"As a CEO you are obliged to keep the company on the right side of the law."
This advice is akin to "don't do drugs." The devil is in the details. And the details aren't always black and white.
The hardest challenge in being a CEO isn't in knowing your obligations. The challenging part is making compromises in order to make good on competing obligations...without letting shit hit the fan.
> Some CEOs do think that it's OK to cause environmental damage, outsource to sweatshops or conduct mass layoffs - as long as it's a lawful act.
I actually think that any of those three might be appropriate in the right context as long as they are lawful. Essentially every company causes some amount of environmental damage because every company uses electricity and has employees that drive to work. It's important that we as a society decide how much environmental damage is acceptable because if we leave it up to individual companies then the worst will profit and out compete the best.
Mass layoffs are unpleasant but if the alternative if bankruptcy then it's better that they occur. It's hard to have an economy that allows new companies to be created and grow without allowing other companies to shrink.
I was shoe shopping this week and my choice essentially came down to 2 pairs of shoes for £45 or one pair for £90.
I bought the one pair.
To say that anyone needs to sweatshop or they'll go bust is a wild mischaracterisation of reality. The few pence difference it would make to the price is something consumers wouldn't even notice. The entire process is driven by corporate greed hidden behind closed doors, not commercial sense.
There's no 100% way to know this (shoes don't come with labels: "Proudly made with low-wage employees"). But you can go off a firms reputation, and how they are positioned within the market.
Which is something else a CEO has to manage - the firms reputation.
What does "position in the market" mean? You can't mean "luxury/upmarket" or "used green and brown and hand drawn graphics in ad copy". Can you give an example of a company positioned as non-sweatshop? I only know a few niche firms, like Amricant Apparel.
It's partly driven by wide open human greed. Corporations, being abstract structures, don't experience emotion, and the people who run them aren't hiding their desire to accrue money and power. Your characterization of the process doesn't conform much to reality itself.
Also, your solution doesn't seem terrible realistic. Most people don't have the wiggle room to quadruple expenses.
That's not the point of Krugmans article. The point is that without that sweatshops the people working there would be even worse off. Is that correct? Maybe, maybe not, but it's completely different from what you're arguing against.
That aside: I also prefer better shoes. I can use them far longer, even if they're more pricey.
> The point is that without that sweatshops the people working there would be even worse off. Is that correct? Maybe, maybe not, but it's completely different from what you're arguing against.
The people working there are free agents. Why would they choose to work for a sweatshop if it makes them worse off than their next best alternative? (Note: I'm discussing about law-abiding businesses that pay low wages, not crime syndicates that enslave people or whatever hypothetical.)
The answer is that because having a job makes them better off. The workers typically have worse alternatives, which is why sweatshops are able to pay a low wage. The workers would otherwise be jobless or have an even lower paying job, or would be subsistence farming.
Discussions about the economics of such situations often fall prey to the weakness in reasoning that's jokingly called the "Copenhagen Interpretation of Ethics": https://blog.jaibot.com/the-copenhagen-interpretation-of-eth... - an obviously fallacious ethics where that, simply by interacting with a situation, you somehow become responsible for it.
If you take this logical fallacy into account, then more jobs and more options are always better things. People can choose what's best for them, and it's not the employer's fault if no better employment option is available. It is rather typically the case that sweatshops and globalization bring visibility to pre-existing poverty that would exist and would be even worse if not for the wages. People typically work a job because they need the money, after all. If people don't need the money, and have some better alternative, then what's stopping them from doing that instead?
(Just so we're clear: there's agreement that people working these jobs have shit options. The disagreement is about whether their employers are somehow doing an immoral thing by offering a job when they might not otherwise have one.)
> The people working there are free agents. Why would they choose to work for a sweatshop if it makes them worse off
> The workers typically have [only] worse alternatives
Well, why would anyone write nonsense, if it makes them worse off? And yet there you go.
Edit:
>If people don't need the money, and have some better alternative, then what's stopping them from doing that instead?
The sweatshop owner, their customers, the government, the economy all have an incentive. The people might be part of any of those, granted, but less likely in poor conditions.
You and Krugman are sinplistically ignoring complex macro effects, like someone sacrificing their previous home and skillset, moving to a new city for the promise of a better job, and getting stuck. Look at the laborers trapped in Qatar with no passports, or everyone involved in labor that involves human trafficking, as an extreme but not unique example.
And suffering the externalities of, for example, a polluting factory in their town.
I don't know about the details of that situation. There are certainly abusive situations in the world, and where that is the case, I would argue that those situations can best be characterized by their criminality and violation of human rights -- in the sense of those effects being the "problem" rather than economic effects. What you're describing sounds like a criminal infringement of universal human rights -- such as in the United Nations Universal Declaration of Human Rights, that no one shall be held in slavery or servitude (Article 4), that no one shall be subjected to arbitrary arrest or detention (Article 9), and that everyone has the right to freedom of movement and has the right to leave any country (Article 13).
