62893 v4 TOOLK IT 4 User Guide RESOLVING CORPORATE GOVERNANCE DISPUTES © 2011. International Finance Corporation 2121 Pennsylvania Avenue, NW | Washington, DC 20433 All rights reserved. The findings, interpretations, and conclusions expressed in this publication should not be attributed in any manner to the International Finance Corporation, to its affiliated organizations, or to members of its board of Executive Directors or the countries they represent. The International Finance Corporation does not guarantee the data included in this publication and accepts no responsibility for any consequence of their use. The material in this work is protected by copyright. Copying and/or transmitting portions or all of this work may be a violation of applicable law. The International Finance Corporation encourages dissemination of its work and hereby grants permission to the user of this work to copy portions for their personal, noncommercial use, without any right to resell, redistribute, or create derivative works there from. Any other copying or use of this work requires the express written permission of the International Finance Corporation. For permission to photocopy or reprint, please send a request with complete information to: The International Finance Corporation c/o the World Bank Permissions Desk Office of the Publisher 1818 H Street NW Washington, DC 20433 All queries on rights and licenses including subsidiary rights should be addressed to: The International Finance Corporation c/o the Office of the Publisher World Bank 1818 H Street, NW Washington, DC 20433 Fax: +1 202-522-2422 TOOLKIT 4 Resolving Corporate Governance Disputes USER GUIDE USER GUIDE RESOLVING CORPORATE GOVERNANCE DISPUTES FOREWORD provides users with options. Policymakers, private sector institutions, and board directors are left to choose their Disputes over the governance of a corporation are own approaches to mitigate disputes in ways that foster inevitable. When disputes erupt into debilitating responsible business conduct and enhance a healthy, confrontations or end up as highly publicized court productive investment climate. cases, they can harm the company’s reputation, handicap its operations, paralyze its board from making To be sure, any policy that favors alternatives to critical decisions, and lead to a reduction in share price traditional litigation must be guided by the rule of law that potentially hastens the corporation’s demise. and the relevant jurisdiction’s judicial system. Case studies show that alternative dispute resolution Many people have contributed to this toolkit, and the (ADR) processes and techniques can help prevent or Forum is grateful for their work and commitment. settle corporate governance-related disputes in ways that Marie-Laurence Guy, a senior projects officer with the are more efficient and effective than the more adversarial Forum, led this effort, building upon the expertise she process of court litigation. The Global Corporate gained in co-writing our FOCUS publication Mediating Governance Forum developed this toolkit to broaden the Corporate Governance Conflicts and Disputes. Her work use of ADR by boards to effectively handle internal and is inspired by her commitment to finding innovative external disputes. The toolkit draws on processes and ways of ensuring the productive capacity of the business techniques that help better align “interests” rather than environment in countries challenged by an ineffective engage in more contentious litigation of incompatible judicial system. “positions.” Others in the core team deserve thanks and appreciation: This toolkit builds on the Forum’s earlier work to build James Spellman who relentlessly edited and researched capacity in countries and companies for understanding, this toolkit; Christopher Honeyman; Mary Jo Larson; developing, and applying good corporate governance Jon Masters; Karl Mackie; Anne Molyneux; and, Alan principles and practices. Providing the tools that can Rudnick. Many experts, practitioners, and the Forum’s help institutions build capacity and promote reforms Private Sector Advisory Group members are also to that inform board competencies and best practices is the be commended for their extensive contributions. It is source of our success and impact. through their participation that the toolkit truly reflects global experiences and innovative thinking. Last but not The guidance and observations in this toolkit draw on least, the Forum would like to acknowledge the excellent discussions and materials provided by a wide range of work Mary Beth Ramsey accomplished in designing corporate governance and ADR experts, practitioners, and laying out this toolkit. and policymakers. Experience with how best to design, implement, and evaluate corporate governance-related dispute resolution is still at an early stage. There is little empirical data about the use of alternatives to litigation in corporate governance disputes and the role that ADR can play in improving or enforcing corporate governance practices. The Forum recognizes that there are many valid Philip Armstrong approaches to using ADR mechanisms. This toolkit Head, Global Corporate Governance Forum Resolving Corporate Governance Disputes USER GUIDE 1 ABOUT THE TOOLKIT What is the purpose of this toolkit? Although much has been achieved