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Strategies & Market Trends : Turnarund Investing
NOVS 0.0666-16.0%Aug 1 5:00 PM EST
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To: grahamcracker who wrote (703)4/28/2012 5:36:41 PM
From: Covenant2 Recommendations  Read Replies (2) of 1876
 
If you are the guy who negotiates or approves borrowings, it is against ethics and conflict of interest policies at almost every company to borrow from the same party personally. There is just too much potential to get the good loan for yourself and the less good loan for the company.

Similarly, if you are the guy determining which assets the company is to sell, owning part of the assets personally makes it hard to determine what the real reason to sell the asset is. Is the reason personal cash flow needs or a business purpose? That is way too much conflict of interest.

Aubrey tries to spin it a different way saying that companies that pay attention to conflict of interest might make different decisions if their own skin was in the game at the transaction level. That may be true, but having their own skin in the game at the transaction level then makes continuing decisions over the assets a continuing conflict of interest. Aubrey's argument is very weak and self-serving. Interest alignment and skin in the game is through direct stock ownership, not stock options or sweetheart participation deals at the transaction level.

Aubrey treats CHK as his personal piggy bank. Just a couple of days ago I thought there was a very low chance of the crony BOD from ousting him. Each new piece of information that comes out is damning for Aubrey. The board and its lax oversight is now coming under enormous pressure. They may have to take action against Aubrey to maintain their own reputations, cronies or not.
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