ISSUES IN JOINT VENTURE MANAGEMENT

The Management Agreement

A JV Management Agreement should explain

• what is to be reported to whom, when, and in what form.
• management's role in increasing the knowledge and skills of board members.

The management of a JV raises for ADCs the key issue of reporting. Financial reports (see “Financial Reporting” above, p. 6-35) are only one of the matters requiring attention.

Once financial reports start to roll in, directors sometimes start to look at the JV merely from a detailed, operational point of view. Having worked so hard to negotiate a Shareholder AgreementShareholder Agreement: a legally-binding document which describes the mutual obligations of the parties to a Joint Venture., they forget the need to monitor the venture at a strategic level. Moreover, their focus on operational detail may distract them from other, equally important aspects of the Shareholder Agreement, such as environmental practices, or regular reports to the communities involved.

To thwart this tendency right from square one, require an annual audit of the Shareholder Agreement. In short, make sure you are getting what you said you wanted and what is due, under law. You may choose to hire an outside consultant to conduct the assessment. You will probably have to cover that cost yourself. (The JV is not likely to, unless it is built into the agreement.) But it will be a worthy investmentInvestment: the purchase of a financial product or other item of value with an expectation of favourable future returns. Generally, “investment” means the deliberate use of money in order to make more money. if it ensures that the benefits negotiated are actually being delivered.

An audit of management should also be built into the management agreement. Are managers performing to industry standards? Are management practices and procedures at the board and managerial level consistent with standard industry practices and the Shareholder Agreement? This type of audit can be carried out as required, but once a year at minimum. Between management audits, it is a good idea for the board to require regular narrative reports from management.

When directors lack experience in the industry, managers must be sure to educate the board about significant issues. This is very important to maintaining quality control. People cannot control management if they do not learn the standards and performance they should expect from the business and its manager.

Being an Active and Honourable Partner

Joint Venturing can be a lot like hunting moose. It isn’t hard to bag one. It can be a lot of fun. But once you’ve bagged it, you might have to cut it up and hump it out. Maybe in three foot of water in a swampy river delta, no less. Then what will you do? The same applies to Joint VenturesJoint Venture: commonly, a business to which two or more parties contribute the essential land, capitalCapital: cash, property, equipment, services, and contracts or leases., and services, in return for a share in its ownership and control. (Note: the Joint Venture is very strictly defined under Canadian law.). It’s easy enough to target one. Doing a good deal requires people with the skill and character to carve things up and carry them out.

Being a good JV partner means actively adding value. If you want to build a reputation as an honourable partner (a very important asset if you want to build a more self-reliant community), don’t sit back and expect management and your partner to do everything. The Aboriginal partner needs to commit to building a successful business.

How is this done? In the case of its trucking JV, Kitsaki used their northern networks to hunt out contracts. They also helped bring those contracts in. This built a lot of respect for Kitsaki as a partner. That is how the ADC created so many JVs and Gross RevenuesGross Revenues: money generated by all of a company's operations, before deductions for expenses, sometimes simply called “the Gross.” of well over $50 million in a relatively few years.