One cannot analyze the economy rationally in the context of flagrant violation of the law and human rights, since economics requires property rights and trade. If a warlord invades a nearby country and his government seizes possession of all companies and their property, and puts people into slavery, then clearly that's an unethical thing, but I don't think it necessarily teaches us much about the economics of a poor but peaceful and law-abiding country in which many workers earn low wages.
Additionally, I agree that there will be macroeconomic effects, but those same effects also argue against your point on a long-term basis:
Why did they move to Qatar in the first place? Presumably because they heard there were good jobs there. What happens now that people hear that there are no good jobs there, and that Qatar engages in criminal violation of human rights? Workers will stop moving there, and will move somewhere else with better opportunity instead. Or if Qatar is still their best option, perhaps they'll risk the same outcome -- but who are you blaming in that scenario? Certainly criminals are to blame for breaking the law, or violating human rights, but I'm not sure what it tells us about law-abiding companies that pay low wages.
If the argument is that companies offering low wages causes criminality and human rights abuses, then that argument needs to be made, not merely hinted at. Rather than assuming that low-paying jobs cause crime, it seems rather simpler and more intuitive to assume that both crime and low-paying jobs exist in areas with preexisting poverty. So the question that I'm posing is, what's the best way to lift areas out of poverty? With jobs -- the best jobs that anyone is willing to offer to workers in the area, and the best jobs that the workers are qualified to work.
I'm really glad you did. I thought that was the single most important paragraph in your essay. I'd love to read more of your thoughts on the topic of ethical decision making for private enterprises.
I will definitely write on that in the future, already had a draft post at sometime but decided not to send it out because it did not feel complete. It's a tough subject, and an even tougher subject to put out there in a way that it is useful because if you let ethics be your main guiding light you might go under just as easily as if you were morally bankrupt and knowing how to find the balance is an extremely hard problem. For instance, last year I broke a couple of ethical rules to make sure that a company survived, I'm sure that did not make me any friends but I'm happy that I did. At the same time, if survival of that company (and by extension the people that get paid their salary every month by that corporation) had not been at stake I would have never done that. Deciding where and when ethics should take a front seat and when the situation dictates you need to purposefully cross a line is super tough. It's akin to the problem where you have to decide which of two groups of people you will rescue when you can rescue only one.
I really hope I will never fuck up in that respect because the way in which I go about these things there is no second guessing, once done it is done and if I break it I'll end up owning the pieces.
But there's no shareholder value in acknowledging externalities, so most professional CEOs appointed by a board won't challenge immoral acts if it would contradict their mantra to "increase shareholder value".
As a recently arrived member of the "C-suite", I find that the cult of maximising shareholder value leaves me cold. But ultimately, the shareholders pay the piper, so they can call the tune.
There certainly can be shareholder value in acknowledging externalities. Proof examples: The Body Shop, many cases where a company gambled on something immoral not being illegal (pollution, fraud) and being wrong, cases where the public gaining knowledge of the externalities cost the company its reputation, etc.
"Maximizing shareholder value" is essentially a myth. Management has wide latitude in deciding how to make long term bets for the brand. Management's job is to decide almost all questions, shareholders choose to buy and sell.
Shareholders have no liability for crimes and torts, management does.
Sure, "shareholder values" is not the same thing as bottom line profit and it might be subjective depending on a number of factors, but it is also not the same thing as value to the broader society; it can be at odds with it depending on who the shareholder is. The duty might be vague to define in practice, but it still is very much in existence.
I don't think that article claims this is untrue, just that the fiduciary duty is broader than the dollar amount in the financial statements.
> I don't think that article claims this is untrue
"There is a common belief that corporate directors have a legal duty to maximize corporate profits and “shareholder value” — even if this means skirting ethical rules, damaging the environment or harming employees. But this belief is utterly false. To quote the U.S. Supreme Court opinion in the recent Hobby Lobby case: “Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not.”"
How much clearer could it be?
Note that shareholders can and will sue companies, the board and the executives for whatever reasons they feel will hold water, but suing is not the same as winning that suit, and that the final interpretation of what your required course of action was in a given situation is in the end up to a judge, not up to a shareholder.
Jacques, I actually didn't know this. It is a claim that has gone around and is often repeated, I'm pretty sure I've heard it used in "expert" interviews in financial & political documentaries, so I guess I assumed it was true.
This might be important enough of a point to include in your post? The actions of a CEO facing difficult decisions might hinge on which of several competing responsibilities they feel most bound or affected by, and removing the belief there's a profit requirement could push Some situations out of gray areas. I'm guessing there also are plenty of other people who also believe that CEOs are bound by law to pursue profits and shareholder values.
