Do things need to fall in a heap before the CEO sees reason?

Dear Aunty B,

Okay, here is one for you. I am on the board of a manufacturing company that has been running at a loss for the past two years. We do well when the dollar is at around 85c but are suffering big time. The CEO doesn’t seem to grasp the enormity of the problem, which also includes increasing competition from Chinese manufacturers, and keeps assuming the dollar will readjust.

So far our bank has been supportive but we need to go back again cap in hand and recapitalize, and I am sure this time they will put their foot down. The trouble is that our CEO is confident of their support. I am not, and I have been around the blocks a few times.
I am urging him to prepare alternative plans and he is ignoring me until after the meeting. It is no good telling me to dump the CEO as he is an important part of the business – and part owner of the company. Do things need to fall in a heap before the CEO sees reason?

In a pickle,
Perth

Dear In a pickle,

I assume “the meeting” is with the bank so this is too important to be left to “urging”. The last thing you want is an unprepared CEO going to such an important meeting.

Now I don’t know if you are chair or an independent director but you need to get the chair to call an urgent board meeting and demand not urge the CEO to present scenarios to the board. This includes a plan for the bank – not a statement of hope – and a plan for the board if recapitalisation is refused.

The plan for the board must look at a number of scenarios including a rights issue or selling off a part of the business. It sounds like you have a weak board that is not determined enough to take on the CEO. But think of it like this. In a few weeks when the bank pulls out, you will be beating yourself up for not acting earlier. You will still have a problem with the CEO but your situation will be worse!

So summon up the will, ring the other board members and act now.

Be smart,
Your Aunty B

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