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This section will demonstrate how lack of transparency along with ineffective
communication can result into a corporate governance issue.
One of the critical factors in the relationship between the board of directors and the
shareholders is communication (Beata et al.2016. p.91). In other words, while
taking crucial decisions, shareholders’ viewpoints need to be taken into
consideration and their concerns need to be raised and heard in order to build a
broader understanding.
The Darden case is a perfect illustration of the communication failure between
shareholders and the board of directors.
Hence, in order to cope with their large losses, the board of directors led by
Clarence Otis, believed that a drastic decision needed to be made. According to
them, selling the Red lobster was the most effective strategy to offset the losses of
income incurred by the Darden group. The board´s expertise along with the
favourable opinion of financial advisers clearly demonstrated that it was the best
approach to counter this issue.
Nevertheless, the shareholders represented by the activist investor, Smith stated
their reservations about considering this sale. He believed that instead of selling
