Corporate governance when the governors aren't around (Sundance Resources)

In my line of work, I sometimes receive information related to disaster investigations, and how forensic examiners reconstruct the circumstances surrounding a disaster. I received an email that contained two photos - one taken one evening at a dinner, and the other taken the next morning on a small plane. That plane ended up crashing, with no survivors; the pictures were recovered from a camera found at the scene. (The camera was damaged, but the memory card was not.)

As I continued to research the story, I found that it contained a fascinating story related to issues of corporate governance. Let me introduce the story:

Six Australian mining executives were killed when their chartered aircraft, twin turboprop Casa C212 crashed in a dense forest of West African nation of Congo. The aircraft was carrying board members of Perth based mining company Sundance Resources, a small Australian listed iron ore group that is developing an iron ore project in Cameroon.

Not only was the plane carrying members of Sundance Resources' board of directors - it was carrying ALL of the members of the board.

Several thousand miles away, in Australia, Sundance Resources had an immediate concern - and a longer-term concern. As a publicly-traded company, the loss of the entire Board of Directors could naturally be devastating to the stock. But in the absence of a Board of Directors, who could do anything about it?

This (PDF) was the first official statement to investors:

21 June 2010
Sundance Resources Limited
TRADING HALT

The securities of Sundance Resources Limited (the “Company”) will be placed in pre-open at the request of the Company, pending the release of an announcement by the Company. Unless ASX decides otherwise, the securities will remain in pre-open until the earlier of the commencement of normal trading on Wednesday 23 June 2010 or when the announcement is released to the market.

So the stock exchange halted trading at the request of the company. But who requested it? According to this message (PDF), it was requested by Peter Canterbury, CFO, and Neil Hackett, Acting Company Secretary.

Later that day, the company announced (PDF) that it was taking extraordinary measures. Canterbury was assuming the role of Acting Chief Executive Officer, and the company (in consultation with shareholders) was appointing three "strategic advisors." One of the advisors, shareholder George Jones, happened to be a former Chairman of Sundance.

This team responded to immediate matters, such as the need to retrieve the bodies from the wreckage, the need to answer questions regarding the presence of the entire Board of Directors in a single plane, and the extension to the trading halt beyond June 23.

By July 2 (PDF), Sundance was ready to declare a more permanent solution to its corporate governance:

International iron ore company Sundance Resources (ASX: SDL – “Sundance” or "the Company") is pleased to advise that it anticipates being able to apply to the Australian Securities Exchange (“ASX”) to lift the voluntary suspension on its shares within a fortnight following the declaration of a defacto Board of Directors.

The Sundance strategic advisors – former Sundance chairman Mr George Jones, commercial lawyer Mr Michael Blakiston and investment banker Adam Rankine-Wilson – who were approached by the Company following the air crash on 19 June 2010, have declared themselves as defacto Directors of the Company along with highly experienced mining industry leader Mr Barry Eldridge.

The declaration of the defacto Directors, follows consultation with major shareholders, the Australian Securities and Investment Commission (“ASIC”) and ASX, and fulfils a key requirement of the Corporations Act which allows the Company to apply to lift the voluntary suspension of its shares ahead of a shareholder meeting to elect the Directors.

These issues and related ones were formally approved at a shareholder meeting, which - most importantly - also approved all actions taken during the period that no Board of Directors existed.

It didn't have to end this way. There are so many things that could have gone wrong. The executives could have been paralyzed in their actions. ASX could have gotten really technical and insisted on formal Board action. George Jones might have wanted nothing to do with his former company. The stockholders could have rebelled.

But in the end, all of the parties worked together and reached a business conclusion.

In legalese, a corporation is a "person." And while the death of a corporation is nowhere near the tragedy that occurs when a flesh-and-blood person dies, at least one disaster was averted by Sundance Resources during that period.