly accepted the divorce settlement.

You do not wish to see the share price of Techno Ltd. fall since this would reduce your personal
shareholdings’ value. You want to avoid the company’s future being jeopardized. You have worked
too hard over many years to build the company and your wealth. It is a matter of pride.

As chairman, you have an obligation to ensure the company’s best interests are served. You have
been concerned about Rosemary as the CEO, given her poor people management skills and the
strain from the divorce. You are thinking of having her become the next chairman but Andrew
might after all do a better job as a CEO — if his sister would be willing to groom him.

You know that your needs, and those of your family, must be aligned with the company’s best
interests. You support �?nding a harmonious solution to the issues presented and have appointed,
with board consent, a dispute resolution expert.

WHAT’S AT STAKE?

Losing the loan facility: If the share value falls too low, the covenant will be triggered and Techno
Ltd. will lose its access to the credit it needs to survive.

Family harmony: Harmony within the family must be preserved while serving the company’s best
interests.

Your retirement: You want to retire but you need to ensure that you have a good succession plan
in place.

Annex 6 : Role Play — Techno Ltd. VOLUME 3 133
ROLE PLAY — TEC H N O LTD . : A N N EX 6

The Dominant Chairman: Paul Schmidt
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

Share value: You want to get the best value for the sale of family shares, including your own.

WHAT YOU WILL DO

PHASE 1: TODAY

You explain your view of the situation and the issues to the expert in a one-on-one meeting. You
know that the expert is having similar one-on-one meetings with Rosemary and John.

You see Rosemary’s need for funds to settle her divorce as the problem. You are anxious to �?nd a
solution — even if it means changes in the company’s succession plans and delaying your personal
sale of Techno Ltd. shares.

PHASE 2: TWO DAYS LATER

The expert facilitates a meeting with you, Rosemary, and John.

You voice your position and suggest solutions.

You are ready to help Rosemary with her cash problems but you also want her to agree to groom
her brother into the CEO position. She could become the next chairperson and allow you to retire
and enjoy some time off with your wife.

134 VOLUME 3 Annex 6 : Role Play — Techno Ltd.
A N N EX 6 : R OL E PL AY — TECHNO LTD.
The Cash-Stranded CEO: Rosemary Schmidt
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

WHO YOU ARE

You are the CEO and director of Techno Ltd. You left school to enter the family business; you resent
having never completed your studies.

You own 3.5 percent of the total shares outstanding for Techno Ltd.

You and your brother get along as siblings, but you are envious of his university degree and peoples’
general impression that he is smarter than you. You sense that Andrew resents your being the CEO,
questioning a decision that he feels was based solely on your being the eldest child rather than on
your expertise and skills.

Your father’s plans for the company’s succession placed you, being the eldest, as the CEO for now.
After your father retires, you would also become the chairman of Techno Ltd. Your brother now
leads the family council and votes the family’s shareholdings (other than yours) in Techno Ltd. at
board meetings.

You recently signed a divorce agreement with your husband. He left the family home for another
partner, leaving you behind to care for two children. In his plea for a divorce, he alleged that wider
family and company interests took too much of your time, depriving your immediate family of their
needs.

The divorce settlement calls for a 50/50 split of the couple’s assets. You must provide your ex-
spouse with $15 million in cash since you want to retain the house and other assets. To do this, you
must sell all your Techno Ltd. shares.

You are bitter about the marriage break-up and want all associations with your ex-spouse to be
terminated quickly.

The divorce proceedings and your new role as a single parent have distracted your attention from
managing Techno Ltd.

YOUR POSITION

You believe you have been an effective CEO. However, there have been complaints about your
people management skills; some say you delegate too many responsibilities to others. You will
�?ght hard to keep your job as CEO until the chairmanship becomes available with your father’s
retirement.

Your top, urgent priority is to settle in cash with your ex-spouse the sum of $15 million, as ordered
by the Family Court. You must sell all your shares at the current price to raise these funds. You don’t
see what else could be done. You will de�?nitely not consider selling your house.

You are concerned about the outlook for the share price and want it to remain as high as possible
as a demonstration of your effective leadership. For sure, selling your shares won’t help but you
have a good reason to do so. You don’t see why anyone else would need to sell their shares.

Annex 6 : Role Play — Techno Ltd. VOLUME 3 135
ROLE PLAY — TEC H N O LTD . : A N N EX 6

The Cash-Stranded CEO: Rosemary Schmidt
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

You do not want your sale of Techno Ltd. shares, or any other sales being contemplated by family
members, to send a signal to the market that there are troubles in the company, which would
trigger steep declines in the share price. If that were to happen, shareholder pressure would build
to force your resignation.

You are against stepping down as the CEO unless you can become chairman, as the succession plan
speci�?es. If you were forced to step down, you would adamantly oppose Andrew becoming CEO.

WHAT’S AT STAKE

Your leadership reputation: You have performed well as a CEO. Share prices have fallen as a
result of the �?nancial crises.

Your relationship with your father: You don’t want to disappoint your father. His views matter
to you.

Your divorce settlement: You need to �?nd the cash to settle the divorce. This has taken too long
already and you want to start a new life.

Your future with Techno Ltd.: Your father is considering retiring soon but you are not sure
anymore about his intentions in terms of succession.

WHAT YOU WILL DO

PHASE 1: TODAY

You explain your view of the situation and the issues to the dispute resolution expert in a one-on-
one meeting. You know that the expert is having similar one-on-one meetings with your father and
John.

PHASE 2: TWO DAYS LATER

The expert facilitates a meeting with you, your father, and John.