in raising awareness and implementing good corporate governance rules and procedures, disputes affecting the governance of corporations. Little has been done to develop alternative approaches for resolving disputes. Left unresolved, these disputes can paralyze the board, harm the company’s performance, and deter investors. Implementing effective dispute resolution processes for preventing and resolving corporate governance disputes is thus essential if the company is to succeed over the long term. Corporate governance disputes do not always lend themselves to court litigation. Yet even when they do, traditional adjudication is typically not the best way to resolve such disputes. Court proceedings are generally slow and costly, and they antagonize the parties. Moreover, in several developing countries and emerging markets, investors distrust the judiciary system and enforcement remains weak. This toolkit explores how ADR processes and techniques that have been used successfully in dealing with commercial and labor disputes can help resolve and prevent corporate governance disputes. Key to understanding this toolkit is the distinction between internal and external corporate governance disputes. Internal governance disputes mainly take place within the boardroom while external governance disputes typically involve shareholders but may also include other stakeholders. Constructive negotiation, mediation, and, in some cases, arbitration constitute established dispute resolution processes that can be applied usefully to external corporate governance disputes. To prevent and resolve internal disputes, directors may find it more effective and more appropriate to borrow the techniques used in ADR processes before turning to more formal approaches that would require involving a third party. Applying ADR processes and techniques to corporate governance disputes provides for innovative approaches to implement and enforce good corporate governance practices in the best interests of the company, shareholders, and stakeholders. 2 USER GUIDE Resolving Corporate Governance Disputes Who will find this toolkit useful? Corporate Governance and ADR institutions and experts This toolkit is targeted at those organizations and institutions that are helping companies implement good corporate governance practices and/or seeking ways to manage and prevent disputes. The following constituencies will especially find this toolkit useful in helping them to better understand corporate governance disputes and offer training, advisory, and mediation services that can help companies avoid the time, costs, and risks associated with litigation: Institutes of directors and corporate governance centers Corporate law firms and corporate governance consulting firms Mediation and arbitration centers Universities, law schools, and research centers Board members, senior executives, corporate secretaries, and company lawyers Listed and non-listed companies — including family firms, banks, and state-owned enterprises — are the ultimate beneficiaries of this toolkit. Board members, senior executives, corporate secretaries, and company lawyers are encouraged to consult this toolkit to learn about and then implement new approaches to prevent and resolve corporate governance disputes. Policymakers, regulators, and judges This toolkit will interest policymakers who are concerned with enforcing good corporate governance practices and building investor confidence. It will also appeal to those who are designing good governance standards and regulations. Through this toolkit, the judiciary can also learn more about corporate governance dispute resolution and understand the benefits of ADR mechanisms — including formal mediation. This is especially important for jurisdictions where court-referred/annexed mediation has been institutionalized. Development agencies and technical assistance programs Although this toolkit has been designed as a self-help tool, the support of development agencies may be required to implement best practices and provide guidance. Therefore, this toolkit should also be used as a knowledge management product through multilateral and bilateral funded corporate governance reform and ADR programs in developing and emerging market countries. Resolving Corporate Governance Disputes USER GUIDE 3 CONTENTS What is in this toolkit? This toolkit provides practical guidance on how consensus-based alternatives to adjudication can help prevent, resolve, and reduce the negative impact of corporate governance disputes and, consequently, contribute to improving corporate governance practices, strengthening investor confidence, and supporting business continuity. Consensus-based alternatives The toolkit breaks down the common types of to adjudication can help governance disputes and provides techniques for prevent, resolve, and reduce effective resolution. It also offers practical suggestions and training resources for corporate governance the negative impact of institutions and dispute resolution experts who wish to corporate governance disputes. offer corporate governance dispute resolution services. This toolkit is divided into three volumes. The first explores the rationale for applying ADR mechanisms to corporate governance disputes. The second focuses on the implementation and use of corporate governance