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Supply Chains & The ESG Imperative: The Buck Stops with the C-Suite

esg Maximizing Sustainability Reporting Using Transportation Invoice Data

Supply Chains & The ESG Imperative: The Buck Stops with the C-Suite

Nike and Chipotle tied executive compensation to sustainability goal achievement. Mary Barra of GM allocated $27B to the development of electric and self-driving vehicles through 2025. Citi recently added circular economy and sustainable agriculture focus areas for its $250 billion Environmental Finance Goal, which it expanded from the original $100 billion goal that it met four years early. Environmental, Social, and Corporate Governance (ESG) is a top concern for today’s businesses and it’s not going away.

This said, there are plenty of businesses still grappling with the challenge. Whether it’s unethical child labor practices in China creating business concerns for H&M or environmental recklessness in the Amazon region creating problems for McDonald’s, Walmart, and Costco, these days the C-Suite is working hard to gain real visibility into risks lurking deep in the supply chain that could cause serious negative repercussions back at HQ.

Let’s call it the new ESG imperative. The movement towards embracing ESG responsibility as a core corporate value has been some time coming. 2000 saw the launch of the Global Reporting Initiative, which redefined corporate governance to include sustainability measures. Today, these standards have been adopted by more than 80% of the world’s biggest corporations.

Sustainable Investing & Regulations Drive Adoption

ESG has risen to even greater prominence today as a form of sustainable investing, whereby investment into new ventures is evaluated through a more holistic lens that looks at the environmental sustainability and societal impact of the funded project and not merely at its projected raw financial performance.

To be sure, there is a growing sense that ESG-funneled investments will perform better than most, as the global community begins to place increased priority on ethical behavior, fair labor practices, combatting human rights abuses, diversity, inclusion, and climate change. In 2018, a survey on climate and sustainability services found that just 32% of investors conduct a structured review of ESG performance. By 2020, that number had jumped to 72%. The pandemic has added fuel to this argument, where sustainable equity funds withstood early pandemic market dips, better than non-sustainable counterparts.

Let’s be clear. There are laws and regulations that will force us to take responsibility for certain aspects of our supply chain. Here in the United States, for instance, the Securities & Exchange Commission (SEC) is promulgating an effective ESG disclosure system – one that would require publicly traded companies to elucidate their broader ESG exposures in their extended supply chain, as part of their annual 10K filings, beyond some existing mandatory disclosure requirements in the area of board membership diversity.

The SEC’s John Coates, Acting Director of Corporate Finance, said on March 11, 2021: “The SEC is well equipped to lead and facilitate a discussion on when and how ESG risks and data must be disclosed, and how to create and maintain an effective ESG-disclosure system that would promote the disclosure of decision-useful, reliable and, where appropriate, globally comparable ESG information.”

“There remains substantial debate over the precise contents and details of what ESG disclosures might or should encompass. Part of the difficulty is in the fact that ESG is at the same time very broad, touching every company in some manner, but also quite specific in that the ESG issues companies face can vary significantly based on their industry, geographic location and other factors,” Coates added.

This isn’t mere posturing. Last Friday the SEC put out a risk alert, citing instances of misleading claims, inadequate internal controls, and weak policies found in an examination of investment advisors, companies, and funds.

Flipping the Script

Clearly, this is only the beginning of what is to come from a government mandate perspective. Even without strong compliance drivers, there are ample, solid business reasons for executives to move proactively to 1) understand/visualize their ESG profile in their extended supply chain and 2) optimize how they position their ecosystems to be operationally resilient and to yield top performance by being “ESG-forward.” It’s short-sighted to see this in defensive or even cynical terms, or to think that real hard-nosed business execs don’t really take ESG seriously. But implementing that desire can be difficult. As I recently told the Financial Times, said businesses want help identifying their exposure but struggle with the many tiers of suppliers on which they depend.