You explain your �?nancial situation. An obvious solution would be for you to sell your shares, but
you are open to other ideas as long as you can settle your divorce as quickly as possible. You also
want to gain back your father’s respect — even if that means agreeing to a new succession plan.
If your father wishes to retire, you would be happy to assume the role of chairman and agree to
groom your brother Andrew into becoming the new CEO. After all, that would help you build a new
life and maybe �?nally earn that university degree you are longing for.

136 VOLUME 3 Annex 6 : Role Play — Techno Ltd.
A N N EX 6 : R OL E PL AY — TECHNO LTD.
The Righteous Independent Director: John Doe
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

WHO YOU ARE

You are one of the independent directors of Techno Ltd. “hand-picked�? by Paul. You take your
role seriously and know what is expected of you by the company and the shareholders. You are
prepared to exert your position and challenge speci�?c family and/or individual perspectives.

You have been an independent director since Techno Ltd. was listed 18 months ago. You are not a
“yes�? man. Paul picked you for your integrity, strength of character, and personal capacity to both
earn the respect of Rosemary and Andrew and to challenge their views. They will listen to you.

Paul also saw your value as a director because of your extensive contacts in the media-buying
industry from previous experience elsewhere.

YOUR POSITION

You want to prevent any further decline in Techno Ltd.’s share price so you will explore how to
prevent any family member or the foundation from selling part or all of their shareholdings.

You want Bank West to relinquish its debt covenant, given Techno Ltd.’s low leverage of debt.

You believe stability of senior management is critical. You nevertheless agree with Andrew that
Rosemary’s attention has been excessively sidetracked by her divorce.

You are skeptical about how an external dispute resolution expert can be of any help, and voted
against Paul’s request to the board. You think it should be your role to �?nd an agreeable solution —
although you haven’t been successful thus far.

WHAT’S AT STAKE?

Company’s performance: Clearly family issues and Rosemary’s divorce are starting to affect the
company’s performance. These issues have to be resolved quickly.

Share value: You are worried about various family members wanting to sell their shares. That
would be the wrong signal for the market at this time. Most importantly, this could trigger the
covenant.

Leadership: You also hope that Rosemary’s divorce will be over soon so she can focus on her job
as a CEO. Otherwise, Andrew might make a better CEO.

Personal reputation: Last but not least, you fear that this whole situation could negatively impact
your reputation as a board director. You think it should be your role as an independent director to
help the family resolve its issues.

Annex 6 : Role Play — Techno Ltd. VOLUME 3 137
ROLE PLAY — TEC H N O LTD . : A N N EX 6

The Righteous Independent Director: John Doe
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

WHAT YOU WILL DO

PHASE 1: TODAY

You reluctantly explain your view of the situation to the expert and question his ability to help
resolve the issues at hand. You know that the expert is having similar one-on-one meetings with
Paul and Rosemary.

PHASE 2: TWO DAYS LATER

The expert facilitates a meeting with you, Paul, and Rosemary.

You focus on the best interests for the company. You will suggest ideas and help Paul and Rosemary
come to a good solution. You want them to feel that if this meeting is a success, it is thanks to you.

You explain that something needs to be done about the covenant.

As much as possible family members should hold on to their shares for now.

If a settlement must include Rosemary’s departure, as much as you have supported her, you would
support Andrew becoming the next CEO.

138 VOLUME 3 Annex 6 : Role Play — Techno Ltd.
A N N EX 6 : R OL E PL AY — TECHNO LTD.
The Dispute Resolution Expert: J. Alfred Peacemaker
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

WHO YOU ARE

You have been appointed by the Techno Ltd. board to help resolve some issues involving family
members that could affect the company’s share value.

You have been selected based on your expertise in mediating corporate governance issues involving
family companies.

You are skilled at focusing on the hard issues while understanding the more sensitive family issues
behind positions being taken. You have demonstrated your ability to inspire trust and con�?dence in
your work.

You are a senior partner in a leading law �?rm and are looking to expand the �?rm’s alternative
dispute resolution practice.

YOUR POSITION

You have no position other than to achieve a workable solution that all can agree on.

You have received some background information on Techno Ltd. and a summary of the issues from
the board.

WHAT’S AT STAKE?

Professional reputation: Although the effective resolution of the issues at hand depend on the
parties’ willingness to �?nd a workable agreement, you are anxious to �?nd a positive outcome.

Expansion of your law practice: This is important for your reputation and will help make the
case in your law �?rm for expanding the alternative dispute resolution practice.

WHAT WILL YOU DO

PHASE 1: TODAY

Meet individually with Paul, Rosemary, and John to better understand what the issues are and
what’s at stake for each of them.

Explain that you have no vested interests in the matter. Your sole goal is to help �?nd solutions
agreeable to all.

Actively listen to Paul, Rosemary, and John. You will paraphrase, clarify, and explore their positions.
You can show empathy but you cannot take sides.

Have Paul, Rosemary, and John agree to meeting together two days later.

Annex 6 : Role Play — Techno Ltd. VOLUME 3 139
ROLE PLAY — TEC H N O LTD . : A N N EX 6

The Dispute Resolution Expert: J. Alfred Peacemaker
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

PHASE 2: TWO DAYS LATER

Welcome Paul, Rosemary, and John to the meeting. Remind them that your sole goal is to help
them �?nd agreeable solutions to their problems.

Have Paul, Rosemary, and John review and agree on their common interests (e.g. acting in the
best interests of the company; avoiding the covenant to be triggered; avoiding an escalation of the
dispute; etc.).

Have Paul and Rosemary agree on what the issues are (e.g., share value decline; risk of triggering
the covenant; Rosemary’s need for cash; company’s reputation; Rosemary’s performance as a CEO;
Chairman’s succession planning; foundation’s and other family members’ desire to sell shares; etc.).

Review each issue and invite Paul, Rosemary, and John to craft joint solutions. Check if the solution
for each issue is agreeable to all. Issues and solutions may be linked.

