Lessons from Lark Distillery: What a board should do when a CEO in crisis steps down

Hobart-based Lark Distillery is in damage control after its CEO stepped down following the publication of a video purportedly showing him smoking an illicit drug — in the aftermath that follows a crisis of this magnitude, is the company’s response a masterstroke or a disaster?

Geoff Bainbridge, 50, says the release of the video was actually the culmination of a six-year extortion racket that began when he found himself in an unfamiliar apartment with two unfamiliar men in 2016.

He told Nine Newspapers he had been travelling in a south-east Asian country investigating new investment opportunities — Bainbridge is the former brain behind burger empire Grill’d — when he struck up a conversation with a woman at a bar.

As he tells it, the last thing he recalls is having a drink at her apartment, but he woke up the next morning to two men demanding money from him.

Bainbridge says he ultimately paid the extortionists nearly $9000 in the years since, but the video was leaked this week anyway.

It was a “perfect storm for public interest, drugs, sex and extortion”, crisis communication expert Sally Branson says.

“Lark immediately ending the association with Bainbridge was the best first step.”

Mopping up in the aftermath

Lark Distilling’s executive team acted swiftly.

A remorseful statement from Bainbridge was released regarding “content showing me engaging in illicit drug use”.

“After paying my extortionists, I sought advice from a London-based threat assessment agency and ceased responding to the extortionists’ threats,” he explains.

He revealed to Nine Newspapers that the company was global risk consultancy Control Risks, which ran a report showing the risks were credible and escalating.

Unfortunately, the extortionists made good on their threat, and The Australian newspaper ran the story as an exclusive.

In the statement, Bainbridge makes it clear that he felt he was the victim of a crime, but that “I accept that I am also responsible for the circumstances I find myself in”.

“I’m a victim of extortion but that wouldn’t have occurred without my poor judgment. I am deeply remorseful for my own actions,” he continues.

But instead of relying on a written statement alone, Branson says adding a video message would’ve been a better move for Bainbridge and the board.

“The footage that leaked was all video-based, and to really control the message, a video media release may have been a good step in conveying sincerity and explaining the situation,” she says.

“A video message combined with an article has more impact and a greater ability to convey sincerity.”

A statement from the company was swiftly sent to shareholders on Wednesday, which spelt out that the board had become aware of the “personal matter” only one day prior.

A new Lark Distillery CEO — fast

Non-executive director Laura McBain was immediately installed as interim CEO — McBain has a strong reputation having headed up Tasmanian-owned infant formula producer Bellamy’s.

Branson says this was a masterstroke.

“Replacing him with an ‘already in the business’ female who formerly worked in the wholesome infant space of baby food and formula is more than a brand could hope for as a ‘pure but experienced’ successor.

“It’s a dream for a worst nightmare.”

In the statement to shareholders, the board made McBain’s qualifications clear: she was a former CEO and managing director of the ASX-listed company, and “oversaw significant change innovation and business growth, including expansion into South East Asia and China”, the statement continued.

McBain was also the managing director of Maggie Beer Holdings from 2017 to 2019 and former non-executive director of Export Finance Australia from 2014 to 2020, it concluded.

But it seems it wasn’t enough to stop Lark Distilling’s share price from dropping by a hefty 20.2% on Wednesday, down from $4.55 to $3.63.

Bainbridge’s colourful interview

So was Bainbridge going to Nine Newspapers for a story the right idea? Branson is torn.

“The story itself reads a bit like a movie — the former CEO is speaking from LA, he’d sought advice from threat assessment business in London with a global footprint — the story of ending up with two men in your room extorting you. A reader wouldn’t be shocked to see Liam Neeson enter the story,” she muses.

“This could be difficult for the average consumer to believe or imagine — but perhaps for some consumers of a high-end whiskey, this is the sort of fantasy they imagine and so immediately sympathise with.”

But she wasn’t convinced by Nine Newspapers mocking up the text exchange — it “could have been done by anyone with a laptop on Canva”, she points out.

Branson says there’s no doubt the incident has caused reputational damage for Lark Distillery, but “with a quick exit, and a replacement strategy Lark has acted responsibly enough for regulators and stakeholders”.

“And for a high performing, financially successful CEO, the damage will recede as quickly as someone needs his skills,” she continues.

“This is a career-ending incident for an alcohol company CEO, but I’m sure we won’t see too much damage to the career prospects of Mr Bainbridge.”