Hollinger International and Conrad Black: The Corporate Governance Conundrum
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Code : GOV0015
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Region : USA |
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Introduction: In the year 2003, TweedyBrowneCo, aNewYork investment firm, approached the Securities Exchange Commission (SEC) to perform a corporate governance review of Hollinger International, a Chicago-based newspaper publisher. A committee, headed by Richard Breeden, former head of SEC was constituted to investigate charges on Conrad Black, the CEO of Hollinger International and his associates for violating federal rules on financial disclosures and breaching their fiduciary duties towards shareholders (Annexure I). According to SEC, Black and his associates had siphoned off $400 m from Hollinger International – an amount that was equal to 95.2% of the company’s profits between 1997 and 2003. They were charged of pocketing millions of dollars as noncompete fees3 and management fees4. Both Black and his wife, Amiel Black had used corporate donations amounting to $6.5 million from Hollinger International to boost their social standing. The board at Hollinger International had been criticized for its inactive approach towards their duties. Harsher criticismhad been hurled at Richard Perle, who was amember of Hollinger International’s executive committee who was alleged to have repeatedly breached his fiduciary duties, paving way for the Hollinger scandal to erupt. It took 14 months for the committee to submit its report butBlackwas forced to resign asCEOofHollinger International in November 2003. The trials against Black are currently on. The Economist wrote, “In addition to whatever punishment handed out, Black will have the misery of watching other people influencing his papers. |
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