If discussions are stuck, suggest ideas for solutions but do not impose any solution. Possible solutions
to explore may include, but may not be limited to the following:

Rosemary could use her Techno Ltd. shares as collateral to borrow $15 million to settle her
divorce. She may need additional cash though since the bank is skeptical that the current share
price can be maintained. She may have to use her home and other �?xed assets as additional
collateral.

Techno Ltd.’s board could persuade the Schmidt Foundation that it would likely be in its better
interests to “drip�? its Techno shares into the market in an orderly manner so that these sales do
not arti�?cially depress the share price and, in turn, reduce the foundation’s endowment value.

The Board could approach Bank West to determine the reduction in size of the facility necessary
for removing the covenant.

Find a new succession plan that would allow Paul to retire without fearing for the future of the
family company. This could include having Rosemary become the new chairperson. However,
she would need to step down as a CEO in favor of Andrew, whom she could groom for the
position.

140 VOLUME 3 Annex 6 : Role Play — Techno Ltd.
A N N EX 7 : R OL E PL AY — M AX HENRY UNIVERSITY
Max Henry University
A Corporate Governance Dispute
Resolution Role Play

SUMMARY > This case explores a dispute between
the president of a private university and one of
its board members over the terms of a donation
he contributed. In exchange for his donation,
the board member expected to have the library
named after his parents. The university president
argues she has never made such a promise. The
library is actually to be named after another
donor. Furious, the director threatens to take
back his donation and to sue the university and
its president. This matter draws out other issues,
including the university’s increasing �?nancial
dif�?culties and the president’s leadership skills.
In the role playing exercise, participants consider
how to best resolve the dispute and avoid a
potential costly and damaging lawsuit.

Annex 7 : Role Play — Max Henry University VOLUME 3 141
ROLE PLAY — M AX HENRY U N IVER SITY : A N N EX 7

142 VOLUME 3 Annex 7 : Role Play — Max Henry University
ROLE PLAY OVERVIEW : MAX HENRY UNIVERSITY
ROLE PLAY BACKGROUND NOTE: FOR DISTRIBUTION TO ALL ROLE PLAYERS AND THE AUDIENCE

A N N EX 7 : R OL E PL AY — M AX HENRY UNIVERSITY
OBJEC TIVES

Understand and resolve a dispute involving the board members of a private university facing
�?nancial problems

Review the bene�?ts of using a dispute resolution expert to help resolve the dispute and refocus the
board’s attention on strategic issues.

THE EXERCISE

Allow 90 minutes for this role play:

90 MINUTES 20 minutes preparation

30 minutes for Phase 1 enactment

30 minutes for Phase 2 enactment

10 minutes for the de-brie�?ng

This role play exercise will involve:

The beleaguered president: Maria Helena Santiago

The betrayed donor and board director: Michael Peruso

The optimistic board director: Juan Fernandez

The seasoned mediator: Alfonso Lopez

This role play may be held as one continuous session or broken into three parts: Preparation; Phase
1 enactment; and, Phase 2 enactment and de-brie�?ng.

The role play may be used for training board directors and dispute resolution professionals.

THE UNIVERSIT Y

Founded 50 years ago, Max Henry University has built a strong reputation in the �?eld of political
and social sciences.

The university is confronting severe �?nancial challenges as its donations dry up and its endowment
continues to lose value following the global �?nancial crisis.

Student enrollment has been declining over the last two years while operational costs have been
rising.

Weaknesses in the university’s academic resources and campus facilities have not been addressed
for years.

Annex 7 : Role Play — Max Henry University VOLUME 3 143
ROLE PLAY OVERVIEW : MAX HENRY UNIVERSITY
ROLE PLAY — M AX HENRY U N IVER SITY : A N N EX 7

Some of the university buildings urgently need to be renovated. A new library is currently under
construction.

The university has repeatedly postponed the launch of Web-based graduate programs, which could
have expanded student enrollment.

THE PARTIES INVOLVED

MARIA HELENA SANTIAGO, PRESIDENT AND CHAIR OF MAX HENRY UNIVERSITY

Maria Helena, 60, has been the university president for 15 years. She had been the head of the
sociology department for 10 years. She often says the “university is her life�? since she is not married
and does not have siblings or children.

The faculty strongly supports Maria Helena. They believe she is the heart and soul of the university.
Her academic publications have contributed to building the university’s reputation.

Maria Helena’s management style is low-key and consensus-oriented. She delegates operational
matters to her administrative staff.

Realizing that the university is facing serious �?nancial problems, she is frantically trying to raise funds.

Maria Helena and the university’s endowment department have worked hard to secure Michael
Peruso’s donation. Having his commitment enabled Maria Helena to convince another donor to
provide funds.

MICHAEL PERUSO, BOARD DIRECTOR AND DONOR

Michael, 50, is an aggressive entrepreneur, who works long hours.

He has been a board member for just over two years and sits on the funding committee.

He is a self-made man and is very proud of his daughter, who just received her bachelor’s degree in
urban sociology from MHU.

Rumor has it that his once successful construction business is facing severe challenges following the
housing crisis.

He authorized a donation for what he believed was the library’s construction, which he saw as a
perfect way to remember his parents.

JUAN FERNANDEZ, BOARD DIRECTOR AND HEAD OF THE FUNDING COMMITTEE

Juan, 38, was appointed six months ago to the university’s board and agreed to head the Funding
Committee.

He has worked as a professional fundraiser but this is his �?rst experience on a board.

He has been tasked with developing a funding strategy for the university and is only starting to
realize that this might be =-more complicated then expected.

He wasn’t involved in the initial discussions between Maria Helena and Michael regarding the
donation’s terms.