What if we can flip the script? Go beyond what is merely the minimum (the basic “compliant” level) and actually find and reward positive behavior. The power of transparency means the right thing to do is a massive business opportunity. This goes beyond the investment world; this goes straight to the core of the corporate world and the myriad extended supply chains of finance, manufacturing, energy, aerospace and defense, pharma, automotive and beyond.

Done right, we can encourage the creation of a better, healthier, safer global economy. We help rebuild trust in the global supply chain. We can reveal and reward the good, as well as see the bad and put a higher cost of doing business in pursuing those out-of-fashion ways of operating.

Likely Changes for the Future

To be sure, there have been a number of self-correcting moves along these lines of late. The large solar-power industry here in the U.S., repped by the Solar Energy Industries Association, resolved to eschew solar-panel product components from a region of China reportedly involved in unethical child labor. The SEIA has been urging its members to move supply out of the Xinjiang autonomous region following reports of forced labor among the local Uighur ethnic-minority population.

Relatedly, numerous international companies involved in sourcing components from the same region – making a range of products from footwear to consumer electronics – are reevaluating their sourcing from Xinjiang in western China as reports surface of forced labor in factories located in this remote region.

In sum, when speaking of resilience in supply chains, more and more companies are realizing that we all have a shared responsibility to upholding our values, protecting the environment and finding a visible seat at the table for ethics. More and more boardrooms, rightly so, are focused on exposure to ESG risk, if you will, of a business. It’s a matter of improving your top and bottom line and of securing your brand’s global reputation.

The following hypothetical scenarios, where improved visibility into your extended supply chain and a will to change into an ESG-forward posture is the new normal, could prompt businesses to:

-Not source lumber from native forests that are not being replenished… in the case of a worldwide home-goods producer

-Refrain from using products tested on certain species… a CPG giant focused on personal care products

-Eliminate the use of child labor at cobalt mines in Congo… a global electric-car/hybrid automaker

-Ensure diversity in your supplier base to increase innovation and economic impact in various socioeconomic demographics

The rising prominence of ESG reflects the moral imperative that faces us as business leaders to hold ourselves accountable for the future of our planet and future generations.

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Jennifer Bisceglie is the founder & CEO of Interos

business culture

5 New Year’s Resolutions To Make Your Business Culture A Winner

New Year’s resolutions are not only for individuals but businesses too. Company goals leaders set for the year ahead are usually measured in data tied to categories like revenue production and expense reduction.

After a difficult 2020 due to COVID-19, many enterprises’ bottom-line numbers will take on extra importance in 2021. And business culture will be just as crucial. Any resolutions that company leaders make are an effective way to measure their work environment and help their teams meet performance metrics, says Mark McClain (www.markmcclain.me), CEO and co-founder of SailPoint and the ForbesBooks author of Joy and Success at Work: Building Organizations that Don’t Suck (the Life Out of People).

“Meeting individual, team, and company goals begin with employees and managers working well together in a vibrant environment,” McClain says. “And given the changes and challenges of these times, culture and how leaders pay attention to it have never been more important.

“The bottom line falls into place when everyone is on the same page. But even if leaders have established a strong culture, it bears constant vigilance to ensure everyone is rowing in the same direction, especially now when a volatile world can threaten to throw even the most solid companies off course.”

McClain offers these business culture resolutions for the New Year that leaders could consider:

Focus on shared values. McClain thinks it’s misleading to frequently state that a “family atmosphere” exists in a company. “The bigger a company gets or the more it grows in capability and value, the less it’s going to feel like a family,” he says. “Creative friction and disagreement on processes and concepts are inevitable. Smart companies leverage broader, shared values as common ground on which workers can connect. I’ve found one of the best places for doing that is through service to the community beyond company walls. If your culture encourages people to work together for some greater good, they’ll continue to appreciate each other as humans and fellow workers.”