> Note that shareholders can and will sue companies, the board and the executives for whatever reasons they feel will hold water, but suing is not the same as winning that suit
That's not really the cause of the trouble though. It's that when you're the CEO of a publicly-traded company (i.e. a company owned predominantly by mutual funds that want higher profits), your compensation and continued employment will be based on increasing quarterly profits.
So even though there are things you can do that are less profitable without violating your fiduciary duty to the shareholders, doing those things will still cause you to lose your bonus or your job. So the people who stand on their ethics are eventually replaced with people who don't, because the people who don't have better numbers and the shareholders only see how much profit was made, not why.
> So the people who stand on their ethics are eventually replaced with people who don't, because the people who don't have better numbers and the shareholders only see how much profit was made, not why.
Let's not underestimate how many startups do things to keep afloat that are black-and-white illegal. I've been ordered to do something illegal to help keep the company afloat. It's tremendously upsetting for me but was treated with enough nonchalance by the CEO / founders that I cannot help but think "Don't break the law" is advice the startup community is DESPERATELY in need of.
I agree with you. The sad truth is that many people only follow the rules as long as they live in fear of punishment. Now, I know that this is obviously a very big brush I use here to paint a picture but just as an example see how long it took for the looting to begin after hurricane Katrina hit New Orleans. Now, was all looting unethical? Not in my opinion, but that's a different point and a discussion for another time.
Katrina isn't a good example because it's inextricably bound to the complexities of racism in U.S. culture — much of what the media reported about looting and other crime was exaggerated or outright fiction, those fears and other mistakes delayed aid for long periods of time, and it completely leaves out official misconduct like shutting down evacuation routes, or racially-motivated police and vigilante killings.
The more I think about it, the fact that even after being so badly failed repeatedly the iconic pictures of looting were people scavenging for no-longer saleable bottled water & food seems more like an argument that most people are law-abiding for reasons beyond just fear of punishment.
> The more I think about it, the fact that even after being so badly failed repeatedly the iconic pictures of looting were people scavenging for no-longer saleable bottled water & food seems more like an argument that most people are law-abiding for reasons beyond just fear of punishment.
That's what I wanted to get at with the part about it not being necessarily unethical, just because it is illegal.
I first thought about using a different example (war zones and how fast peoples behaviour detoriates into "I take what I want because no one can stop me"), but somehow Katrina felt more relatable. Reading your linked articles maybe it wasn't the best example after all. Thanks for the heads-up.
Yeah, please don't take what I wrote as a criticism of you personally — I think it's a great example of how long a widely-seen sensational news report can color our collective memory.
> This advice is akin to "don't do drugs." The devil is in the details. And the details aren't always black and white.
If the details were black and white you wouldn't need a CEO, you could build a machine to do the job, but actually you can get a black and white version: Pick a wide enough safety margin between the black parts and the white parts. Now, if you make it too wide your profit will suffer. If you make it too small you run risk of going from white to black. And somewhere between those two extremes is the correct course of action to take, depending on your personal risk profile (really white? Maybe a bit gray? dark gray?), your knowledge of the situation (I KNOW that this is white vs. yeah, probably okay) and so on.
Yes, and I would add this text is naive (in some aspects)
Being a CEO you sometimes need to enter agreements you can't honour (at the time).
It's condescending
> So, for example, if there is some kind of lucrative short-cut to making a lot of money but it is illegal in your jurisdiction to do so: don’t do it.
Youtube, Uber, Airbnb have been founded on a grey legal area, some other ones have closed because of it (like the one that would stream OTA TV, I forgot the name)
You can't hold up Youtube, Uber and Airbnb as examples for others to follow, those are extreme outliers that willfully and consciously chose to challenge a very specific aspect of the law. In the case of Youtube the only thing that saved their asses was the fact that they got bought out by a party strong enough that they could stand the heat, the other two had sufficient funding that they could take a chance on the battle not lasting longer than they could afford.
There is nothing condescending about this post and if you feel that as a CEO you 'sometimes need to enter into agreements you can't honour (at the time)' then you've misunderstood what this is all about, if you enter into such an agreement you are actively misleading the other party and they may very well have cause to sue you personally if your gamble does not pay off and this will likely stick.
If that's ok with you, then be my guest, go sign whatever you feel like and to hell with the consequences but do not complain that you have not been warned.
> if you enter into such an agreement you are actively misleading the other party and they may very well have cause to sue you personally if your gamble does not pay off and this will likely stick
True, but not necessarily misleading. And of course you may be subjecting yourself to a lawsuit (also depends on the juridical safety of the location you're in)
In that context you are right. But in the context of ordering a large shipment of goods that you have no ability to pay for gambling that you will have the money by the time the invoice is due is going to get you looked at in a different light. Depending on the magnitude of the transgression you could be looking at anything from an honest mistake all the way up to fraud and deception.
It's important to know where the distinction lies, and as a general rule you should not contract when you can expect that you will not be able to perform.
And by your example your expectation to perform hinges on your suppliers ability to deliver and all things being normal you are actually able to expect this. That's a 'chain' of liability that does not end with you.