144 VOLUME 3 Annex 7 : Role Play — Max Henry University
THE CONTEX T

A N N EX 7 : R OL E PL AY — M AX HENRY UNIVERSITY
The latest university bulletin announced that the construction of the new library should be completed
by the end of the calendar year and bears the name of famous sociologist Emil Durkheim.

Board Director Michael Peruso contends that the University’s president had agreed to name the
university library after his parents, Anna and Rodriguez Peruso. This was a condition for his donation
to the university.

Although this was not stated in the written agreement he signed with the university, he readily
transferred the funds, which were used immediately to cover initial construction costs and pay for
an overhaul of the campus information technology system.

As soon as he saw the announcement in the university bulletin, Michael challenged Maria Helena.
She countered that he had misunderstood the terms they had agreed upon verbally. Besides, the
library naming rights have been committed to another donor through a signed contract.

Clearly upset, Michael threatened to sue the university and its president; he is asking for his donation
to be returned.

This dispute arises as the university faces increasing �?nancial dif�?culties and struggling to integrate
new information technologies in its programs.

THE ISSUES

The terms of Michael’s donation: Unless the library is named after his parents, Michael wants his
donation returned. He has threatened to go to court. Michael’s donation has already been partially
spent and the remaining funds fully committed by the university.

The university’s �?nancial problems: Student enrollment is declining and generous donors are
dif�?cult to �?nd. The university is facing increasing operational costs and must upgrade its systems
and venues. The university cannot afford to reimburse Michael.

The president’s performance: The conﬂict over Michael’s donation and the mounting problems
faced by the university are creating tensions on the board and casting a shadow on Maria Helena’s
leadership skills.

THE SCENARIO

PHASE 1: TODAY

Juan Fernandez, the head of the funding committee, has called a meeting with Maria Helena and
Michael to discuss the university’s future funding strategy. He is secretly hoping to �?nd an amicable
resolution to the dispute over the donation. He would at least like to convince Maria Helena and
Michael to call in a professional mediator before resorting to litigation.

Annex 7 : Role Play — Max Henry University VOLUME 3 145
ROLE PLAY OVERVIEW : MAX HENRY UNIVERSITY
ROLE PLAY — M AX HENRY U N IVER SITY : A N N EX 7

PHASE 2: A WEEK LATER

Alfonso Lopez, a professional mediator, has been called in by Juan to help sort out the dispute
over Michael’s donation. The mediator received a background brie�?ng and brieﬂy met with Maria
Helena and Michael. A meeting has been scheduled to help Maria Helena and Michael �?nd a
solution. Maria Helena and Michael both agreed that Juan should also participate in the meeting.

146 VOLUME 3 Annex 7 : Role Play — Max Henry University
A N N EX 7 : R OL E PL AY — M AX HENRY UNIVERSIT
The Beleaguered President: Maria Helena Santiago
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

WHO YOU ARE

Age 60, you have been the university’s president for 15 years. Before that, you headed the sociology
department for 10 years.

The “university is your life.�? You never married and don’t have any children or siblings. You have
always been extremely dedicated to your work and career.

You have strong support from the faculty. They see you as “one of them.�?

You are more comfortable discussing abstract concepts and strategy than holding meetings on
pension programs and maintenance contracts. You delegate day-to-day operational responsibilities
to your staff. You value a consensus approach to decision making.

You realize your understanding and use of information technologies are limited and you have been
reluctant to embrace online teaching.

You �?nd it hard to press potential donors for university contributions, but you have been trying very
hard to raise funds to help the university overcome its �?nancial dif�?culties.

YOUR POSITION

You contend that you outlined the terms of Michael’s donation verbally, which would allow some
form of recognition on the library building, but not naming rights.

You are unable to understand how anyone could question your credibility and honesty.

You feel betrayed by Michael’s allegations and suspect personal motives lie behind his deceit. You
think he is a rude , uneducated man who doesn’t belong on the university’s board.

You are under pressure to ensure the university’s �?nancial recovery and reputation.

Your personal prestige and your good relations with the faculty are all in jeopardy.

You want to settle the dispute as quickly as possible to avoid any backlash from other donors who
have either committed funds or expressed an intent to do so.

The university must avoid a lawsuit. At a dif�?cult time, it cannot afford the consequences to
its reputation; its survival is at stake. You are confdent that you would win since the donation
agreement signed by Michael does not mention any naming rights.

WHAT’S AT STAKE?

The university’s �?nancial situation and reputation: The university’s future is in jeopardy if it
loses Michael’s funding and that of other donors.

Your personal reputation: Your reputation and your leadership skills are on the line. You need to
�?nd a solution to this dispute and regain the board’s trust. You don’t want to disappoint the faculty,
which has always been extremely supportive.

Annex 7 : Role Play — Max Henry University VOLUME 3 147
ROLE PLAY — M AX HENRY U N IVER SITY : A N N EX 7

The Beleaguered President: Maria Helena Santiago
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

The university’s future: You understand the university’s needs to make several important
strategic decisions to continue attracting new students. It cannot live on past glory.

The threat of a lawsuit: You want to avoid a lawsuit but are not willing to succumb to Michael’s
demands.

WHAT YOU WILL DO?

PHASE ONE: TODAY

You will meet with Juan and Michael to discuss the university’s fundraising strategy. If Michael
brings up the question of his donation, you will express your views. How could he even think that
the library could be named after his parents! What you took for a generous philanthropic donation
was just buying fame for his family. The more you think about it, the more you �?nd the dispute very
upsetting.

PHASE TWO: A WEEK LATER

You are glad Juan convinced you to retain a mediator. Obviously, you will be able to �?nd a solution
to the dispute without external help. Besides, you think you may have gone too far with Michael
and upset his feelings. You know he is very sensitive about not having any formal education and
very proud about his daughter going to college. You are open to exploring solutions with the
mediator and are very scared that this might end up in court, which would be truly embarrassing
and devastating for yourself and the university. You have done a lot of thinking over the past week
regarding the university’s future, and you are certainly not ready to resign.