Avoid prima donnas. “Talented people are essential for a successful business,” McClain says, “but don’t fall in love with a gifted person if they are constantly letting you know how special they are. Watching them work can be breathtaking, but not when they’re the ones sucking the air out of the room.”

Double down on integrity. “Large legacy companies are often loaded with people who are just taking up space and collecting a paycheck,” McClain says. “It’s a significant issue, and it goes hand-in-hand with integrity. Effective workers know the difference between busywork and producing value. Everybody in the organization must be clear on what success looks like. The role of management is to be clear on objectives and then let people run.”

Don’t stop innovating. McClain says many companies stagnate in this area and should learn how to expand their innovations while encouraging the cultivation of new ideas. “Innovation is an amalgam of product marketing and product management skills, of listening to the market, and of engineering people who can take a problem and figure out how to solve it,” he says. “But innovation should apply in every direction – in how a company contracts, how they sell, how they market.”

Be the first to own mistakes. “Anyone who has been involved in conflict directly knows there’s always the sense that both parties have some responsibility,” McClain says. “The sooner you own yours, the more likely the other person will own theirs – and the project can move forward.”

“New Year’s resolutions are often easily discarded because of a person’s lack of commitment,” McClain says. “For business leaders and their workforce, they reflect company core values and can create or improve a culture that everyone will appreciate and aspire to uphold and deepen.”

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Mark McClain (www.markmcclain.me), ForbesBooks author of Joy and Success at Work: Building Organizations that Don’t Suck (the Life Out of People), is CEO of SailPoint, a leader in the enterprise identity management market. McClain has led the company from its beginnings in 2005, when it started as a three-person team, to today, where SailPoint has grown to more than 1,200 employees who serve customers in 35 countries.

Authentic leadership

What Every Global Leader Needs to Know About Authentic Leadership

Leadership falls into the functions of management and is at the core of being a great manager. Without great leadership, a manager is stagnant, only concerned for the status-quo. Leadership, being the core of management, is crucial to an organization’s success from a performance and management level. Leadership is critical to business success and has relative value in organizations throughout North American and the rest of developed countries.

However, leadership, when assessed from a distance, is somewhat elusive. For instance, four scholars by the names of Francis Yammarino, Shelley Dionne, Jae Uk, and Fred Dansereau found some mismatches between theoretical concepts of leadership and empirical investigations and explained that while the theoretical concepts of leadership are extensive, empirical studies could not have sufficiently supported these theoretical concepts.

In fact, past studies about leadership lacked a multilevel approach and only focused on downward control. Not accounting for a middle-level leader who takes a two-way approach to influence both superiors and subordinates—more of liaison. Another reason was that there is no determined set of variables used to investigate effective leadership, owing to the diversity of leadership theories with different perspectives about effective leadership. A third reason relates to studies about leadership that lack a systematic approach and stem from interdisciplinary approaches. Thus, leadership has remained relatively silent on how to integrate theories, methods, and concepts from diverse disciplinary domains to provide a rich basis for understanding the true leadership theoretical and applicable concepts.

Several authors focus on different aspects of leadership models and argue that existing leadership models could have reasonably developed some ways of appraising an effective leader versus an ineffective leader. They also identified a number of variables potentially affecting the effectiveness of leadership. Unfortunately, these leadership models have been challenged by various researchers and leadership has still left executives with rudimental and anecdotal ways to lead, leaving a gap between leadership effectiveness, satisfying followers, and meeting customer needs. These leadership models have failed to disclose the nature of filling the leadership gaps between performance and success.

When looking at leadership from a new perspective, executives should understand leadership models but place more emphasis on applying what works best for them in their current work environment. Many executives wonder what academic and leadership writers are trying to explain through such models. There is not much difference, except that a theoretical framework has been tried and tested while a model may be an application that leaders can learn and teach others.

For instance, various models are presented in an attempt to portray the concept of leadership. However, there have been several shifts in the thought of leadership, and subsequently, newer approaches to leadership emerged leading up to the rise of an authentic leadership model.

