One of the boards of directors I serve on received a letter recently that was addressed to the Chairman. This letter was from a former employee of the company who was claiming they owed him a huge sum of money for unpaid past wages - unusual to say the least.
This employee had been a “bad actor” from the start, and now was proving himself to be trouble even after his tenure ended. It was clear that he wasn’t going to go quietly and that he wanted more than what the situation offered.
Although his claims may have been considered unfounded and without merit, it still caused a big distraction to the company and its management team - and it needed to be dealt with quickly and accordingly. Choices were developed at a hastily called board meeting: among them was the option of doing nothing. Ignoring this wasn’t a real option, however, because even though he had not sought legal counsel yet, ignoring his claims would be irresponsible and likely only anger him more. Also not a good option was just paying the huge sum of money he requested in full, as it would have bankrupted the company.
Not really wanting any legal action and expense, the company needed another approach. To this end, the Board was challenged to come up with some new ideas to deal with this situation.
Our best idea was to have the board - or more specifically, a single person on the board - run interference.
This is a great benefit to having a board, as it frees up the company’s resources. This enables them to focus on stability and profit rather than this type of “noise” that can suck up most of a small company’s precious time and money. So, rather than springing into action like hair on fire and responding to this claim immediately, the board simply wrote a letter back that asked for more information about this claim - including background on the amount requested. We also asked for the contact information of his lawyer. This was the first step in initiating a process that I like to call “molasses mode.” I call it this because it’s SLOW and steady. It’s designed to carefully draw out the process of gathering information, learning about the person’s background, understanding their perspective and settling the claim until one of two things happen:
- He grows frustrated, gives up and drops his claim. Then we can begin negotiating towards a settlement in a new context of better perspective sharing.
- The company grows enough so that they can pay the claim more comfortably - and not risk the entire future of the business.
With a capable board of directors in place, this company and its leaders can avoid legal action now, focus on generating revenue and moving ahead day to day, while we run interference on this and other distractions that will undoubtedly crop up from time to time. By containing much of this noise, we’re ensuring that it doesn’t distract from the main goals of the company and its management team, as well as its impact to the shareholders, who we’re there to represent and protect. This claim is just that - a claim - and the board can step up to engage and add value in the process. It’s a nice option to have for this company.
Do you have anyone helping you handle noise like this? Do you have a board?
The best time to set up a board is when things are calm and relatively quiet, then it'll be in place when you can really use their help! Keep in mind: it’s best to have a board in place before you wish you did.
The board also provides for some creative problem solving that may not have been possible otherwise. After all, it can be too easy to ignore or try to pay a claim such as this - or to settle it quickly - just to make it go away. An advisory board or board of directors can help strategize different (and oftentimes better) solutions to the problem at hand. In this case, we’ve been able to put this ex-employee on ice for a while to delay any action on his claim for as long as possible. At the same time, we’re mitigating any future risk that the claim gets escalated or legal action is begun against the company.
This is just one (of many benefits) a board can provide. If you’d like to learn more, this is a good place to start. Or, please reach out and schedule a time to talk - no charge! We’ll discuss your business and the benefit a board might provide.