Diligent to hire new CFO, general counsel after compliance missteps

Diligent Board Member Services, whose software helps directors to manage corporate governance information flows, will replace chief financial officer Steven Ruse and general counsel Robert Norton after an internal probe into compliance missteps.

The personnel changes are among a number of recommendations adopted by the board after it set up a special committee to look into share options for executives including chief executive Alex Sodi that didn’t comply with their incentive plans. The committee ended up taking a wider, ‘forensic’ look into the company.

Chairman David Liptak said Norton, who is of retirement age and would retire, didn’t have experience dealing with so many securities-type issues in multiple jurisdictions.

Ruse, who will stay on in a lesser role, was taken on in 2009 and “did quite a good job” helping steer the company through lean times when cash was restricted. As Diligent had grown and its disclosure requirements become more complex, Ruse had conceded he lacked that experience, Liptak said. .

“Companies that grow as fast as we have frequently have new people coming in because the jobs change,” Liptak told BusinessDesk. The changes “put us in a much stronger position in terms of our compliance.”

That committee made its final report on March 12, recommending remedial steps to improve internal controls and governance, according to the company’s annual report filed to the US Securities and Exchange Commission.

It found that the compliance lapses were inadvertent and came in a period of rapid growth for the company in the US, which meant it had to comply with both the US and New Zealand regulatory regimes. Still, internal controls at the company required improvement, the report says.

Senior managers responsible for compliance “did not have adequate expertise in relevant requirements and did not regularly consult with advisors in a manner that ensured compliance with applicable requirements relating to stock option grants and stock issuances,” the report says.

There also “was not an open flow of information and communication between legal and finance personnel” prior to the issue of stock options, it said.

Nothing in the special committee’s report necessitated a re-statement of the company’s financial statements.

Diligent plans to hire staff with expertise in compliance “with the company’s complicated legal and regulatory environment, including a new general counsel,” it said. The company will also hire additional accounting and finance resources including a CFO “with more investor relations and compliance experience.”

Diligent shares rose 0.6 percent to $6.28 on the NZX today and have soared 114 percent in the past 12 months.

Earlier this month it reported full-year net profit almost tripled to US$9.1 million while sales jumped 143 percent to US$43.7 million.

(BusinessDesk)

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