148 VOLUME 3 Annex 7 : Role Play — Max Henry University
A N N EX 7 : R OL E PL AY — M AX HENRY UNIVERSITY
The Betrayed Donor and Board Director: Michael Peruso
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

WHO YOU ARE

You are 53, a self-made man heading a large construction company, which you founded 20 years
ago.

Your business is suffering from one of the worst housing crisises that the country has seen in
years.

You pride yourself in making fast, direct decisions. You value your business acumen and your work
ethic.

You work long hours and you have no patience for small talk. You can be brusque and stubborn.

Yesterday your bank called you and demanded that you repay one of your company’s loans to cover
losses from defaults in commercial and residential real estate loans. Your loan’s terms allowed for
the bank to recall the loan after a 30-day notice.

You pride yourself for sitting on a university board but consider all these academics as being useless.
You accepted this position to make your family and daughter proud.

WHAT YOU THINK

The university has your money, and you believe Maria Helena has a moral obligation to honor the
verbal agreement you believe you made with her. You want your parents’ names on that library. It
means a lot to you.

If Maria Helena doesn’t agree to name the library after your parents, then you may as well demand
your money back to help you deal with your own �?nancial issues.

At �?rst, you were polite and deferential to Maria Helena, but you have become angry with her. Her
laidback, arrogant leadership style is a major source of the university’s problems.

This issue with your donation is the latest in a series of problems demonstrating Maria Helena’s
sloppiness in handling major issues upon which the university’s survival rests. You want to expose
Maria Helena’s incompetence and use this debacle to force the installation of a new president,
fearing that her continued involvement will not provide the leadership and vision the university
needs to survive the dif�?cult years ahead.

You have threatened Maria Helena with a lawsuit, although this is the last thing you need in your
life now.

WHAT’S AT STAKE?

Your personal honor and reputation: You will not tolerate Maria Helena questioning your
understanding of your donation’s terms. She is just short of calling you a liar. You have already told
your daughter that the library would be named after her grandparents and you want to surprise
them with that fact when the new building is inaugurated.

Annex 7 : Role Play — Max Henry University VOLUME 3 149
ROLE PLAY — M AX HENRY U N IVER SITY : A N N EX 7

The Betrayed Donor and Board Director: Michael Peruso
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

University’s future and leadership: The university is struggling to meet new challenges. Student
enrollment is falling, and funding needs are not being met. Teaching methods are outdated and
hardly use modern information technologies. The university cannot move forward if Maria Helena
remains as the chairperson and president.

Your credentials as a board member: The university’s dif�?culties and now this dispute over your
donation badly reﬂect on the board’s performance, including yourself. You can already hear people
gossiping in town.

Your company’s own �?nancial issues: You hadn’t planned to reimburse your bank loan this
year — let alone in 30 days. The university is not going to feed your family, so if they don’t want
your parents’ name on the library, you could use that money to reimburse your bank instead of
seeking an alternative and more expensive solution.

WHAT YOU WILL DO?

PHASE ONE: TODAY

You will attend the fundraising strategy meeting called by the young head of the funding committee.
You will use this opportunity to confront Maria Helena. After all, it is only normal that Juan, the
funding committee’s head, be involved in this discussion. Further, the issues around your own
donation are bound to have an impact of the fundraising strategy. You will not take “no�? for an
answer and challenge Maria Helena’s leadership skills. You will threaten to sue her if needed.

PHASE TWO: A WEEK LATER

You feel you have painted yourself into a corner and are glad that Juan convinced you to agree
to retain the services of a professional mediator. You don’t want to go to court. This would mean
additional expenses and could lead to adverse publicity. Besides, you would never get your money
back in time to repay your bank loan. You will be more reserved and open to �?nding some workable
solutions around the term of your donation and the university’s future, but you want your parents’
names to be publicly recognized.

150 VOLUME 3 Annex 7 : Role Play — Max Henry University
A N N EX 7 : R OL E PL AY — M AX HENRY UNIVERSITY
The Optimistic Board Director: Juan Fernandez
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

WHO YOU ARE

You are 35, well-educated, and a talented professional fundraiser.

You were appointed six months ago to the university’s board. This is your �?rst experience as a board
director. You look forward to making this a success. You hope to serve soon on the board of some
listed companies.

You are an optimist by nature and believe the university’s funding dif�?culties can be overcome with
your leadership.

You were just married, enjoy entertaining people, and are generally a happy person. Some of your
friends call you ambitious and think you are too eager to please others.

WHAT YOU THINK

You were not involved in the discussions that led to Michael’s donation. To you, this all sounds very
unprofessional regardless of who is right or wrong. Most likely, this was just a misunderstanding
that could have been straightened out immediately at the onset. Things really need to change in
the university’s administration and processes.

You are amazed at how immature Maria Helena and Michael are behaving, and you are starting to
worry about the direction that this dispute is taking. If this incident becomes public, your fundraising
objectives will be much more dif�?cult to achieve. Moreover, people may think the fault was yours
since you are heading the fundraising committee. No one will notice of the fact that you were not
involved in this donation agreement.

You personally like Maria Helena. She is an incarnation of old world class, and you are thankful for
her supporting your board appointment.

Michael is not really your type, but you think he brings a pragmatic approach to the board
deliberations, which the university needs.

You think you may �?nd a way to talk sense into both Maria Helena and Michael and then resolve
the dispute. But, you are not sure how to do so.

WHAT’S AT STAKE?

Your reputation as a board member and head of the funding committee: If this dispute is
not resolved, it could tarnish your reputation and jeopardize your ambitious plans.