dispute resolution mechanisms and services. The third reviews the skills required for effectively resolving corporate governance disputes and addresses the training needs of both directors and dispute resolution professionals. QUOTE “Countries seeking to create a capital market (and companies seeking to attract local or global capital) must develop a framework that assures investors of two things: first, the assets they provide will be protected and, second, the disputes related to the company’s governance can be addressed effectively.” CHRISTIAN STRENGER PSAG DEPUTY CHAIRMAN MEMBER OF THE GERMAN CORPORATE GOVERNANCE COMMISSION DIRECTOR, DWS INVESTMENT ADVISORY GROUP 4 USER GUIDE Resolving Corporate Governance Disputes Volume 1 : Rationale Module 1 | What Are Corporate Governance Disputes? DISPUTES AFFECTING CORPORATE AUTHORITY ................................................................ 1 Defining Corporate Governance Disputes ...................................................................... 1 Differentiating Corporate Governance Disputes ............................................................. 2 DISPUTES AFFECTING ALL TYPES OF COMPANIES .............................................................. 5 Small Companies ........................................................................................................... 5 Joint Venture Companies ............................................................................................... 7 Family Firms ................................................................................................................... 7 State-Owned Companies ............................................................................................... 9 Listed Companies ........................................................................................................... 9 DISPUTES AFFECTING INTERNAL AND EXTERNAL CONSTITUENCIES ................................ 11 Internal Disputes .......................................................................................................... 11 External Disputes.......................................................................................................... 18 Module 2 | Why Care About Corporate Governance Disputes? DISPUTES PUTTING THE COMPANY AT RISK .................................................................... 25 Impact of Internal Corporate Governance Disputes ...................................................... 30 Impact of External Corporate Governance Disputes ...................................................... 32 DISPUTES CALLING FOR OUT-OF-COURT RESOLUTION .................................................... 34 Cost of Court Litigation ................................................................................................ 34 Limits of Court Litigation .............................................................................................. 39 Module 3 | How can ADR Mechanisms Help? MORE EFFECTIVE DISPUTE RESOLUTION .......................................................................... 41 ADR Benefits ................................................................................................................ 41 Appeal of ADR ............................................................................................................ 43 Use of ADR .................................................................................................................. 44 MORE FLEXIBLE DISPUTE RESOLUTION............................................................................. 48 Negotiation .................................................................................................................. 48 Mediation .................................................................................................................... 52 Arbitration ................................................................................................................... 59 Annexes...................................................................................................................... 63 Resolving Corporate Governance Disputes USER GUIDE 5 CONTENTS Volume 2 : Implementation Module 1 | What Should be the Role of the Board? DEVELOPING A CORPORATE GOVERNANCE DISPUTE RESOLUTION STRATEGY...................1 Planning Ahead ..............................................................................................................1 Assessing Internal and External Corporate Governance Disputes .....................................5 Anticipating Potential Internal and External Corporate Governance Disputes ...................7 Adopting a Corporate Governance Dispute Resolution Strategy ....................................10 Deciding Who Will Manage the Corporate Governance Dispute Resolution Process ......12 Identifying the Appropriate Internal or External ‘Peacemaker’ .......................................13 Incorporating Dispute Resolution Policies into Corporate Documents ............................20 Assessing the Effectiveness of the Dispute Resolution Process .......................................26 Being Prepared For Litigation if Alternative Dispute Resolution Processes Fail ................26 PREVENTING AND MANAGING BOARDROOM DISPUTES ..................................................28 Encouraging