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Archive by topic: Fiduciary responsibility

3 Critical CEO Attributes

May 1st, 2016

Although different companies may require different qualifications at different times, the following key attributes are essential no matter what the situation.

Every CEO must be able to

  1. Create, with input from appropriate management team members, a carefully conceived written plan
  2. Recruit and retain the right people
  3. Ensure that the company has in place a sound system for ensuring accountability throughout the organization

Preparing a list of qualifications for a new CEO? Be sure that these three attributes are in the “must have” column. Without them, the entity will flounder.



The job of the board of directors

March 9th, 2014

On Thursday, during a panel discussion on “Corporate Governance Perspectives,” a part of Portland State University’s Idea Xchange, Rick Miller, Founder and Chairman of the Board, Avamere, succinctly summarized his view of the role of a corporate director:  “Strategically engaged; operationally distant.”

The question in my mind is, “How distant?”  Elsewhere in my blog I have described major operational shortcomings in well known companies, shortcomings that have a negative impact on the bottom line.  Clearly, the board should not be mucking about in operations, but shouldn’t the board have some way of evaluating operational effectiveness?

 



Renee’s Rule™: Check references.

May 6th, 2012

As you probably know by now, the CEO of Yahoo, Scott Thompson, misrepresented his educational achievements on his resume.

Verifying the accuracy of educational claims is easy.  Really easy.  Evidently, however, no member of the Board of Directors asked whether any one had verified all of the statements on Thompson’s resume.

How could this happen?  Apparently, board members “assumed” that basic due diligence had been done when, in fact, it  had not.

Why does this happen?  My personal theory is that many CEO’s and board members have never been intimately involved in or had responsibility for the details of running a business.  They focus too much on the big picture and not enough on the details that can spell the difference between success and failure.

If you have time, I’d love to know your theory!



Harry and David Update

March 23rd, 2011

There’s a very tight lid on communications from Harry and David. I don’t know what’s going on inside, but here are some things I do know:

1.    According to media reports, two lawsuits have been filed against Harry and David.

  • The first was filed by Drew Reifenberger, Executive Vice President and Chief Customer Officer, who was fired by then-CEO Steven Heyer in January. The basis of the lawsuit? Termination without cause and lack of contractually required payments.
  • The second suit, claiming almost $10 million, was filed last week by Convergys Customer Management Group (CCMG).  According to the suit, Harry and David and CCMG signed a 2-year contract which required CCMG to provide call center services and to hire an additional 25 full-time personnel during that period.  CCMG is requesting payments due under the contract.

2.    On February 18th, Harry and David announced the hiring of Kay Hong as “Chief Restructuring Officer and CEO.”

3.    Harry and David is hiring.  Careerbuilder.com shows 14 jobs that have been posted since Kay Hong was hired.  Positions advertised include store managers, Controller, Director of Online Marketing, Director of Market Research, and Manager of Website User Insights.  Nothing in the ads indicates that this is a “turnaround” situation.

What is the significance of all of the above?

With regard to the lawsuits

1.    When the contract was signed with CCMG in August, did Harry and David’s CEO and upper management realize that Harry and David’s situation was precarious?  If so, was it ethical to enter into an agreement it might never be able to honor?  Was it wise? If Harry and David’s CEO and board did NOT realize that the situation was precarious, they certainly should have.  Any competent turnaround CEO would have known that, but, of course, Wasserstein hired Heyer, who was not, in fact, a turnaround expert.

2.    Who signed the contract with CCMG?  Was it Heyer, or was it Reifenberger?  If it was Heyer, it raises questions about his experience, wisdom, and ethics.  If it was Reifenberger, is that part of the reason his employment was terminated?  Again, however, responsibility lies with Heyer and the board.  One of the first groundrules established by an experienced turnaround CEO is that material contracts require his/her sign off.

3.    Is the company not paying CCMG and Reifenberger because it is conserving cash so it can successfully navigate a planned Chapter 11?

With regard to “Chief Restructuring Officer and CEO”
—In my experience the title CRO is used primarily in a bankruptcy situation, so the title suggests that the company expected to file Chapter 11 at the time Hong was hired.

Hiring: If you follow my blog, you know that my assessment is that poor quality control coupled with poor customer service have contributed to the problems facing the company, so I am happy to see that they MAY finally  be focusing on the customer experience.  One caveat, however:  when I advertise for positions in turnaround situation, I usually try to let applicants know right away about the situation facing the company.  Some people love a challenge.  Those are the people I am looking for.  I have met many people, however, who have been recruited into troubled situations in which the executives have failed to disclose the company’s situation.  Shame on the companies!

On a different note:  Perhaps the recruiting is a signal that management believes that Harry and David can, in fact, survive.



I’m on THESTREET.COM

October 18th, 2010

Today, TheStreet.com published an article by me, “5 Biggest Business Mistakes.” You can read it by clicking here.

I sent an email to some of my business contacts with a link to the article, and an amazing number responded with either similar views or their own tales of horror.

If you have time, I’d love to see your comments, too.



Blockbuster

May 8th, 2010

I am not a Blockbuster expert and don’t know any of the players personally, but the situation has caught my attention.

First, Gregory Meyer, who is challenging the incumbent board member, points to stock performance during the reign of the current CEO and the board member Meyer opposes. (Background: According to reputable news sources, Meyer wrote a letter to the board in 2005 urging them to focus on distribution through kiosks; no one from Blockbuster responded, and, as we all know, they also did not follow his advice. In addition, Meyer owns more stock than his opponent.)

Since Jim Keyes became CEO and Board Chair in July 2007, Blockbuster’s stock has plummeted from approximately $4.00 per share to $ .37.

Keyes publicly opposes Meyer’s board bid. Is this appropriate? I think not.

Particularly in a publicly-held company, a key responsibility of the board is to hold the CEO accountable. Although it is common practice that the CEO and Chair are one and the same, that situation creates inherent conflicts of interest.

It is noteworthy—and inappropriate, in my view—that Blockbuster’s CEO is taking a position on who should be elected to the board; i.e., to whom he should report.



Renee’s Rule™- There is no subsitute for common sense

March 4th, 2009

It seems like every minute a new book with the “latest” business “secrets” hits the market.  In reality, however, running a business profitably and well boils down to taking care of the basics; i.e., having a well-conceived plan, having a capable leader, and implementing a carefully crafted management control system.  It is astounding to me that so many companies lack these basics—not just family-owned, but also publicly and private equity-owned (You know some of their names.)

Much of the information in this blog may sometimes sound like nothing more than common sense, but common sense and an attention to the basics are too often missing-in-action.

An example from my personal experience: In 2007, a private equity firm interviewed me for a turnaround project.  The company had been losing money for three years; there was no business plan; the president was clearly not qualified; and there was no effective management control system in place.  After I mentioned that the company needed these basics, the managing director said, “We know that.” (As in, “do you think we are idiots?”)  So…if they knew all of that, then where had they been, and what had they been doing for the past three years?  And these were people with MBA’s from prestigious institutions, who, presumably, have a fiduciary duty to their investors and definitely know better.

Find a way to step back from your business, to take a cold, hard look at where you are and what your real prospects are…Are you making money or losing money?