YOU MAKE THE CALL: Are You Responsible For Knowing That This Executive Hire Was About to File Bankruptcy?
Let's say you're leading a CEO Search for a company that does $48 Million in Revenue and prints $24 Million in Net Income annually. Are you responsible for knowing the hire you made was in financial trouble?
Is that your responsibility? Is that your business? Would the Board of Directors expect that level of vetting?
A company recently missed along these lines, getting surprised by their CEO filing for bankruptcy just months after he was hired. Whether you agree with it or not, I'm thinking there's no way the company makes the hire if they knew their candidate was carrying such heavy financial woes. Here's the details of the CEO's situation, which are public record:
"_____ recently filed for Chapter 7 bankruptcy, and documents filed today in federal court show that he has only some $1.2 million in assets, compared to more than $25 million in liabilities. He's making $850,000 as part of his 10-month contract to _____, so it would appear ______has quite a long-term problem here.
He has just $300 in cash on hand and $500 in his checking account, the bankruptcy documents show.
_____ estimates the only real property he owns as worth $2,000 from a "1/4 interest in deceased parents real estate — 8 acres in Iona, Idaho worth $8,000.00 (total).
The latest court filing shows the extent of those difficulties. The biggest claim against him is $20 million from Terra Springs LLC, in Louisville. Republic Bank and King Southern Bank in Louisville claim $2 million and $902,000 respectively. American Express is claiming $10,810.
Chapter 7 bankruptcy is used to liquidate debts. Among the other assets ____ lists are: $5,000 in home furnishings, $2,500 in memorabilia rings and watches, $900 in books and pictures, $950 in clothing and accessories and $200 in golf clubs and a shotgun."
Hit me in the comments and tell me two things: 1) Was it the lead HR exec's responsibility to know this data about the candidate, and if they knew, should they have made the hire?
PS - the CEO in question is embattled Arkansas football coach John L Smith. Click here for details.