Collegiality and Civility ..............................................................................28 Clarifying Management and Board Roles.......................................................................30 Establishing Orderly Board Processes .............................................................................31 Ensuring the Proper Flow of Information .......................................................................33 Allowing for Discussion, Debate, and Deliberation ........................................................36 Improving Communications ..........................................................................................39 Applying Dispute Resolution Techniques .......................................................................39 Stepping Out of the Boardroom ....................................................................................41 Module 2 | How to Mainstream Corporate Governance Dispute Resolution? REVIEWING THE CORPORATE GOVERNANCE DISPUTE RESOLUTION ENVIRONMENT ........45 Considering Dispute Resolution Traditions .....................................................................48 Assessing the Dispute Resolution Legal Environment .....................................................49 Looking up International ADR Standards and Agreements ............................................52 STRENGTHENING THE CORPORATE GOVERNANCE DISPUTE RESOLUTION FRAMEWORK .. 53 Introducing Laws and Regulations .................................................................................53 Introducing Administrative Rulemaking and Listing Requirements .................................54 Introducing ADR through Codes of Best Practice ...........................................................57 SUPPORTING THE IMPLEMENTATION OF CORPORATE GOVERNANCE DISPUTE RESOLUTION .......................................................................................................59 Raising Awareness ........................................................................................................60 Fostering Court Annexed Mediation ..............................................................................64 Module 3 | Who Can Provide Corporate Governance Dispute Resolution Services? SEEKING THIRD-PARTY DISPUTE RESOLUTION EXPERTISE..................................................69 Corporate Law Firms and Consultants ...........................................................................73 Corporate Governance Institutes and Directors Associations..........................................77 Mediation Centers and ADR Firms .................................................................................77 Universities and Business Schools ..................................................................................85 6 USER GUIDE Resolving Corporate Governance Disputes DEVELOPING CORPORATE GOVERNANCE DISPUTE RESOLUTION SERVICES......................86 Research and Planning Phase ........................................................................................86 Implementation Phase...................................................................................................90 Annexes .................................................................................................................... 91 Volume 3 : Training Module 1 | What Skills Are Needed for Corporate Governance Dispute Resolution? DIRECTOR DISPUTE RESOLUTION SKIILS ..............................................................................1 Conflict Management Styles............................................................................................2 Dispute Resolution Skills and Expertise ............................................................................6 THIRD-PARTY DISPUTE RESOLUTION SKILLS ......................................................................16 Meditation Processes and Styles ....................................................................................22 Ethics, Credibility, and Trustworthiness ..........................................................................26 Dispute Resolution Skills and Expertise ..........................................................................28 Corporate Governance Knowledge and Exposure..........................................................31 Module 2 | Dispute Resolution Training for Directors COURSE OUTLINE .............................................................................................................37 TRAINING NOTES ..............................................................................................................38 TABLE OF CONTENTS ........................................................................................................43 POWERPOINT PRESENTATION ...........................................................................................44 Module 3 | Corporate Governance Training for Dispute Resolution Experts COURSE OUTLINE .............................................................................................................63 TRAINING NOTES ..............................................................................................................64 TABLE OF CONTENTS ........................................................................................................69 POWERPOINT PRESENTATION ...........................................................................................70 Annexes .................................................................................................................... 