The success of your fundraising strategy: You think that the university could raise more money
but you need the board’s support. Maria Helena and Michel need must act in the university’s best
interest instead of �?ghting each other.

University’s future: The university needs to rethink itself and improve its image. You look forward
to doing your part of the job, but the rest of the board also needs to wake up to reality.

Annex 7 : Role Play — Max Henry University VOLUME 3 151
ROLE PLAY — M AX HENRY U N IVER SITY : A N N EX 7

The Optimistic Board Director: Juan Fernandez
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

WHAT YOU WILL DO?

PHASE ONE: TODAY

You will warmly welcome Maria Helena and Michael to the meeting you call to discuss the university’s
fundraising strategy. If they approve, you will present the strategy at the next board meeting. You
want to use this opportunity to help iron out issues between Maria Helena and Michael over his
donation. If they don’t manage to see eye-to-eye on this donation matter, you want to have them
at least agree to meeting with a professional mediator before seriously considering litigation. You
will show empathy but remind them that the university’s best interest is at stake.

PHASE TWO: A WEEK LATER

You are relieved that a mediator has made himself available on short notice to meet with Maria
Helena and Michael. The dispute over the donation runs deeper then you thought; it has brought
out many other issues between them. If a solution cannot be found with the mediator, you are
considering quitting yourself rather than being exposed to a lawsuit. Maria Helena and Michael
have both agreed that they want you to be part of today’s meeting — at least they like and respect
you. You will take the back seat at this meeting, but can help �?nd creative win-win solution and
positively reinforce any steps taken in the right direction.

152 VOLUME 3 Annex 7 : Role Play — Max Henry University
A N N EX 7 : R OL E PL AY — M AX HENRY UNIVERSITY
The Seasoned Mediator: Alfonso Lopez
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

WHO YOU ARE

You are 58 and one of the most experienced mediators of the National Mediation Center. You have
mediated nearly 2,000 dispute,. most of them linked to construction and insurance issues.

You believe disputes are part of life and, if channeled properly, they can lead to amazing positive
developments.

You have written much about ADR and its bene�?ts, and you are looking forward to doing some
dispute resolution work with the Max Henry University board.

You are not a corporate governance expert and have never sat on a board, although you would �?nd
that experience tempting. Regardless, helping resolve disputes — any dispute for that matter —
requires good mediation skills and some common sense.

You do not have any conﬂicts of interest with the university, Maria Helena, Michael, or any of the
other board directors. You hadn’t heard about Juan before he contacted the Mediation Center’s
secretariat for assistance.

WHAT YOU THINK

Juan briefed you on the dispute over Michael’s donation, and you brieﬂy met independently with
Marie Helena and Michael.

They both seemed quite upset at each other, but individually admitted that they did not want a
court battle.

There is some obvious room for compromise over the dispute’s terms, but this is just the tip of the
iceberg.

If these two want to get along and do constructive work together, some deeper resentments will
need to surface. Or else, even if this donation matter is resolved, they will �?nd something else to
�?ght over sooner rather than later.

Obviously, there are some tensions over the university’s leadership, �?nances, and many other issues
that need to be addressed. You would very much like to suggest a strategic board retreat, which you
or one of your colleagues would be happy to facilitate. This would allow issue to surface, prevent
disputes, and help �?nd a more effective way forward for the university and its board.

WHAT’S AT STAKE?

Resolving the dispute: A dispute can only be resolved if the parties are willing participants.
It’s their dispute and their solution. But, mediators often get blamed when discussions end in a
deadlock. You will do your best to facilitate a workable outcome to the dispute.

Annex 7 : Role Play — Max Henry University VOLUME 3 153
ROLE PLAY — M AX HENRY U N IVER SITY : A N N EX 7

The Seasoned Mediator: Alfonso Lopez
C O N F I D E N T I A L R O L E P L AY I N S T R U C T I O N S

National Mediation Center’s and your own exposure: This case is good exposure for the
center; it could help broaden the scope of potential clients. You are personally very interested in
making a name for yourself as a mediator specialized in boardroom disputes.

WHAT YOU WILL DO?

PHASE ONE: TODAY

For the purpose of this exercise, you will be allowed to listen in on the meeting Juan has called with
Maria Helena and Michael. You can also look at their con�?dential role playing notes.

PHASE TWO: A WEEK LATER

You will welcome Maria Helena, Michael, and Juan. You will state the meeting’s purpose and ask
the parties to express their commitment to �?nding a workable solution to their dispute. You will
ask Maria Helena and Michael to present their positions without interrupting each other. You will
then move to building a common understanding of the overall situation including: the university’s
funding dif�?culties; the need to modernize the facilities; and, the necessity of Web based training
programs. Through this discussion you will help build common ground on their understanding of
the university’s best interest. You will encourage Maria Helena to acknowledge that — considering
the university’s situation — she is most grateful for Michael’s donation. You could then explore
with Michael if he would be willing to have his parents acknowledged in any other way than having
the library named after them. You can ask Juan for ideas and invite Maria Helena to make some
suggestions.

If time allows, you could help Maria Helena, Michael, and Juan think about how they could more
effectively address the issues, which the university is confronted with. If there is appetite for
constructive work, suggest organizing a board retreat.

154 VOLUME 3 Annex 7 : Role Play — Max Henry University
A N N EX 8 : C A SE STU D Y EXERCISE —AGROM ASH OSJC
Agromash OSJC
A Corporate Governance Dispute
Case Study Excercise

SUMMARY > This case explores a dispute between a
group of shareholders and the management board
of a partially privatized company, Agromash OJSC,
over governance practices. Led by the company’s
former CEO, dissident shareholders try to convene
an extraordinary shareholder meeting to approve
an anti-crisis program and reelect the management
board and its chairman. The management board
rejects the request because the shareholders do
not collectively meet the 10% minimum share
voting rights threshold. After a second unsuccessful
attempt to call an extraordinary meeting the
case is publicized in the media. Management
�?les a complaint with the local prosecutor while
the dissident shareholders �?le a lawsuit. The
management board and dissident shareholders
eventually agree to mediation while the case is
pending in court. In this exercise, participants
will consider the respective merits and possible
outcomes of court litigation and mediation.