Authentic leadership provides prescriptive and anecdotal applications that leaders and supervisors can grasp. It is straightforward and uses a variety of guidelines for both leaders and followers alike. A prominent scholar that is well known in the Academy of Management by the name of Bill George explain authentic leaders as those managers who “recognize their shortcomings, and work hard to overcome them. They lead with purpose, meaning, and values. They build enduring relationships with people. Others follow them because they know where they stand. They are consistent and self-disciplined. When their principles are tested, they refuse to compromise.”

However, authentic leadership has not evaded the criticism by scholars that normally are associated with leadership models and theories. For example, two scholars by the names of Jackie Ford and Nancy Harding maintain that the foundations of authentic leadership are somewhat vague, and the lack of attention to how an authentic leader can adapt to every situation and present different faces to different followers while remaining authentic. They also challenge authentic leadership in terms of its theoretical foundations and approach to adapting people to the collective. It’s argued that this leadership style fails to consider the fact that each person is full of contradictions. In addition, Rita Gardiner, an author and scholar in the area of management at the University of Western Ontario, critiques authentic leadership for the lack of a theoretical rationale by which the essential role of social and historical factors can be justified. She posits that “authentic leadership is deeply problematic because it fails to take into account how social and historical circumstances affect a person’s ability to be a leader.”

For a leader to be completely authentic, telling the truth is not always easy. Therefore, is being an authentic leader a good thing? Yes. Does it work in every situation? No. Should a leader know about it and consider being as authentic as possible when determining his or her strengths and weaknesses? Absolutely.

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Mostafa Sayyadi works with senior business leaders to effectively develop innovation in companies and helps companies—from start-ups to the Fortune 100—succeed by improving the effectiveness of their leaders. He is a business book author and a long-time contributor to business publications and his work has been featured in top-flight business publications.

succession

5 Ways HR Can Make Diversity and Equality Central to Succession Planning

Women are making progress in corporate leadership. A record 41 female CEOs are scheduled to run Fortune 500 companies in 2021.

Along with this positive news about diversity and equality in the workplace, business observers think another good example was set by a male CEO deciding to step down in 2021. Zalando’s Rubin Ritter said he is leaving his position so he can put his wife’s career first.

While these actions atop corporate structures signal steps forward for women, the challenge at many companies remains how to create a culture of diverse and equal succession planning at all leadership levels, says Jennifer Mackin (www.jennifermackin.com), ForbesBook author of Leaders Deserve Better: A Leadership Development Revolution and a leader of two consulting firms.

“Diverse teams are built through a focused and strategic succession plan, which identifies the best talent early on and commits to developing those people over a long period of time to replace leaders who inevitably leave,” Mackin says.

“It’s been proven that executive teams with varied backgrounds and leadership styles offer important advantages to businesses. And the C-Suite must drive the succession planning strategy in order to maximize the process.”

Mackin offers five ways for companies and their HR departments to create a culture of equal and diverse succession planning:

Intentional emphasis by top leadership. Through her experience working with many organizations, Mackin has found that even among companies focusing on diversity and inclusion, most haven’t hit their goals. One of the problems, she says, is a lack of clear initiatives backed by leadership. “Many companies don’t implement a succession plan consistently,” Mackin says. “If current leaders don’t have the time to devote to it, it comes back to bite the company when potential replacements aren’t properly prepared. It requires a culture change, where top leadership embraces diversity as a foundational part of the succession plan and the company’s future growth.”

Commitment for the long term. Mackin says it can take three to five years for a company to have sufficiently prepared people for their next move. Yet many companies find themselves in a position where they lose a key executive and they haven’t planned well enough ahead for the transition. “Succession planning is a long, detailed process that takes into account all the demands of the job while determining who best to fill it,” Mackin says. “That requires documenting key knowledge and skills needed for success, and the company identifying  support and development needs to make the replacements ready for their new role.”