89 Resolving Corporate Governance Disputes USER GUIDE 7 CONTENTS ANNEXES VOLUME 1 – RATIONALE 7. SAMPLE MEDIATION LAWS FROM AROUND THE WORLD ...........................................................122 1. FURTHER READING ...................................................63 8. SECP – DISPUTE SETTLEMENT MECHANISM ...........124 2. SAMPLE BOARD STRUCTURES AND POTENTIAL FOR DISPUTES ..........................................................65 9. AMMAN STOCK EXCHANGE DIRECTIVES FOR DISPUTE RESOLUTION.............................................125 3. EXCERPTS FROM DIRECTORS’ RESIGNATION LETTERS ...................................................................66 10. BSE ARBITRATION COURT.......................................129 4. CATEGORIES OF CORPORATE GOVERNANCE 11. BM&FBOVESPA MARKET ARBITRATION PANEL .......133 RELATED DISPUTES ...................................................71 12. KING REPORT ON GOVERNANCE FOR 5. EXAMPLE OF DISSIDENT SHAREHOLDER LETTER SOUTH AFRICA – 2009 ...........................................137 TO THE BOARD ........................................................72 13. FACTORS TO GUIDE SELECTING ADR SERVICES......140 6. REVIEW OF SELECTED ADR PROCESSES ....................74 14. AGREEING ON THE TERMS OF MEDIATION .............141 7. TABLE COMPARING NEGOTIATION, LITIGATION, MEDIATION ..............................................................77 VOLUME 3 – TRAINING 8. TYPICAL STEPS IN CONSTRUCTIVE NEGOTIATION.....78 1. BASIC ADULT LEARNING GUIDELINES .......................89 9. SAMPLE DEFINITIONS OF MEDIATION FROM AROUND THE WORLD ..............................................79 2. STANDARD GUIDANCE FOR CORPORATE GOVERNANCE DISPUTE CASE STUDY 10. LINKS TO SAMPLE MEDIATION RULES AND DISCUSSIONS ...........................................................94 PROCEDURES ...........................................................83 3. ROLE PLAY TECHNIQUES ..........................................95 11. TYPICAL STEPS IN MEDIATION ..................................86 4. ROLE PLAY – KARDAL FASHIONS LTD .......................97 12. TYPICAL STEPS IN ARBITRATION..............................87 5. ROLE PLAY – NEONSPARK CORP.............................113 VOLUME 2 – IMPLEMENTATION 6. ROLE PLAY – TECHNO LTD ......................................127 1. ESSENTIALS OF A SHAREHOLDER AGREEMENT .........97 7. ROLE PLAY – MAX HENRY UNIVERSITY ...................141 2. SAMPLE MEDIATION AND DISPUTE RESOLUTION 8. CASE STUDY EXERCISE – AGROMASH OSJC ..........155 CLAUSES FROM AROUND THE WORLD ....................99 9. CORPORATE GOVERNANCE READING GUIDE 3. IMPLICATIONS OF E-MAIL COMMUNICATIONS FOR DISPUTE RESOLUTION EXPERTS .......................160 FOR NEGOTIATION .................................................104 4. SAMPLE BOARD EVALUATION TOOL ......................108 5. SAMPLE DIRECTOR SELF-EVALUATION TOOL ..........111 6. SAMPLE SELF-ASSESSMENT QUESTIONNAIRE FOR BANK DIRECTORS ...........................................114 8 USER GUIDE Resolving Corporate Governance Disputes COUNTRY INDEX Albania: Vol. 1 P. 79; Vol. 2 P. 122; Germany: Vol. 1 P. 2; Vol. 1 P. 18; Russia: Vol. 1 P. 13; Vol. 1 P. 21; Vol. 1 P. 72-73; Vol. 2 P. 22; Vol. 2 Vol. 2 P. 45; Argentina: Vol. 2 P. 62; Vol. 2 P. 122; P. 51; Vol. 2 P. 66; Vol. 2 P. 106; Serbia: Vol. 1 P. 81; Vol. 2 P. 123; Australia: Vol. 1 P. 28-29; Vol. 2 P. 22; Vol. 3 P. 45; Vol. 2 P. 25; Vol. 2 P. 49; Vol. 2 P. 51; Singapore: Vol. 1 P. 84; Vol. 2 P. 51; Ghana: Vol. 2 P. 48; Vol. 2 P. 122; Vol. 2 P. 102; Vol. 2 P. 123; Hong Kong, China: Vol. 2 P. 67; Austria: Vol. 2 P. 51; Vol. 2 P. 122; Slovakia: Vol. 1 P. 81; Vol. 2 P. 123; Hungary: Vol. 1 P. 80; Vol. 2 P. 122; Belarus: Vol. 2 P. 122; Slovenia: Vol. 1 P. 2; Vol. 1 P. 34; Iceland: Vol. 1 P. 33; Belgium: Vol. 1 P. 84; Vol. 2 P. 51; South Africa: Vol. 1 P. 60; Vol. 2 P. 58; Vol. 2 P. 99; Vol. 2 A. P. 26; India: Vol. 1 P. 6-7; Vol. 1 P. 35; Vol. 1 Vol. 2 P. 64; Vol. 2 P. 77; Vol. 2 P. 94; P. 37; Vol. 1 P. 80; Vol. 2 P. 48; Vol. 2 Vol. 2 P. 102-103; Vol. 2 P. 107-139; Bosnia and Herzegovina: Vol. 1 P. 56; Vol. 2 P. 67; Vol. 2 P. 74; P. 43; Vol. 1 P. 53; Vol. 1 P. 79; Vol. 2 Sweden: Vol. 1 P. 83; P. 122; Indonesia: Vol. 2 P. 48; Vol. 2 P. 122; Switzerland: Vol. 2 P. 49; Vol. 2 P. 51; Brazil: Vol. 1 P. 2; Vol. 1 P. 8; Vol. 1 Italy: Vol. 1 P. 80; Vol. 2 P. 54; Vol. 2 Tanzania: Vol. 1 P. 60; P. 79; Vol. 2 P. 15; Vol. 2 P. 45; Vol. 2 P. 79; Vol. 2 P. 123; P. 47; Vol. 2 P. 55; Vol. 2 P. 57; Vol. 2 Thailand: Vol. 2 P. 66; Jordan: Vol. 2 P. 54; Vol. 2 P. 125-128; P. 58; Vol. 2 P. 122; Vol. 2 P. 133-136; Vol. 3 P. 48; Vol. 3 P. 77; Tonga: Vol. 2 P. 62; Kenya: Vol. 1 P. 15; Vol. 1 P. 60; Bulgaria: Vol. 1 P. 9; Vol. 1 P. 20; Vol. UAE: Vol. 1 P. 10; Macedonia: Vol. 2 P. 123; 1 P. 42; Vol. 1 P. 61; Vol. 1 P. 85; Vol. 2 Uganda: Vol. 1 P. 32; Vol. 1 P. 43 P. 99; Vol. 2 P. 122; Vol. 2 P. 129-132; Malaysia: Vol. 1 P. 23; Vol. 1 P. 53; Vol. 1 P. 58; Vol. 2 P. 65; Canada: Vol. 1 P. 19; Vol. 2 P. 49; Vol. Maldives: Vol. 1 P. 34; Vol. 2 P. 67; 2 P. 51; Vol. 3 P. 45; Malta: Vol. 2 A. P. 27; Ukraine: Vol. 1 P. 38; Vol. 1 P. 39; Colombia: Vol. 1 P. 