Monday, June 23, 2014
What is a board supposed to do when its CEO is suspected of moral turpitude? Fire the CEO, of course. The reputation of a company exists beyond the character of any one of its individuals. Terminating employment, however, can result in ugly outcomes -- like this one. The CEO called the action a "power grab" and is suing the board. The situation has become messy and the company is suffering as a result -- in other words, the exact opposite outcome of the board's intent to protect the company. Doing one's duty is a losing strategy. Not doing one's duty risks shareholder lawsuits and worse. One can feel sympathy for the directors. I'm sure they didn't sign up for problems like this. Board members normally discuss growth and business challenges, not the misbehavior of their CEOs. It is a distasteful part of the job and negative perceptions rub off on the directors as well. "O, you are a board member of X. What IS happening there?"