Orion Logistics Corporation :

Director Dominance vs Independence in Boards

Group 5

19120 Chirag Tibrewal 19129 Jasleen Kaur

 
19211 Ananta Chhajer

19231 Jayant Jain 19257 Rishika Sureka 2019002 Aaushi Sharma

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The $42 million claim
The Basis of the claim Is the claim reasonable ?
• A bank guarantee had been furnished by TPD to OLC when • The rationale behind the quoted number is right and all the
the contract was signed.  contract details mention the major heads under which the claim
is to be made. 
• The contract provided for encashment of the bank guarantee
by OLC to cover losses incurred in case the completion of • However, said that, given the two organizations have had 
the project got delayed.  major transactions in the past and TPD was going through
some major aberrations in the management, OLC should have
• OLC computed the amount to be recovered from TPD on the kept TPD informed about the development on their end before
following three counts: taking a decision of assigning the remaining work to a new
contractor. 
a) additional cost incurred to get the project completed by
another contractor • Furthermore, OLC was accused of playing a critical role in the
delay of the project which cannot be overlooked, thus lifting
b) penalty payable by TPD due to delay in completion of the accusation and the claim from TPD to a large extent. 
the project
• Thus, it would be fair to say that the claim was not reasonable
c) loss in profits from delay in completion of the project.  and well researched.
 Impact on the management
Major Activities
Opposing views of
7+ years of litigation without Change in senior Sought external
TPD approached govt. &
any resolution incurring management in help- investigation
London court independent
$1mil every year OLC &TPD by AC
directors of OLC

Functional directors remained
AC took a stand neutral and chairman remined
outside
Tussle between independent and AC gave three option to
AC suggested negotiated
govt directors over the negotiated resolve the case
settlement, TPD agreed
money

The govt officials The decision of the Executives involved in Appeared as a

needed to be
convinced, especially
the financial advisor
The decision of the
settlement was the negotiation were backlash from
settlement was finally
finally taken by the questioned by the the govt.
taken by the board
board vigilance  directors

Finally

The case, was resolved eventually at the negotiated price suggested by the Audit Committee after thorough calculations. However, there were major differences in
opinion between independent and government directors and other senior management executives ( all who wanted to keep a safe position) some of who's
actions certainly left a bitter taste and a lasting experience for everyone involved.
 Different perspectives over a decision
Evaluation of options Management Perspective

• Opportunity cost of time

• Fixing responsibility for the costs as proposed by the government
directors was not supported by the management since executives
• The cost associated with every year in the attending the hearings
originally associated with the project had left Orion
• Past Experience of Orion Logistics in handling negotiations
• Decision to deal with case to be delinked from the internal
investigations
• Internal legal advice on a probable solution
• Internal investigations to be used as a medium to improve the future
• Seeking external experts' advice over the matter
processes in Orion Logistics

4
 Investigations by Audit Committee
Choice by Audit Committee and Board's view Implications

• Conflict of interest as stated in the case that functional directors were

neutral because of the worry about their own careers
• The intent was correct, but the method was wrong
• Biased opinions due to conflict of interest
• An independent committee of experts should have been set up with a
representation from Audit Committee to prevent conflict of interest
• No rigorous review 
• The board was looking for an objective view towards the matter
• Potential tussle between the board members
• The board should have asked for an independent third-party review
• Delay in decision making within the organization

4
 Investigation by Vigilance Department 
Why Investigation? Chairman's decision

• The investigation for once put an end to the skepticism and set a precedent
for any such future cases
• The demand for investigation could have been placed before the board
allowing for greater transparency 

• Questions about why the issue of vigilance was not raised in the meeting
• Hounding the executives for implementing board decision would
when the proposal was accepted.
demotivate the organization immensely in future
• Government directors should have pointed at the exact point of contention
• The investigation was seen more as a witch hunt for not agreeing to the
rather than throwing an open investigation making it look like they just
wanted to harass the negotiators for not agreeing to their demand in the terms even though it was carried out after the approval from the board
board meeting 
• Harassment by vigilance committee was a major issue that would deter any
future debate with the government directors

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THANK YOU