Focus on all leadership roles at all levels. “A sound culture top to bottom relies on the HR team to ensure that potential leaders at each level are thoroughly prepared,” Mackin says. “That requires a broader development plan for every individual in the organization.”

Measuring performance objectively and subjectively. Mackin says consistent and high-performing employees who keep improving and take on more responsibility may have the right stuff for leadership. But determining how to objectively measure the performance of a possible future leader is critical to the overall process. “It is difficult to create a succession plan without objective data and leadership coaches, who can extrapolate that data and know what it means in terms of leadership capability,” Mackin says.

Share company plans with leadership candidates. “Sharing the plan shows employees that the company is thoughtful about their future plans, is willing to invest in employee development, and that there are opportunities to work toward,” Mackin says. “Communicating and outlining all roles will help others aspire to gain the knowledge and skills they need to fill them in the future.”

“Diversity and equality need to be a cornerstone of succession planning,” Mackin says. “That kind of culture starts at the top and never stops, showing that real progress means everyone’s included.”

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Jennifer Mackin (www.jennifermackin.com) is the ForbesBook author of Leaders Deserve Better: A Leadership Development Revolution, and a leader of two consulting firms – CEO of Oliver Group, Inc. and President and Partner of Leadership Pipeline Institute US. As an author and speaker with over 25 years of consulting experience, she is a recognized leadership development influencer, having worked with CEOs, human resources managers, leadership development leaders, entrepreneurs, and other senior leaders in all industries. She earned her BS in marketing from Indiana University and her MBA from Owen School of Management at Vanderbilt University. 

succession

Who’s The New Boss? How To Avoid Succession Planning Mistakes.

Many corporations have endured a rough 2020 that included the resignations of top executives at some major brands. Will their replacements be ready? It’s a fair question, especially if the new company leader is promoted from within. Studies show many senior leaders don’t think their companies properly educate and prepare future leaders for succession.

If an organization has no pipeline of leaders ready to take over senior leadership positions, then a lack of succession planning can be catastrophic for even the most enduring company, says Jennifer Mackin (www.jennifermackin.com), a leader of two consulting firms and the ForbesBook author of Leaders Deserve Better: A Leadership Development Revolution.

“Many companies don’t find the development of leaders significant until they are readying for succession planning, embarking on a new venture, or weathering storms that threaten their viability,” Mackin says. “This reactive approach is risky because development takes time.”

Mackin says it’s time for CEOs, senior leaders, and heads of HR to modernize their leadership development because of the ever-evolving business world, which is especially volatile now.

“Leaders often weren’t ready to assume higher roles before the pandemic, and now it’s a bigger problem in terms of succession,” Mackin says. “A rapidly-changing time, such as now, is a good reason to focus on succession to ensure the chances of a company’s long-term survival.”

Mackin says the common mistakes companies make in their succession plans are:

They start too late. Even when companies realize they will have a void in their leadership roles, they wait too long to get the succession process started, Mackin says. “They may know people are retiring in two years,” she says, “but they need to start their planning well before then. It takes three to five years to do it right.”

They only consider the CEO role in their succession conversation. Mackin says that when a company does a thorough evaluation of its people, looking not only at their present performance but gauging their future, they might discover they don’t have the right kinds of people in the right roles. “Companies that win think strategically and have a people plan to address those gaps,” she says. “I recommend an overall development plan for the organization’s leaders as a whole and for individuals, and a succession plan for all key roles, not just for the CEO or C-Suite.”

The succession plan and development plan aren’t shared with leaders. Many companies worry that if their plans are known by the individuals slotted for upcoming senior roles, other people, not chosen, will leave. “Having outlined all roles with expectations will help others aspire to gain the knowledge and skills they need, because then they know what is required at the next level,” Mackin says.

Decisions are made subjectively by the top leadership team. “It is tough to create a succession plan without objective data about the future open roles and the employees that could potentially fit those roles with the right development,” Mackin says.