That was just about google caching stuff and making that cache available again, it has nothing to do with the core of google (search engine / advertising) and was not as far as I can see a founding principle for google.
Typically the index only returns an abstract, not the whole article, yes, you could invert the index on a word-by-word basis and reconstitute some or all of the articles but that is not the interface that is exposed to the outside world and that was definitely not what this lawsuit was about.
The statement that 'google was founded on a gray legal area' holds absolutely no water for me.
The core of Google is a search engine and that case has everything to do with the founding principles of Google. As I said, this is just one of the cases. There was also Parker v. Google. Or Authors Guild et al vs. Google. Or Viacom v. Google.
You keep on bringing more and more stuff on that has nothing to do with what google was founded on. Google news linking to newspaper articles has nothing to do with the search engine and so on (it was in fact someone's '20%' project that gained traction long after google was founded). Anyway, I'm done with pointing these out, yes, google got sued a lot, nobody ever - as far as I know - sued them on what they were founded on, let's say pagerank or the fact that they are a search engine at all or anything closely related to their mainstay of income once they found a way to generate it (adsense). And there was absolutely nothing 'legally gray' about it.
Your dismissal of what the parent brought up is arbitrary. All of these lawsuits are due to Google's business model, which it needs to keep the search engine running.
I like to focus on individual problems, like the employee collusion fiasco. I wonder if it would be possible for Eric Schmidt to report Steve Jobs for doing it, and at least admission of wrongdoing in settlements would be nice.
I'm no CEO, but that's some decent advice on the blog, I'd want the CEO of my employer to read it. A question beckons...where would the likes of Amazon/Uber be if they followed rules and regulation? Microsoft, famously trampled its way to success.
My hypothesis is that out of some hundereds of CEOs that do break the rules, only a handful get caught, so the incentive simply isn't there, compared to accelerate growth that could be had by bending the rules, as it were, and acquiring enough wealth or importance that then you can lobby your way through and change the rules to suit your business or motivies.
Ben Horowitz (ironically a partner at A16Z, that's a major investor in Zenefits) wrote: "Wartime CEO cares about a speck of dust on a gnat’s ass if it interferes with the prime directive." And I tend to agree with that, too. But I never managed a fruit-stand in my life, so what do I know?
It's tough being a CEO. You need a team to make your way through, I guess.
I respectfully disagree. Some laws are better broken, like taxi medallion (read: state enforced monopoly) laws. Uber has improved the lives of millions of people by breaking laws.
Great for you. But for Uber to wilfully decide to attack certain laws they decided were unjust was a conscious decision and in some places that caused real trouble for drivers and others. Of course if you are aware of all that and you still decide to go through with it then that's ok with me.
But there are other laws than just the taxi medallion ones (which are locally quite varied) and those other laws for the most part are better left unbroken. In other words, for every rule there are exceptions, better be aware of when you feel that you are entering that exceptional territory and better be in the possession of very deep pockets in order to deal with the resulting fall-out.
For the vast majority of start-ups it would be a very bad decision to go and break laws willy nilly without understanding fully what the consequences could be.
It really depends on what you believe about the legitimacy of man-made law. Large segments in the world population do not consider it be legitimate. Even the papacy openly questioned its legitimacy in 1937, quite before Hitler became truly obnoxious. Therefore, the issue is rather about laws that are enforceable. If the law is really enforceable, you may indeed want to refrain from breaking it. Otherwise, it is your own call.
I've seen a couple of people that tried to put thoughts such as these into practice. Personally I think this is a very dangerous course of action and given how they ended up I feel that my position is backed by some hard to refute evidence. What you believe should be right is of little or no importance if that conflicts with the law of the land.
There are vast fortunes to be made for those that manage to successfully challenge the law but most - not all - ordinary businesses are not set up for that purpose.
There's a lot of people in U.S. prisons or graveyards who acted on your perspective. Feel free to try. The likely outcome is courts handing down a judgment. After you resist, they send regular cops that you'll probably shoot given Hitler references. The next round will look like the Waco videos on YouTube except you probably have less guns and soldiers. Not to mention cops get extremely, rightly aggressive once you've started killing them. It will be over much more quickly esp given all the military hardware our cops have these days.
The above scenario played out many times ranging from tax dodgers to drug dealers to land grabs. My money is on them is you follow that foolish philosophy.
Uber has also caused massive pain to its drivers by not giving actual employment protections and causing unilateral drops in pricing to make previous jobs untenable.
Uber is basically Walmart for taxis. Come in, bankrupt local taxis with subsidised pricing for drivers and riders. Afterwards keep low pricing for riders but squeeze drivers for all they got.
As one driver put it, it doesn't matter if a 30% price drop create more customers. Drivers can only drive so many hours in a day, so drivers end up with 30% less money.