41; Vol. 2 P. 23; Vol. 1 P. 45; Vol. 1 P. 50; Vol. 2 P. 83; Mexico: Vol. 1 P. 61; Vol. 2 P. 54; Vol. 2 P. 45; Vol. 2 P. 62; Vol. 2 P. 64; United Kingdom: Vol. 1 P. 30; Vol. 1 Vol. 2 P. 80; Vol. 2 P. 122; Montenegro: Vol. 2 P. 123; P. 810; Vol. 2 P. 2; Vol. 2 P. 49; Vol. 2 Croatia: Vol. 1 P. 79; Netherlands: Vol. 2 P. 101; P. 59; Vol. 2 P. 101; Denmark: Vol. 2 P. 51; Vol. 2 P. 100; Pakistan: Vol. 1 P. 37; Vol. 1 P. 53; United States: Vol. 1 P. 10; Vol. 1 Vol. 1 P. 81; Vol. 2 P. 55; Vol. 2 P. 56; P. 11; Vol. 1 P. 12; Vol. 1 P. 13; Vol. 1 Egypt: Vol. 1 P. 79; Vol. 1 P. 84; P. 16; Vol. 1 P. 17; Vol. 1 P. 22; Vol. 1 Vol. 2 P. 124; P. 25; Vol. 1 P. 30; Vol. 1 P. 31; Vol. 1 Ecuador: Vol. 2 P. 122; Papua New Guinea: Vol. 1 P. 34; P. 31; Vol. 1 P. 37; Vol. 1 P. 41; Vol. 1 Finland: Vol. 1 P. 21; Vol. 1 P. 33; Vol. 2 P. 66-70; Vol. 1 P. 81-82; Vol. 2 P. 10; Peru: Vol. 2 P. 62; P. 15; Vol. 2 P. 66-67; Vol. 2 P. 122; Vol. 2 P. 20; Vol. 2 P. 49; Vol. 2 P. 73; Philippines: Vol. 2 P. 76; Vol. 2 P. 81; Vol. 2 P. 83; Vol. 2 P. 84; France: Vol. 2 P. 29; Vol. 2 P. 49; Vol. 2 P. 123; Vol. 3 P. 16; Vol. 3 P. 27; Vol. 2 P. 85; Romania: Vol. 1 P. 81; Vol. 2 P. 123; Resolving Corporate Governance Disputes USER GUIDE 9 TOOLS What tools does this toolkit provide? This toolkit is user-friendly. It shares worldwide experiences and existing best practices while providing new avenues for better managing corporate governance disputes. The following items will help users navigate the toolkit’s contents and tools: Module Tabs Each module is introduced by a color tab presenting the rationale and the module’s contents. Examples The toolkit includes examples and anecdotal evidence worldwide to illustrate the content and impact of corporate governance disputes and possible approaches to resolving such disputes. Quote Boxes Users can find quotes from experts and professionals that provide insights into topics. Focus Boxes Boxes containing practical and targeted information provide users with a brief overview of studies and state-of-the-art thinking. Glossary Boxes Users can consult the section for key terms used throughout the toolkit. Graphs Graphics provide users with a snapshot of existing data and visual representations to enhance conceptual understandings of the toolkit’s contents. Further Reading Volume 1 provides readings that further discuss practical and academic issues. 10 USER GUIDE Resolving Corporate Governance Disputes Cross References Each module includes cross references to the toolkit’s other modules and annexes. Users can easily locate related topics, guidelines, and documentation. Practice Boxes The use of ADR processes and techniques to help prevent and resolve corporate governance disputes is still at an early stage. Practice boxes offer users options and actions to consider in dealing better with boardroom and shareholder disputes or any other disputes, involving stakeholders challenging a company’s governance. Role Plays The toolkit’s training volume includes role plays, which can be used by organizations’ training directors and/or mediators. Participants are given situational facts and then assume roles of those involved in making a decision about the issue that divides the board. In these exercises, the participants master the content while developing leadership skills, particularly the ability to prevent or defuse potentially damaging conflicts within a corporate board. Annexes These are at the end of each volume, providing background documentation and samples that can help users with practical step-by-step approaches to implementing corporate governance dispute resolution services and practices. PowerPoint Volume 3 includes two standard Powerpoint Presentations to be used and adapted for training directors and dispute resolution experts. Resolving Corporate Governance Disputes USER GUIDE 11 CONTRIBUTORS To develop this toolkit and gather the “lessons COUNTRY Oleg Stoilov learned” and best practices from developing, CONTRIBUTORS Chairman emerging market, and developed countries, the Chamber of Commerce Forum invited representatives from mediation BANGLADESH and Industry, Stara centers, law firms, consultants, institutes of Zagora Lopa Rahman directors, and corporate governance centers Project Director (former) worldwide to share their experiences and discuss BELGIUM Bangladesh Enterprise milestones and challenges in implementing Institute Jozef Lievens corporate governance ADR. Partner BULGARIA Eubelius — Attorneys at Law Bistra Boeva The Forum would like to Member PSAG Professor University for National thank everyone who actively and World Economic BRAZIL supported this initiative Studies Leonardo Viegas Member PSAG Chairman of the including the following Education Committee Silvi Chernev Brazilian Institute of experts, practitioners, and Chairman Corporate Directors Arbitration Court, Private Sector Advisory (IBGC) Bulgarian Chamber of Commerce and Industry Member PSAG Group members for providing Zoya Gerasimova Nora Rachman materials, examples, and Chairman Chief Counsel Bulgarian Association BM&FBovespa extensive comments. for Alternative Dispute Resolution (BAADR) COLOMBIA Vassya Prokopieva Raphael Bernal Managing Partner Gutiérrez EU&BG Legal Director Consultants Center of Arbitration and Conciliation, Tsvetan Simeonov Confecamaras Deputy Chairman Bulgarian Chamber of