“Prepared leaders who are stepping into higher roles have never been more important than they are now,” Mackin says. “They are more adept during unforeseen disruptions and are able to pull their teams together. They can recraft a new, realistic, strategic direction quickly.”

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Jennifer Mackin (www.jennifermackin.com) is a ForbesBook author of Leaders Deserve Better: A Leadership Development Revolution, and a leader of two consulting firms – CEO of Oliver Group, Inc. and President and Partner of Leadership Pipeline Institute US. As an author and speaker with over 25 years of consulting experience, she is a recognized leadership development influencer, having worked with CEOs, human resources managers, leadership development leaders, entrepreneurs, and other senior leaders in all industries. She earned her BS in marketing from Indiana University and her MBA from Owen School of Management at Vanderbilt University. 

equity

Tales from the Trenches: Founder Equity and Founder Agreements in the Pandemic

From day one, it’s crucial to put your company on the right path. With proper planning, you can avoid a number of common problems that would make investors run for the doors, such as co-founder disputes, tax issues, and cap tables. Startup equity is one of those things that most founders struggle with unless they have an MBA.  But as with all of life, founders’ paths may grow apart for different reasons. It’s one thing when the “divorce” is peaceful, but sometimes situations become very complicated. In a blink of an eye, you’re fighting over the “custody” rights with someone who was previously on your side.

With the added stresses of the pandemic—working from home or working from anywhere—and the pivots required for businesses to adapt their models and work styles to the new normal, we are seeing significant pressure placed on the relationships between founders and other founders, between boards and founders, and between investors and founders.

Founder equity splits. When considering how to initially split founder equity among the various co-founders, some of whom may be present, and some of whom are merely a twinkle in your eye, startups should think long term.

First, consider the relative contributions each person will make.  While everyone says they are “all in” at the start, are they quitting their jobs? Have they invented something? Is their role critical to fundraising or engineering? Who is adding the most value now, and who will add value later? What cash is available? Get clear on these issues from the start and understand that they will evolve over time.

Types of startup equity. As to the types of startup equity, they are generally structured as common stock at formation. The price per share is usually insignificant, or what is referred to as “par value,” a “peppercorn,” or close to zero. This is referred to as “sweat equity,” which is vested over time.

Founder stock terms can also include some of the elements typically found in preferred stock, such as governance rights, liquidation preferences, and super-voting rights. Special founder terms can be a red flag for venture capital investors, and for that reason, particular consideration should be given as to whether such terms are reasonably obtainable.

At formation, cash investors typically receive a convertible note, a simple agreement for future equity, or series seed preferred stock. Some founders put in cash at the formation and structure the cash investment in one of these instruments.

Who gets what? There are four groups of people who typically get equity in the early stages:  founders and co-founders, advisors, investors, and employees, and consultants. Who gets what is more art than science, and there is no simple answer. Numerous websites offer purported “co-founder equity split” calculators and practical advice.

Equity incentive plans. Stock options are the typical currency for employees, consultants, and advisors of startup companies. Restricted stock units, restricted stock awards, phantom stock, and a large assortment of hybrid instruments may also exist.  In early-stage and venture-backed startups, the currency is usually a stock option. Stock options can be structured in a number of ways for tax purposes. Typically, they can be “incentive stock options” or “ISOs.” If options do not qualify for ISO status, they are referred to as “non-qualified” stock options, or “NSOs.” An ISO gives an employee the right to buy shares with the profit taxed at the capital gains rate, not the higher rate for ordinary income.

Vesting. Founder equity, like stock options, typically vests over time. Founder equity is usually subject to repurchase by the company, with one-fourth of the equity ceasing to be subject to repurchase, or vested, after a one-year cliff. After that, founder equity vests monthly or quarterly until the culmination of four years from the formation. Sometimes, repeat entrepreneurs can obtain equity without offering the right of repurchase or reverse vesting, or with reduced vesting, but four years is the standard.

