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CEO Inaction Killing the Company: Final Thoughts

Jim Harness's Profile

From Proformative: This discussion is part 3 of an ongoing conversation.

Part 1:

Part 2:


"We are all experienced CFOs on this site. For me, I knew the challenges working for this company prior to coming on board (maybe not to the level it sunk to, but certainly I understood this was a challenged company). I thoroughly understand the job risks involved in disclosing to the shareholders (family) and the likely repercussions. My post was really to see if there was a consensus amongst CFOs to the concept of "fiduciary responsibility" of the CFO to report dire financial conditions to shareholders other than the minority CEO shareholder, that is the open question. If the CEO blocks access to shareholders, which from my experience could only happen with a family run company, can we as CFOs simply accept this and do not report further? I don't yet see a consensus of the individuals commenting on this site, and may not. By the way, I had already taken action a couple of months ago and will disclose the results in my last post. My intent was to have a thoughtful, open discussion of the concept of "fiduciary responsibility" of the CFO in this particular case."


Topic Expert
Wayne Spivak
Title: President & CFO
LinkedIn Profile
(President & CFO, |

Your fiduciary responsibility (and you should have talked either to the GC and/or your own attorney) is to inform the shareholders, to clarify we're talking a dire matter, not hey we had a bad few months..

Failure to do so may place you in a precarious legal position (on many fronts).

Jim Harness
Title: CFO
Company: Independent
(CFO, Independent) |

I want to thank all of you who took the time to respond to my questions. Your comments provided valuable insight for me on this issue. In particular, I had been referring to "shareholder" throughout my discussions, but disclosing to the "Board" is really what I meant to say. The difference is minor in this case, the family are the shareholders and most of the shareholders are on the board. I made a request to the CEO to have a family, i.e. the board, discussion of the financial situation. The CEO did not see the need, I pressed and my employment arrangement dissolved. No surprises here.

I have been reviewing some Illinois law and found there is legal precedent for a shareholder in a privately held company to have a fiduciary responsibility to the other shareholders, In re Joy Recovery Technology Corp, a bankruptcy court sitting in Illinois remarked that “[a]ctions by shareholders [in closely held companies] that leave a company insolvent could be disloyal and in bad faith.” Whether the case law is similar in other states, I do not know.

So through the posts to this site, I have broadened my understanding of fiduciary responsibilities and feel completely comfortable with my document trail in trying to alert the CEO and at least one board member to the dire financial condition of the firm. In the end, the CEO must take responsibility for stopping my communication to the board of the the current and projected financial decline of the firm, not me.

Thanks again for everyone who responded. Your comments have been very helpful and informative. Now, anyone need a talented and resourceful CFO?

Topic Expert
Scott MacDonald
Title: President/Owner
Company: AlphaMac Resources, Inc.
(President/Owner, AlphaMac Resources, Inc.) |

I have been advocating for years that all CFOs should have a clause in their employment agreement that allows them significant severance pay for instances such as this. Call it a "fidelity/honesty" clause. If a CFO gets fired for communicating unpopular information, they should not have to suffer financially.


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