I'll have that one too, sir. You're a regular here with insightful comments. So, let's see what you dealt with and learned from it. Well, I just read the "learned from it" part. The origin then. :)
Brilliant post, but gave me the shivers that he had to write some of that. If the desire (or concern) to write this is legitimate—and I can't find much of a reason it wouldn't be—then there are some scary folks running companies out there.
There are definitely some scary folks running businesses out there. Like Jacques I cannot specify any names but the number of companies who think it's ok to omit paying their taxes or their suppliers is... well, there are quite a few of them (source: I work with a lot of UK tech companies through my business, GrantTree).
This is not just as a short-term cash flow loan, which would be at least somewhat justifiable ("we're in the middle of a raise, it's cheaper to get an implicit loan from HMRC by paying the payroll taxes late than to negotiate a loan with a loan provider" is at least something I can imagine myself thinking under a lot of pressure). Over the years I've met a good number of companies who seem to think it's ok to do this consistently, year after year after year.
Unsurprisingly, a consistent neglect of paying your taxes is very much inversely correlated with the success of the business. I guess they also neglect many of the other things that Jacques mention.
Never ever short the tax man. They get very angry, and then seize your bank accounts. All of them. Even the secret one you didn't think anyone would know. Even the bank accounts that are for your kids, or anything that is remotely attached to you.
Better to drag out terms with a supplier than the tax man. Suppliers have to go to court, get a judgement, hire a sherrif - the tax man just decides on his own to take the bank account (don't make him angry, you wouldn't like him if he was angry)
Source: I know 3 business people (in last 25 years) that shorted tax man, got caught, bank seizures and then almost immediately go out of business. Scary how quick it happens too.
And if you do ever find yourself in a position where you really can't pay the taxman go to them before they come to you and try to make some kind of deal. If they do come to you they will seize everything.
In the UK, they won't - at least not if you're a relatively small business. I've found HMRC surprisingly accommodating. Which I guess is why some people consider it a valid way to extend themselves some extra cash flow funding. It's still a very bad sign and generally correlated with the business remaining small, failing, defaulting on other debts, etc. But it's the CEO themselves who's sinking their business there, not HMRC (at least I've never observed HMRC going after a small business in this way and "seizing everything" - even though I've frequently observed entrepreneurs who were chronically late with their taxes for years.
Very true. I previously worked at a place that had a customer who never paid vendor invoices. They would wait until they were going to get cut off and pay the minimum possible.
We hosted all their online content which gave us leverage to be paid. We continued doing work for them but required up front cash payment before anything would be done.
It's as legitimate as it could ever be (in fact, it is still ongoing, think of this post as a way to get some of my frustration out of my system), the inside story however will likely never be told, definitely not by me. It's enough for me if some of the abstract lessons from this tragedy will help someone else at another place and time.
Jacques the one thing that makes this advice complex is when you are both the CEO and also the major shareholder. I do agree with you that you need to know what the legal and moral limits are and don't cross them. Everything else is hard.
Great write-up, Jacques. Bookmarked it. :) Nice reference to Interface CEO, too. I like what he did. His presentation style is so good I can never tell if he genuinely cares or just wants us to think so. Just has that kind of smooth delivery. Could've been a politician if he wanted.
Back to your article. You seemed to cover unethical dealings with a warning not to do them. Then, comments here contradicted that where you chose to scheme for survival of business. This brings me to a topic you didn't cover much: competition, esp pricing or service, in many industries can force a CEO to use unethical practices of competitors to achieve parity. For instance, selling cheap clothing to people will almost inevitably end with manufacturing done in low-labor countries if not sweatshops. Likewise, in INFOSEC, one can't build a secure system using certain popular components but demand side forces their inclusion in "secure" or "security" products. Invalidates the whole claim but you fail otherwise.
So, it seems that unethical behavior might be a prerequisite to success in established industries where the inputs or certain value-adds specifically rely on unethical behavior to exist. I would suggest people avoid those industries as a result but many are critical. It might be more ethical to compete with a differentiator, a bit more honesty, and better working/environmental conditions even if still kind of horrific. One is still exploiting and doing damage within the operating constraints but reducing overall damage.
So, what's your thoughts on this part of ethical CEO activity?
It's tricky. If someone is actively working against the company I don't mind putting on some pressure to ensure survival, even if that's not the most ethical thing to do. But that's one individuals discomfort balanced against the continued employment of a whole pile of people. If it were actually illegal or if that person was not a party to generating the problem to begin with I would never do it. It all revolves around the particulars of the situation so there is no 'one size fits all' advice in this particular respect.
Exploitation, damaging outsiders, generating net negative value while increasing your own capital, all those are well outside of what I would consider acceptable behavior.
As a CEO you set the rules your company operates under and you determine who else has what kind of powers within the company. For instance, you could delegate some of your work to others that you feel are more qualified or that can help you lighten the load. Even so, you are still responsible for whatever it is that they do and even though it is great to work with others and to be able to trust them because the end responsibility is yours you are still required to check up on them to make sure that they actually do what they say they do.
