OW BUNKERS

OW Bunkers was one of those companies that the Danes are good at.  A niche market, in this case supplying bunker fuel, the gunky product at the bottom of the refining process that ships use; a large proportion of turnover in the form of exports; and a name that the man in the street has not heard of. OW Bunkers was by this year vying for position as the world's leading supplier of bunker fuel, with a market share of around 9%. It was the second biggest company in Denmark in terms of turnover, behind A.P. Møller-Mærsk.

Until Friday, when it went into receivership. It's still unclear what exactly happened, but it appears that unsecured loans to a supplier in Singapore went wrong, bringing down the whole company.

What is odd about this tale is that OW Bunkers was only listed this spring. Its prospectus said that local managers had a credit limit of US$300,000, and that anything over that had to be approved by top management. Anything over US$10 million had to be formally approved by the Board. Given that the loan in question was for a whopping US$125 million, fingers are already being pointed at the board for lax controls.

The role of the Board in public companies is in my view the great unaddressed issue since the financial crisis hit in 2008. Boards are supposed to represent the interests of shareholders by keeping management on their toes and up to scratch. Yet that job is difficult, if not impossible, not least because many Board members are full-time chief executives in other public companies. Apart from not having much free time to understand the business for which they are formally responsible, there is often an "I won't rock the boat in this company if you don't rock the boat in mine" mentality. When rocking the boat/saying no/putting restrictions in place is exactly what is required.

I would like to see a rule introduced whereby nobody can become the director of a public company if they have an executive job in another public company. This would lead to the emergence of a new professional, a full-time non-executive director, with positions in perhaps 3-4 public companies. Non-executives would set the parameters and hold people to account; while executives would stick to executing. It wouldn't stop companies going bust, but it would perhaps stop them going bust for the reasons that OW Bunkers went bust, namely that managers in effect gambled with shareholders' money.

Walter Blotscher