Stock options are not actual ownership, and there is no cash outlay upon grant. These options become exercisable after one year from the initial vesting date, which is usually the date of grant, and they vest in monthly or quarterly installments until four years have transpired from the initial vesting date. In order to exercise stock options, the holder pays the exercise price, which for tax purposes must correspond to fair market value upon the date of the grant. Unless the option has ISO status, upon subsequent exercise and sale, it would be taxed at ordinary income tax rates.

Cap tables. Founders are well served to ensure that their companies use a technology-enabled vendor to store the company’s capitalization records in an automated, secure, and cloud-available format.

409A valuations. In a nutshell, Section 409A of the Internal Revenue Code provides a safe harbor. It suggests that the IRS will not challenge an exercise price as being below fair market value if a third-party independent valuation firm established the fair market value, and that value was approved by the board of directors, all within the prior year of the grant. While there is much fine print and some exceptions, a 409A valuation is generally important to obtain once a year and after each financing round. This risk of doing nothing is that the IRS could argue that the option was granted below fair market value and impose a higher tax rate on the income or gain.

When things change. After your company’s formation is complete, the founder equity has been divided, the equity incentive plan approved, and stock options doled out, life goes on. The world turns, and things change. Co-founders join, co-founders leave, co-founders fight, key employees join and depart, venture capital is raised, and M&A transactions come and go.

Founder roles adjust over time. It’s only natural. So, as well, should their salaries, bonuses, commissions, downside protections, and equity stakes. These are all easy to adjust when things are going well, but what about when things go sideways? Management carve-out plans can provide incentives for people to struggle through a tough spot.

Founder break-ups and departures. When founders leave, the first questions asked are whether the equity is vested and what happens to it. If unvested, the company should repurchase it at the issue price. For vested equity, founders will want it bought back at fair market value, and investors won’t want precious dollars going out the door to provide liquidity to someone who is leaving. Deals are struck where founders have something that investors want, like super-voting rights, board control, and exit rights. When the parties can’t agree, founders who push the envelope too far risk getting recapitalized and diluted, being terminated for cause, undergoing investigation, and having their information rights clipped. Does the founder have the right to severance? Is it enough to buy peace?  Non-competition agreements post-termination of employment are generally not enforceable in California, so this can be another carrot that departing founders can dangle in exchange for a buyout of their shares. Will the remaining team know where the bodies are buried, or is a consulting agreement with the departing founder required to make sure her or his services are available when needed? Was there a bonus due? A commission? Inevitably, companies and departing founders will need to get along to ensure a good exit.

Mergers and acquisitions. It is not uncommon for companies to be put up for sale when a founder departs, and market participants expect it.  So for boards and founders in a deadlock, is it the right time to bring things to a boil? Who constitutes the universe of potential strategic and financial buyers? Is it feasible to raise a growth equity round or “minority recap” with primary and secondary capital to reshuffle the C-suite and the cap table? Is a management carve-out plan needed? A new retention plan? Or restructuring? Potential scenarios abound…

What happens next. Invariably, after a founder divorce, the parties need to find a way to get along…in the board room…to raise capital…to help sell the business…to market the message…to evangelize the mission.

Things sometimes fall apart. Founders have to know how to keep things together until the next off-ramp is in sight.

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Louis Lehot is the founder of L2 Counsel. Louis is a corporate, securities, and M & A lawyer, and he helps his clients, whether they be public or private companies, financial sponsors, venture capitalists, investors or investment banks, in forming, financing, governing, buying and selling companies. He is formerly the co-managing partner of DLA Piper’s Silicon Valley office and co-chair of its leading venture capital and emerging growth company team. 

L2 Counsel, P.C. is an elite boutique law firm based in Silicon Valley designed to serve entrepreneurs, innovative companies and investors with sound legal strategies and solutions.