This is an issue that trips up companies that get into legal trouble; oftentimes the CEO or senior management suggest that they are not responsible for the actions of a "rogue employee" or a scheme that was carried out by underlings without their knowledge. In the U.S., the company (and its officers) are liable for the actions of employees.
There is a book by Constance Bagley called The Entrepreneur's Guide to Business Law, 4th Edition (ISBN 9780538466462) that covers this and other issues (contracts, incorporation, fiduciary responsibility, etc.). It's a great resource for anyone running their own business.
Given the sheer amount of laws and regulations, how easy is it really for first time CEOs (or even experienced CEOs) to avoid breaking the law completely?
We often criticize users for clicking "I accept terms" without reading through them, but how many of us have actually read through a law passed by congress?
Having strong legal advisory helps, but very few companies can hold on to huge legal departments just to deal with regulatory compliance.
How many times have we heard lawyers talk about a "Legally grey area"?
Its one thing to intentionally break the law. But do we really want startup founders afraid to even begin their company and try to disrupt existing monopolies because they don't want to risk ending up in jail?
It is true that there are a lot of laws and regulations out there, and it may very well be impossible over a really long run as a CEO to avoid running afoul of some law or other. But that's not what this is all about, it is about making major mistakes under pressure because of being mis-informed about what the rights and obligations of a CEO really are and - to my surprise - I keep running into people that occupy these jobs that seem to be critically unaware of what their position really is.
Improvements are just not going to happen prior to the downfall of our current ruling class; a window into how this currently works is the excellent Extortion, How Politicians Extract Your Money, Buy Votes, and Line Their Own Pocketshttp://www.amazon.com/gp/product/0544103343, or as Ayn Rand put it in Atlas Shrugged:
Did you really think that we want those laws to be observed?" said Dr. Ferris. "We want them broken. You'd better get it straight that it's not a bunch of boy scouts you're up against - then you'll know that this is not the age of beautiful gestures. We're after power and we mean it. You fellows were pikers, but we know the real trick, and you'd better get wise to it. There's no way to rule innocent men. The only power any government has is the power to crack down on criminals. Well, when there aren't enough criminals, one 'makes' them. One declares so many things to be a crime that it becomes impossible for men to live without breaking laws. Who wants a nation of law-abiding citizens? What's there in that for anyone? But just pass the kind of laws that can neither be observed nor enforced nor objectively interpreted-and you create a nation of law-breakers and then you cash in on the guilt. Now that's the system, Mr. Rearden, that's the game, and once you understand it, you'll be much easier to deal with.
I'm sure it's worse in common law countries, because precedence cases hold legal weight there, but in civil law countries, it's not really hard.
In Germany, all the laws are only in multiple formats (including on GitHub with proper history in markdown), and all the regulations are freely available, too.
Additionally, the laws here are written in normal language — so anyone can just read them.
I personally have read quite a few laws in the original text, and I'm just a normal CompSci student, not even a C-level exec.
While laws in civil law countries are indeed usually more straightforward than in common law countries (that distinction becomes more blurred though anyway with common law countries enacting more statutory laws and civil law countries adopting practices from precedence law) they in many case still allow for interpretation.
A notable example is the German bankruptcy law, which in theory outlines pretty clear and simple conditions that constitute bankruptcy. In practice, however, determining if and when those conditions are met isn't quite so simple, particularly when it comes to assessing liabilities vs. assets.
Legally, a German CEO (Geschäftsführer) is obligated to file for bankruptcy within 3 weeks from knowing that his company has more liabilities than assets, otherwise committing a criminal offence.
The result of this assessment is just a snapshot that depends on both the point in time it was taken and on more specific regulations, which aren't part of the law itself and whose interpretation can vary depending on the local jurisdiction.
This often results in rather unfortunate situations where a CEO might be held liable for not filing for bankruptcy in time although the actual situation of the company wasn't quite as bad and not filing for bankruptcy was justified at the time.
Moreover, a German CEO can be held accountable for not filing for bankruptcy for up to 3 years after the fact, which is often used as leverage to put pressure on the CEO when the company tanks at a later time.
I'd love to read more advice like this, especially about how the execs can be effective leaders and lead an organisation to a good culture. I have worked my way to a point where I can now call myself a Chief Something Or Rather, and I'm terrified that the Peter Principle is in play. While I am undertaking some training on governance and finance (which is really aimed at board of directors rather than newbie executives), it's overly formal and doesn't cover the implicit leadership challenges.
Cleaning a wound hurts but is necessary for the healing process.
But it can be very difficult to know how to clean the wound.
I think the most important lesson from this article is to always acknowledge a wound exsists and that a CEO is always responsible for taking care of the wound.
Sometimes I got the feeling that shareholders also like to eat meat from the corpse so they don't mind a living or dead body.
