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As a starting point, the author asked for the following: any and all governance documents, including recent board minutes and meeting materials, bylaws, relevant correspondence, board and committee charters, risk registers, compensation plans, and financial statements (in no particular order).

The author, as part of his methodology and data collection, would also interview each director, each member of senior management, the internal audit function, and possibly other assurance staff. The author would also tour Chessfield's facilities and have access to the cash room[1] so he could see operations firsthand. All requests were acceded to, and the author began his work. This work took about 30 days on a part-time basis, and a report was generated to the board and endorsed by the regulator.

Document Review

It soon became apparent that governance documentation at Chessfield was minimal. The board did not have guidelines; committees did not have charters; position descriptions for board leadership roles, directors, and the CEO did not exist; and meeting agendas and minutes were very sparse, with the average meeting agenda being one page with key headings only. There was no documented, board- approved strategic plan or risk appetite framework. Indeed, many material risks were not reported to the board at all.

Documentation for keyboard decisions, including evidence of review, reporting, assurance, due diligence, and deliberation, appeared to be either lacking meaningful content or nonexistent.

Interview Data

Many noncompensation committee directors neither knew nor approved what or how the CEO and the former CEO (who was also on the board as the longest- serving director) were paid. The nonexecutive board chair had a consulting stream paid to him by Chessfield, which certain other directors did not know about. The internal auditor was junior, inexperienced, and unqualified; had operational and revenue generation responsibilities; and had little exposure to, or oversight by, the audit committee. Audit committee members did not possess adequate financial literacy or relevant qualifications. The compensation committee chair rarely attended meetings in person for health reasons, and did not possess compensation expertise. His tenure as committee chair exceeded 11 years. He was a former service provider (now retired) of a large New York law firm.

  • [1] Part of this company's business operation involved receiving cash directly from consumers, which was assembled, tallied, and reconciled in what is known in the industry as the "cash room."
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