CEO
jacquesmattheij.com
jacquesmattheij.com
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.
And as to sweatshops I'll let Paul Krugman talk for me: http://www.slate.com/articles/business/the_dismal_science/19...
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.
Which is something else a CEO has to manage - the firms reputation.
Also, your solution doesn't seem terrible realistic. Most people don't have the wiggle room to quadruple expenses.
That aside: I also prefer better shoes. I can use them far longer, even if they're more pricey.
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 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.
And suffering the externalities of, for example, a polluting factory in their town.
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 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.
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.
Shareholders have no liability for crimes and torts, management does.
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.
"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.
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.
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.
Precisely.
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.
http://articles.latimes.com/2010/aug/29/opinion/la-oe-solnit...
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.
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.
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)
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.
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)
Selling before buying is pretty common.
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.
The statement that 'google was founded on a gray legal area' holds absolutely no water for me.
The Authors Guild had to do with Google books and Viacom vs Google was an outflow of them buying youtube.
Really, you are simply not correct about any of this.
These cases mostly revolve around the same issue - they say Google is ripping off their content.
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 sold my car and save money thanks to uber.
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.
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.
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 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.
A general story about ethics is always good. Satisfying my curiosity is probably not the best I can get from this blog post. :-)
edit: found your email address, sent.
Thanks!
[username]@gmail.com
Thanks in advance.
I also wouldn't mind hearing the context.
Thank you.
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.
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.
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.
I also put some ideas down in a Medium article last week. https://medium.com/@lanec/what-to-expect-as-a-new-ceo-9489df...
There are a lot of things to learn when you are becoming a CEO.
Having lived the tough experience the best advice I can add is don't do anything you will be embarrassed about looking back 10 years later.
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?
Exploitation, damaging outsiders, generating net negative value while increasing your own capital, all those are well outside of what I would consider acceptable behavior.
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.
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?
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 Pockets http://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.
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.
So, at least in Germany, there's no real excuse.
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.
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.
This is a strange conflict.
"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 not a simple problem, filtering and education so far seems to be the most effective ways of dealing with it.
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.
I do have a question: if you get outside legal advise, can you show these people confidential legal documents if they are your own lawyers?
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.
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.
https://en.m.wikipedia.org/wiki/Principal%E2%80%93agent_prob...
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.
You even snuck "the company" and "employees" in your paraphrase.
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.
The EU itself can not do any action, just approve or deny one.
The competence to suggest laws or executive orders lies with the national governments.
I don't remember why I said that at the moment. I guess I'll read it again.
Your response is gracious nonetheless. Some people really like longform writing though, the more meandering and reflective the better. Each has its place IMO.
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.
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.
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.
> 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.
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
Ok.
Will drop you a line.
> 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.
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.
If you thought that was worthwhile reading - have a look at Ben Horotitz' book - it's much more dense and full of actionable advice.