"You are not allowed to cause the company to break the law."
With spam, growth hacking and whatever someone calls it these days, I see a violation of this rule multiple times a day - done by startups, small businesses and even large corporations. Every single unsolicited mail is breaking those anti spam laws.
And yes, I know the laws where I conduct business about spam, UCE, UBE and whatnot.
Spam is a real problem. The background is that the law now centers on the sender of the message, rather than the beneficiary of the spam, so spam services simply pop up in places that don't have such laws. Having the law go after the beneficiaries is also fraught with danger, it would be tremendously easy to do a joe job on a competitor.
Spam is not a simple problem, filtering and education so far seems to be the most effective ways of dealing with it.
My post was not so much about spam services, more about companies, from startup to large, listed companies who simply ignore current law (opt-in) in the country where I conduct business. In these cases, the sender is mostly the beneficiary too.
Such spam mostly gets through filters which makes it costly in terms to handle.
Most folks don't even care when I tell them about current legislation - I am thinking about starting to sue these companies.
Ah right, yes I understand now. Such spam I simply forward to the local anti-spam watchdog (OPTA, in my case) with a form letter I made for the purpose and a CC to the sender. Very very rarely do they reply (both the OPTA and the senders), never have I seen another email from a sender that got that treatment.
I feel like this article is an angry criticism on a situation which I am unaware of. If he knows a company breaking the law then I propose he whistle-blow, rather than right a legal guide on a blog and hope law-breaking CEOs stumble upon it.
In all jurisdictions that I'm familiar with you can, but of course since you're already talking to a lawyer it would be best to open the discussion with that question if you are unsure.
Importantly... You can make sure this is a stipulation of your employment contract: That you can confidentially share material with your own personal attorneys for advisement purposes. How unjust would that be if you weren't permitted to get unbiased legal advise when you're personally liable for any actions you take!?
That's a good point and worth including, I'm totally out of time for today but I'll make a note and update the text at some point later tomorrow. Thank you.
In many cases these are not things that people do consciously, and in some cases they do it because they are pressured to make the wrong decisions without fully realizing the consequences. For instance, shareholders could push a CEO to expand the company when the financial situation does not actually allow it.
I agree that if someone willfully breaks the law that no blog post will stop that from happening, but quite frequently when and if it happens (especially in smaller companies where CEOs tend to be younger and less experienced) it is actually not intentional and rooted in incompetence rather than in malice.
Somehow this reminds me of estimation in software development and developers who give estimates they are not comfortable with if a manager pressures them hard enough: "So long? Come on, don't be so pessimistic, we need it on xyz, you can do that, can't you?"
Yes, there are definitely some parallels. My personal approach to this is to point blank refuse to cave in to any kind of pressure whatsoever. Stuff happens on my time-table and with what I feel is achievable or not at all, no matter whether it is as a hired hand or as the CEO of a company under pressure from shareholders.
Of course that's relatively easy for me to say, I'm a pretty hard person to push forward in a way that doesn't sit right with me but I think that in a management role you can't afford to be timid about this. It goes with the territory that you exhibit some degree of independence, otherwise you are just an extension of the board or the shareholders to take the blame if things go wrong.
Essentially, when owners appoint a manager (CEO) there is the risk that this manager will make decisions that enrich themselves and their friends (corruption) at the expense of the company, its employees and shareholders.
> Inaction, or postponing a decision long enough that a situation spirals out of control is generally speaking not an option.
Can you please send a link to your blogpost to EU leadership and some EU nations' leaders? Right now we have probably 3 situations that have spiraled out of control. And getting worse by the hour.
I'm always amazed with the capacity and skills American have to write so many words without any actual content. Just words, ramblings, perfectly synchronized sentences. I remember when I first read "Getting things done". You'd get 1 valuable lesson/advice every 30 pages. Same thing here. 1 valuable piece of content every 5 (giant) paragraphs.
I think that if you believe that I'm American that's probably the best compliment I could get. Writing is hard for me, and this is not my native language, but I'll take your criticism to heart and I'll try to tighten up the text. Thank you for your feedback, greetings from NL.
OMG. I just saw this waterfall of comments (stupid HN doesn't have notifications or anything). I'm sorry Jacques, I didn't want to offend you. And it's great if you're not a native english speaker, your english must be really good!
I don't remember why I said that at the moment. I guess I'll read it again.
FWIW he doesn't claim you're American, he claims Americans do something and then claims that thing is also done in the OP.
Your response is gracious nonetheless. Some people really like longform writing though, the more meandering and reflective the better. Each has its place IMO.
You're still missing it - the crucial point is 'you had nothing to say, it was a rant'.
If you think the internet is a soapbox for you to vent your frustrations out and have people go 'yeah, me too', then you don't need to change anything at all.
If your intent was to actually give meaningful advice, then you could start with giving credentials for what qualifies you to be giving CEOs advice, followed by sharp, concise bullet points - since CEOs don't have the time to read pages of text.
