CEO Inaction Killing the Company - Part 2

From Proformative: This discussion is part 2 of this previous conversation: https://www.proformative.com/questions/ceo-inaction-killing-company-now-what

Continued:

"I am trying to be cautious and not disclose too much information for anyone to identify the company, but Mike Haile, went right to where the problem resides. It is a family run company. Efforts to hold board meetings have been impeded by the CEO. If there are any board meetings, they are done at a family home and no one but family members are attending. They are not formal meetings to the best of my information. The company's financial situation is deteriorating and projections look dire. The CEO is not responding and is off on side-tracked projects. Regarding my position. I went into this knowing full well that being straightforward about the financial condition could impact my job with the firm. That's OK. My greatest concern is a failure of the company and the impact that a failure would have on the family and the employees. I have always been of the belief that my ultimate fiduciary responsibility is to the shareholders which includes the CEO but also many family members. The CEO does not hold a majority interest in the firm."

Answers

Wayne Spivak President & CFO • March 2, 2016

If you don't tell the family - the business shuts down and you are out of a job.

If you do tell the family - the business may survive and you may be out of a job.

So, either accept the fact that you will be out of a job or gamble that they keep you on, but you need to get off the fence (besides make sure your neck isn't in the noose).

Lee Andrews P/T CFO, Business Consultant • March 2, 2016

I have been in a couple of similar situations. My immediate thought is, if you do not have a rewarding financial interest in making things work, why bother? Why waste your career time? It is tough on the family (and employees) if the company fails, but if the family is not up for fixing things or even asking the right questions of the CEO, then it is on them.

Also, consider this. Sounds like this might be a company that has had a need for funds -- so are there any debt holders? If so, have they been kept advised of the status via correct financials, covenants, etc.? No "spin stories". What if the company folds and the debt holders are left to seek redress. You may not be a director, but if you are the officially appointed CFO, you are an officer of the company. How is your/company D&O liability insurance coverage, in case there is an issue there?

Len Green Performance Improvement Consultant and ERP Strategist • March 2, 2016

If you think it is inevitable that you will leave, be prepared to consider how you may depart. If the family wants to buy your silence (i.e. please don't talk to our bankers or auditors, so here is x months severance). make sure you are not falling into a trap where you get thrown under the bus when the business collapses. Make it clear you are distanced from their decisions.
i.e. forget about severance and the associated "silence clause" that may come with it.

David Wittenberg Director of Financial Strategy • March 6, 2016

Dropping in very late and I may have overlooked key dynamics, but one pitfall we, as financial professionals, are vulnerable is framing success only in terms of the business' financial performance. In family firms, success might be defined by many other values. They may never have been verbalized or, if they have, they may not be unanimously agreed upon across the family.

If the CEO hasn't already clearly outlined his true values, there may be an opportunity to enhance your advisory relationship -- help him articulate those values and describe what the future holds in terms of those values (e.g. family members out of jobs, his legacy lost, community reputation soiled, etc.). At the same time, we might find that a company's survival is not critical to the family's success... mind-blowing for anyone who hasn't grown up in a family business but possible, particularly if there are undisclosed family crises.

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CEO Inaction Killing the Company - Part 2

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