Stay public, or go private: directors who can carefully evaluate the pros and cons will be particularly valuable.

• Author: Millen, Jay
• Position: BIG DECISIONS

DIRECTORS, nonexecutive chair-man, and chief executives face increasingly significant challenges in governing a business for short-term success and accretive shareholder value The accelerating issue of operating the business for success versus the weight of public reporting, governance and stakeholder management responsibilities has become more visible in the past year through highly publicized ownership model changes.

The potential conflicts of interest are substantial in value creation decisions that involve the choice to remain public or take a company private at a share price premium. Maximizing long-term value creation for all stakeholders without creating potential conflicts between shareholders, board members and executive leadership is an emerging and continuing issue in the marketplace and the boardroom.

Publicly traded companies will need to carefully evaluate the pros and cons of privatization before making the decision to resist or carry out the transition. So long as the pressure to privatize exists, executives and board members who understand this dilemma and can navigate it will be of utmost value.

It is up to board members to protect shareholders' assets and ensure that they receive a decent return on their investment. Therefore, directors who can meet this responsibility while supporting long-term value creation and forging unity between divided shareholders and executives will be particularly valuable.

So, how do directors carry out this task?

1. The creation of a special committee: Removed from the conflicts of day to day governance, the special committee can not only evaluate existing offers but also make sure alternative options are proactively pursued to ensure maximum pricing for any buyout.

2. Study the landscape frequently: Directors must watch emerging trends and review adjacent market activity in privatization efforts.

3. Review cost of capital and debt proactively: A semi-annual "checkup" on debt structure, debt service costs, and refinancing of credit lines, revolving and longterm debt will inform critical decisions.

4. Manage CEO and CFO succession and morale: Directors must take a pulse check of these leaders at a personal level frequently and outside the confines of the boardroom. They are in the crucible daily, and if they...