> You're still missing it - the crucial point is 'you had nothing to say, it was a rant'.
Ah ok.
> If you think the internet is a soapbox for you to vent your frustrations out and have people go 'yeah, me too', then you don't need to change anything at all.
I don't think that was the gist of it, yes, it was partially written out of frustration but at the same time my inbox seems to indicate that you're the one that is missing the point here.
> If your intent was to actually give meaningful advice, then you could start with giving credentials for what qualifies you to be giving CEOs advice
If you actually are the CEO of a company you no doubt already know that my credentials don't matter even a little bit, in the end the only thing that matters is what your own counsel will tell you. And that's one of the key points there: it doesn't matter who you trust, you should verify whatever it is that you take into consideration.
> since CEOs don't have the time to read pages of text.
That's going to be tough then when the time comes to sign some important contract. Guess what, I've actually heard that excuse.
Just like another poster here already commented: if you don't like it feel free to write your own version and link it, I'll be happy to vote it up.
I think you are entirely missing both the context and content of the post as well as my response to you but in the meantime I note that you have not linked to anything you wrote yourself that better reflects what you feel needs to be said so I'll let that sit there.
My argument certainly wasn't meant as proving to you that there are 'me too's in my mailbox. It was meant - in case that wasn't clear - that what I wrote already served to help some people in a very concrete manner and as such that's a > 0 result. Which is the only reason I went through the trouble of writing this up in the first place, if it so much as gets one person on the planet to find the handbrake before it is too late then it was worth doing.
You on the other hand have merely wasted some bits with this exchange. Now take up my challenge and do something better or get of your high horse.
Hey Jacques, reading your post, I initially have a piece of advice: Use more commas, it helps the flow along. Currently it reads a bit urgently, here are some examples:
> what bothers me is that in many of these cases the company is much sicker than it has to be, the wounds are to a large extent self inflicted and if only someone had had the presence of mind to change direction when it was still possible the company might have survived
Better punctuation:
> what bothers me is that, in many of these cases, the company is much sicker than it has to be. The wounds are, to a large extent, self-inflicted, and, if only someone had had the presence of mind to change direction when it was still possible, the company might have survived.
Also, I, too, would appreciate an email with context, as something feels missing now.
Personally, I think the proposed second example is too many commas, and does not improve the text. It adds a halting and pedantic feeling style to put 'and' in a clause by itself, for example, and arguably bad to separate 'self-inflicted' from 'largely'. It's not wrong, can be useful on occasion, is used frequently by some literary writers, but best avoided for general writing. You are making a purely stylistic suggestion, so this is completely subjective, but in my subjective opinion, the proposed fix is a net negative.
The writing in the article is very good, and generally speaking, the usage of commas is spot on throughout, in my opinion. But FWIW I did actually have to stop to parse one sentence that needed a comma to signal the intended meaning of the sentence. I wouldn't have even considered posting on the topic of commas were this thread not here, so, apologies.
I read the whole thing again twice, and couldn't find the sentence I tripped on, but I found a couple of examples to make my point, which is that the main reasons to care about commas are the non-stylistic scenarios where adding a comma changes the meaning of the sentence.
> Even so, no matter who advises you and no matter how insistent they are in the end the decisions are yours and yours alone and if there is a conflict between the direction that you think the company should go in or if there is second guessing of your decisions in the end your word is the one that matters.
This could easily be read:
> no matter how insistent they are in the end, the decisions are yours
But you probably were thinking:
> no matter how insistent they are, in the end the decisions are yours
Another one:
> If you are both a shareholder and a CEO note that these are two different roles
Since there's a condition followed by a suggestion, I would expect a separator between the clauses.
> If you are both a shareholder and a CEO, note that these are two different roles
The suggested commas are jarring because the sentence is jarring. If I could rewrite the entire sentence, it would be more like this:
> what bothers me is that, in many of these cases, the company is much sicker than it has to be. The wounds are largely self-inflicted, and the company might have survived if only someone had had the presence of mind to change direction when it was still possible.
I'm open to further corrections, how would you write that sentence? (I did the best I could on the original, if I could have done better I would have but punctuation is hard (and quotes are the hardest, for some reason)).
He's advocating a combination of ethics, following the law, playing it kind of safe, following financial obligations, and giving a shit about human beings. What made you think American on the first guess? You have a lot to learn about business practices in an imperialist, capitalist country. Do more research.
Note: To be clear, I'm an American saying this from vantage of all the evil shit I see in my business news on daily basis. The above points would make me guess European or Nordic before American. "jacques" would make me guess French or French/Canadian.
This advice is akin to "don't do drugs." The devil is in the details. And the details aren't always black and white.
The hardest challenge in being a CEO isn't in knowing your obligations. The challenging part is making compromises in order to make good on competing obligations...without letting shit hit the fan.