Annex 8 : Case Study Discussion — Agromash OSJC VOLUME 3 155
CASE STUDY EXERCISE —AGR OM A SH OSJ C : A N N EX 8

156 VOLUME 3 Annex 8 : Case Study Discussion — Agromash OSJC
CASE STUDY OVERVIEW : AGROMASH OSJC

A N N EX 8 : C A SE STU D Y EXERCISE —AGROM ASH OSJC
OBJEC TIVES

Understand and discuss a corporate governance dispute between the board and a group of
shareholders collectively controlling a minority share of total votes.

Understand and explain the potential bene�?ts and limitations of mediation and litigation.

THE EXERCISE

Allow 50 minutes for this exercise:

50 MINUTES 10 minutes to read the case

15 minutes to discuss the case

15 minutes to compare the potential bene�?ts and limits of mediation and litigation

10 minutes for the de-brie�?ng

This case study exercise should be conducted as one continuous session.

This case may be used for training board directors and dispute resolution professionals.

FOR GUIDANCE ON CORPORATE GOVERNANCE
DISPUTE CASE STUDY DISCUSSIONS, SEE VOLUME
3 ANNEX 2.

THE COMPANY

Agromash OJSC (Agromash) was created through the country’s privatization program in 1995. It
manufactures small-size farming tractors, towing equipment, and other implements. As required
by the country’s company law, Agromash has a two-tier board structure.

As a result of the country’s voucher privatization program, the company’s ownership is widely disbursed
but the company is not actively traded. The government (State Property Fund) owns 29% of the
company, the work collective (427 employees) 69%, and other individuals and legal entities 2%.

Agromash faces major �?nancial problems as two other companies begin operations in the country.
It is having dif�?culties raising capital to �?nance a modernization program and become more
competitive.

Agromash’s former CEO, Ivan Petrovich Zubitsky, was ousted after the privatization and replaced
by Nikolay Vasilyevitch Rostotsky. Ivan Zubtsky remained a shareholder and was appointed Head of
the Foreign Relations Department of the Region’s Administration.

Annex 8 : Case Study Discussion — Agromash OSJC VOLUME 3 157
CASE STUDY EXERCISE —AGR OM A SH OSJ C : A N N EX 8

THE CONTEX T

September 27, 2004. A group of shareholders, cumulatively holding 10.6% of total votes, submitted
a request to convene an extraordinary general shareholders meeting (GSM) with the following
agenda:

(1) Reelection of the management board and the management board’s chairman

(2) Approval of the anti-crisis program

Their request’s justi�?cations included: critical �?nancial and economic position of the joint-stock
company; absence of a clear turn-around program; and, dilution of Agromash OJSC’s assets. The
request was addressed to the region’s State Administration, the State Property Fund, management,
and the board directors; however, the request was sent only to the regional Administration.
The following morning, the Oblast Administration delivered the request to the CEO against his
signature.

September 29, 2004. The management board reviewed the shareholders’ request and decided to
verify authenticity of the shareholders’ signatures. A commission was formed to test the signatures’
accuracy by checking them against the shareholders’ registry and polling the shareholders. The
commission established that: shareholders controlling 0.9% of the vote had not signed the request
and that their signatures had been forged; and, shareholders controlling 0.7% of vote, gave
up their claim in writing for a variety of reasons (e.g., “did not understand implications of their
actions,�?“changed their mind�?).

October 15, 2004. Following the veri�?cation procedure, management decided to turn down the
shareholders’ request because: (1) it had been signed by an insuf�?cient number of shareholders
(possessing 9% instead of 10% of votes); (2) in August 2004, at a public board meeting, management
already reported on its performance results for the �?rst six months of 2004; and, (3) the regular GSM
is scheduled for �?rst quarter of 2005, subject to clause 8.2.1. of the company’s statute.

November 12, 2004. Dissident shareholders reapplied to management with the request, signed by
shareholders controlling 11.2% of the votes.

November 23, 2004. At their own discretion, this group of shareholders published in a local
newspaper a noti�?cation of an extraordinary GSM. The meeting’s agenda included: management’s
report on Agromash OJSC’s �?nancial and economic standing and on Agromash OJSC assets
divestiture transactions, and, elections of all management bodies.

November 26, 2004. Management published in the media a noti�?cation to convene a GSM on
March 22, 2005 with the following agenda: CEO’s report on Agromash OJSC’s operational results
for the reporting period; board report on performance results for the reporting period, and,
approval of the annual report and �?nancials.

In parallel, management �?led with the local prosecutor’s of�?ce a complaint concerning the illegal
actions of the group of shareholders. The shareholders �?led a lawsuit with a local court, which
scheduled the �?rst hearing for February 5, 2005. In an effort to manage the conﬂict, management
suggested

Mediation will be attended by: Ivan Petrovich Zubitsky, Agromash’s OSJC, the former CEO, and
currently the head of the Foreign Relations Department in the region’s state Administration. (He will
be representing the shareholders who initiated the meeting.); and, Nikolay Vasilyevich Rostotsky,
the incumbent CEO of Agromash OJSC.