FINLAND Commerce and Industry Olli Virtanen Simeon Semov Secretary General Head of the Legal The Finnish Association Department of Professional Bulgarian Stock Board Members Exchange (BSE) Member PSAG 12 USER GUIDE Resolving Corporate Governance Disputes GERMANY PHILIPPINES SWITZERLAND WORLD BANK GROUP Christian Strenger Atty Adelita Vergel Andre Baladi CONTRIBUTORS Deputy Chairman de Dios Chairman PSAG President and CEO International Arbitration Alejandro Alvarez Director Institute of Corporate and Dispute Resolution de la Campa DWS Investment Directors (ICD) Organization (ARICI) Private Sector Member Member PSAG Development Specialist Jesus Estanislao German Corporate WB Chairman Governance Commission UGANDA Institute of Corporate Khawar Ansari Directors (ICD) Geoffrey Kiryabwire Operations Officer GUATEMALA Member PSAG Judge IFC Michelle Secaira High Court Commercial Division Philip Armstrong Melville De Arrivillaga RUSSIA Head Lawyer Igor Belikov GCGF Arbitration and UNITED KINGDOM CEO Conciliation Center — Lada Busevac Russian Institute of Chris Pierce Chamber of Commerce Sr. Operations Officer Directors CEO (CENAC) IFC Global Governance SLOVENIA Services Ltd. Mohsin Ali Chaudhry ITALY Legal Specialist Alenka Podbevek James South Giuseppe De Palo IFC CEO Mediator Chairman of the Board Socius Training Director Hassan El Shabrawishi ADR Center S.p.A Center for Effective Consultant SOUTH AFRICA Dispute Resolution GCGF PAKISTAN (CEDR) Tony Dixon Ralitza Germanova Samina Noman Joe Tirado Director (retired) Project Coordinator Case Administrator and Partner, Head of Institute of Directors in GCGF Advocate International Arbitration Southern Africa Karachi Centre for and ADR Patricia Jungreis-Sulser Dispute Resolution Mervyn King SC Norton Rose LLP Principal Counsel Non-Executive Chairman IFC Atiqa Lateef Qazilbash Brait SA — Luxembourg UNITED STATES Associate Partner Min Li First Vice President Awanraza Law Firm Consultant Institute of Directors in James Groton Southern Africa Partner (retired) GCGF Rai Muhammad Saleh Azam Member PSAG Sutherland, Asbill & Motria Onyschuk- Managing Partner Brennan LLP Morozov Azam & Rai Law Firm Richard Ruben Principal Operations Officer Professor of Law IFC University of Missouri - Vladislava Ryabota Columbia School of Law Corporate Governance Officer IFC Resolving Corporate Governance Disputes USER GUIDE 13 AUTHORS Marie-Laurence Guy is a Senior Projects Officer at Mary Jo Larson is the Principal in FlexAbility the IFC Global Corporate Governance Forum and this International LLC. She provides consulting services project’s team leader. She is in charge of the Forum’s to international, multilateral, and private sector corporate governance dispute resolution activities and organizations. She co-authored the Forum’s Corporate oversees the Forum’s activities in the Middle East, Governance Board Leadership Training Resources Kit, North Africa, and Southeast Europe. Over the years, conducts corporate governance board leadership she has continuously worked on developing global faculty training, and addresses corporate governance corporate governance reform tools to help implement conflicts and disputes. Her areas of expertise include good corporate governance practices. Ms. Guy has co- leadership, active adult learning, negotiation, mediation, authored and coordinated the production of two other stakeholder engagement, multi-stakeholder program toolkits: Building Director Training Organizations and development, and sustainability. Dr. Larson earned Developing Corporate Governance Codes of Best Practice. her Doctorate of Philosophy in Conflict Analysis and Ms. Guy previously worked with the Corporate Affairs Resolution from George Mason University. She is a Division of the OECD and the French Ministry of Senior Fellow, University for Peace established by the Finance, Economy, and Industry. She recently co- United Nations in Costa Rica, Adjunct Faculty member authored a Forum Focus publication on Mediating at the American University, and author of publications Corporate Governance Conflicts and Disputes and is a on leadership, adult learning, negotiations, mediation, CEDR accredited Mediator. conservation, gender, peace building, and multilateral diplomacy. Christopher Honeyman is Managing Partner of Convenor Conflict Management, a consulting firm Jon Masters is a Principal in Masters-Rudnick & based in Washington, DC and Madison, Wisconsin. Mr. Associates, LLC and a trusted advisor to CEOs and Honeyman is the lead external consultant to the ADR boards of both business and non-profit organizations. Center (Rome), the largest neutral dispute resolution He has been a managing principal of a corporate firm in continental Europe. He has served as mediator, governance consulting firm, a senior partner in a law arbitrator, or in other neutral capacities in more than firm, a vice chairman of a securities firm, and a director 2,000 disputes since the 1970s, and as a consultant to of both business and non-profit corporations. He has numerous academic and practical conflict resolution also served as the Legal Advisor to the Blue Ribbon programs in the United States and other countries. He Commission established by the National Association also directed a 15-year series of Hewlett Foundation- of Corporate Directors on Performance Evaluation of funded