158 VOLUME 3 Annex 8 : Case Study Discussion — Agromash OSJC
THE TASK

A N N EX 8 : C A SE STU D Y EXERCISE —AGROM ASH OSJC
Split participants into two groups:

Group 1 will review the merits of the dispute using the courts and the likely outcome

Group 2 will review the merits of mediation and the likely outcome

Participants may use the following table for guidance:

AGROMASH OJSC: BENEFITS AND LIKELY OUTCOMES OF COURT LITIGATION
AND MEDIATION

COURT MEDIATION

Plaintiff’s interest

Defendant’s interest

Possible decision with regard
to plaintiff

Possible decision with regard
to defendant

Further actions of the plaintiff

Further actions of the
defendant

SOURCE: Adapted from IFC Europe and Central Asia Department - Corporate Governance Unit.

Annex 8 : Case Study Discussion — Agromash OSJC VOLUME 3 159
ANNEX 9
C OR PO R AT E G O VE RN A N CE R EADING GUIDE FOR DISPUTE RESOLUTION EXPERTS : A N N EX 9

CORPORATE GOVERNANCE READING GUIDE McCahery, J. and E. Vermeulen. Corporate Governance
FOR DISPUTE RESOLUTION EXPERTS of Non-Listed Companies. Oxford: Oxford University
Press, 2008.
Alkhafaji, A. A Stakeholder Approach to Corporate
Governance. New York: Quorum Books, 1998. Monks, M. G. and N. Minow. Corporate Governance.
London: Blackwell Publishing, 2004.
American Bar Association, Committee on Corporate
Laws, Corporate Director’s Guidebook. Fifth Edition. Morck, R. K. A History of Corporate Governance
Washington, D.C.: ABA, 2007. around the World: Family Business Groups to Professional
Managers. Chicago: University of Chicago Press, 2005.
Bain, N. The Effective Director: Building Individual and
O’Brien, J., ed. Governing the Corporation. Regulation
Board Success. London: Institute of Directors, 2008.
and Corporate Governance in an Age of Scandal and
Bainbridge, S. The New Corporate Governance in Global Markets. West Sussex: John Wiley & Sons,
Theory and Practice. New York: Oxford University 2005.
Press, 2008.
Organization for Economic Cooperation and
Cadbury, Sir Adrian. Family Firms and Their Development. Conclusions and Emerging Good Practices
Governance: Creating Tomorrow’s Company from to Enhance Implementation of the Principles. Paris:
Today’s. London: Egon Zehnder International, 2000. OECD, February 2010. Available at: http://www.oecd.
Available at: http://www.eiodqa.eiod.org/%5CUploade org/dataoecd/53/62/44679170.pdf.
dPdfFiles%5Cfamily_�?rms_cadbury.pdf. ________________________________. Corporate
Colley, J., J. Doyle, W. Stettinius, and G. Logan. Governance and the Financial Crisis: Key Findings and
Main Messages. Paris: OECD, June 2009. Available at:
Corporate Governance. The McGraw-Hill Executive
http://www.oecd.org/dataoecd/3/10/43056196.pdf.
MBA Series. New York: McGraw-Hill, 2003.
________________________________. Principles of
International Finance Corporation. Corporate
Corporate Governance. Paris: OECD, 2004. Available
Governance Success Stories. Washington, D.C.: IFC,
at: http://www.oecd.org/dataoecd/32/18/31557724.
2010. Available at: http://www.ifc.org/ifcext/mena.nsf/
pdf.
AttachmentsByTitle/CGSuccessStories/$FILE/Corpor
ate+Governance+Success+Stories.pdf. Solomon, J. Corporate Governance and Accountability.
Hoboken, N.J.: John Wiley & Sons, 2007.
________________________________. IFC Family
Business Governance Handbook. Washington, D.C.: Varallo, Gregory V., Daniel A. Dreisbach, and Blake
IFC, 2008. Available at: http://www.ifc.org/ifcext/ Rohrbacher. Fundamentals of Corporate Governance:
corporategovernance.nsf/AttachmentsByTitle/ A Guide for Directors and Corporate Counsel. Second
Family+Business_Second_Edition_English+/$FILE/ Edition. Washington, D.C.: ABA, 2009.
Englilsh_Family_Business_Final_2008.pdf. Ward, John. Creating Effective Boards for Private
________________________________. Practical Enterprises. Marietta, Ga.: Family Enterprise
Publishers, 1991.
Guide to Corporate Governance: Experiences from the
Latin American Companies Circle. Washington, D.C.: Zall, Ronald I. The Board of Directors in a Family-
IFC, September 2009. Available at: http://www.ifc.org/ Owned Business. Director’s Handbook Series.
ifcext/corporategovernance.nsf/Content/C33DDE650 Washington, D.C.: National Association of Corporate
E2B859E852576250066191B?OpenDocument. Directors, 2004.

160 VOLUME 3 Annex 9 : Corporate Governance Reading Guide for Dispute Resolution Experts
A N N EX 9 : C OR POR ATE G OVERNANCE READING GUIDE FOR D ISP U TE R ES OLU T ION EX PERTS
USEFUL WEBSITES
Berlin Center of Corporate Governance (BCCG)
www.bccg.tu-berlin.de

Brazilian Center for Corporate Governance (IBGC)
www.ibgc.org.br

Centre for International Private Entreprise
www.cipe.org

Egyptian Institute of Directors
www.EIOD.org

European Corporate Governance Institute
www.ecgi.org

Global Corporate Governance Forum
www.gcgf.org

Hawkamah
www.Hawkamah.org

International Chamber of Commerce
www.iccwbo.org

International Financial Corporation
www.ifc.org

International Corporate Governance Network
http://www.icgn.org

OECD - Corporate Governance
www.oecd.org

The Corporate Library
www.thecorporatelibrary.com

The Encyclopedia About Corporate Governance
www.encycogov.com

World Bank
www.worldbank.org

Annex 9 : Corporate Governance Reading Guide for Dispute Resolution Experts VOLUME 3 161