research and development programs in ADR, Chief Executive Officers, Boards and Directors. His of national or international scale. Mr. Honeyman is co- public service includes being an advisor to the U.S. editor of The Negotiator’s Fieldbook (ABA 2006), which Securities and Exchange Commission, work on the is widely regarded as the most thorough reference redevelopment of Bedford-Stuyvesant, and service work in the field, co-editor of Rethinking Negotiation in the U.S. Defense Department, and on the Special Teaching, (DRI Press 2009), and author or co-author Political Research Staff of President Lyndon Johnson. of more than 50 published articles, book chapters, These experiences enable him to bring to his work a and monographs on dispute resolution ethics, quality uniquely comprehensive view of corporate governance. control, and infrastructure development. He co-chairs He is a graduate of Princeton University and Harvard the ABA Dispute Resolution Section’s Committee on Law School. Negotiation. 14 USER GUIDE Resolving Corporate Governance Disputes Karl Mackie is founding Chief Executive of CEDR Alan Rudnick is a Principal in Masters-Rudnick & (Centre for Effective Dispute Resolution), one of the Associates, LLC, providing a full range of governance first ADR organizations in Europe and now the largest assessment and advisory services to corporate boards outside the United States, delivering ADR services, and executives. He co-founded Masters-Rudnick after training, and consultancy in ADR, negotiation, his retirement from the CSX Corporation where, after and conflict management. He has been a barrister, holding various finance and law positions, he was Vice psychologist, educator, and business strategy consultant, President-General Counsel and Corporate Secretary. and has mediated regularly for more than 20 years, Mr. Rudnick served as Counsel to The Conference in addition to his strategic direction of CEDR. He Board’s Commission on Public Trust and Private specializes in general commercial mediation, and has Enterprise. He is Program Chair for The Conference worked with parties from over thirty countries. He has Board’s Directors’ Institute and other corporate been Special Professor in ADR at the Universities of governance programs. He is an Adjunct Professor at the Birmingham and Westminster, author or co-author of College of William and Mary Law School. He holds a a number of leading texts on ADR, and is a Fellow of B.A. from the University of Chicago, and a J.D. from the Chartered Institute of Arbitrators. Dr. Mackie is on Case Western Reserve University. the Panel of Distinguished Neutrals of the Singapore International Commercial Mediation Centre and the Editor: James D. Spellman, a Principal in Strategic International Institute for Conflict Prevention and Communications LLC, provides communications Resolution (CPR). Dr. Mackie was a founding member and corporate governance consulting services to a of the European Business Ethics Network. variety of public and private-sector clients, including the Global Corporate Governance Forum, hedge Anne Molyneux is a Director with CS International. funds, and securities firms. He co-authored and edited She provides consulting services to international, the Forum’s Corporate Governance Board Leadership multilateral, and private sector organizations in Training Resources and participated in training the heads financial market regulation, corporate governance, of Institutes of Directors from more than 10 countries. financial reporting, accounting, and audit regulation He also writes about the financial services sector and practice. Mrs. Molyneux co-authored the Forum’s for the Financial Times Financial Adviser and other Corporate Governance Board Leadership Resources and publications. Mr. Spellman is an Adjunct Professor at contributed to the Forum’s Building Director Training George Washington University’s School of Media and Organizations Toolkit. She is a Member and a Fellow Public Affairs, teaching public relations strategy. He of the Australian Institute of Directors (AICD). She holds an M.Phil. in International Relations from Oxford has led program development in corporate governance University (UK). and director training courses in many countries and she was an author and trainer for the AICD’s Company Directors Course. She was a member of the Australian Investment and Securities Commission’s (ASIC) Corporate Governance Roundtable. She contributed to the revision of the OECD’s Corporate Governance Principles and its Corporate Governance Guidelines for State-Owned Entities. Resolving Corporate Governance Disputes USER GUIDE 15 Design: Mary Beth Ramsey | Creative Alchemy 3100 Connecticut Avenue, NW #437 | Washington, DC 20008 Printer: Westland Printers 14880 Switzer Lane | Laurel, MD 20707 This publication was printed on recycled paper. AUTHORS Marie-Laurence Guy Christopher Honeyman Mary Jo Larson Karl Mackie Jon Masters Anne Molyneux Alan Rudnick EDITOR James Spellman DESIGN Mary Beth Ramsey SECRETARIAT The Global Corporate Governance Forum is OUR DONOR PARTNERS a leading knowledge and capacity-building GLOBAL CORPORATE platform dedicated to corporate governance GOVERNANCE FORUM reform in emerging markets and developing 2121 Pennsylvania Avenue, NW countries. 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