
CEO - jacquesm
http://jacquesmattheij.com/ceo
======
zaidf
"As a CEO you are obliged to keep the company on the right side of the law."

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.

~~~
wimagguc
It's not really within the premise of the post, but focusing too much on the
law side without much regard on morals & ethics isn't that great either.

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.

~~~
EdwardDiego
But there's no shareholder value in acknowledging externalities, so most
professional CEOs appointed by a board won't challenge immoral acts if it
would contradict their mantra to "increase shareholder value".

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.

~~~
mehrdada
It goes even beyond just upsetting some shareholders paying for it. The CEO
has the fiduciary _duty_ to ignore such externalities.

~~~
jacquesm
That is an oft repeated un-truth.

~~~
mehrdada
Would love to be corrected with evidence.

~~~
jacquesm
[http://www.nytimes.com/roomfordebate/2015/04/16/what-are-
cor...](http://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-
obligations-to-shareholders/corporations-dont-have-to-maximize-profits)

Will that do?

~~~
mehrdada
Sure, "shareholder values" is not the same thing as bottom line profit and it
might be subjective depending on a number of factors, but it is also not the
same thing as value to the broader society; it can be at odds with it
depending on who the shareholder is. The duty might be vague to define in
practice, but it still is very much in existence.

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.

~~~
jacquesm
> I don't think that article claims this is untrue

"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.

~~~
dahart
Jacques, I actually didn't know this. It is a claim that has gone around and
is often repeated, I'm pretty sure I've heard it used in "expert" interviews
in financial & political documentaries, so I guess I assumed it was true.

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.

~~~
jacquesm
I will probably do a separate blog post on that one of these days.

------
ignoramous
Reminds me of peace-time ceo vs war-time ceo [0]

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.

[0]
[http://www.bhorowitz.com/peacetime_ceo_wartime_ceo](http://www.bhorowitz.com/peacetime_ceo_wartime_ceo)

------
HappyTypist
I respectfully disagree. Some laws are better broken, like taxi medallion
(read: state enforced monopoly) laws. Uber has improved the lives of millions
of people by breaking laws.

I sold my car and save money thanks to uber.

~~~
jacquesm
Great for you. But for Uber to wilfully decide to attack certain laws they
decided were unjust was a conscious decision and in some places that caused
real trouble for drivers and others. Of course if you are aware of all that
and you _still_ decide to go through with it then that's ok with me.

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.

~~~
gizi
It really depends on what you believe about the legitimacy of man-made law.
Large segments in the world population do not consider it be legitimate. Even
the papacy openly questioned its legitimacy in 1937, quite before Hitler
became truly obnoxious. Therefore, the issue is rather about laws that are
enforceable. If the law is really enforceable, you may indeed want to refrain
from breaking it. Otherwise, it is your own call.

~~~
jacquesm
I've seen a couple of people that tried to put thoughts such as these into
practice. Personally I think this is a very dangerous course of action and
given how they ended up I feel that my position is backed by some hard to
refute evidence. What you believe should be right is of little or no
importance if that conflicts with the law of the land.

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.

~~~
gizi
Uber and airbnb are doing absolutely fine in my impression! ;-)

------
olalonde
That post seems strangely specific, am I missing some context?

~~~
jacquesm
You are spot on, email in your inbox.

~~~
samstave
um id like same in my email.....

~~~
jacquesm
I'm sure you would but I don't have yours and your profile doesn't list one.

edit: found your email address, sent.

~~~
anilgulecha
+1 ..

------
rglover
Brilliant post, but gave me the shivers that he had to write some of that. If
the desire (or concern) to write this is legitimate—and I can't find much of a
reason it wouldn't be—then there are some scary folks running companies out
there.

~~~
swombat
There are _definitely_ some scary folks running businesses out there. Like
Jacques I cannot specify any names but the number of companies who think it's
ok to omit paying their taxes or their suppliers is... well, there are quite a
few of them (source: I work with a lot of UK tech companies through my
business, GrantTree).

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.

~~~
gregpilling
Never ever short the tax man. They get very angry, and then seize your bank
accounts. All of them. Even the secret one you didn't think anyone would know.
Even the bank accounts that are for your kids, or anything that is remotely
attached to you.

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.

~~~
jacquesm
And if you do ever find yourself in a position where you really can't pay the
taxman go to them before they come to you and try to make some kind of deal.
If they _do_ come to you they will seize _everything_.

~~~
swombat
In the UK, they won't - at least not if you're a relatively small business.
I've found HMRC surprisingly accommodating. Which I guess is why some people
consider it a valid way to extend themselves some extra cash flow funding.
It's still a very bad sign and generally correlated with the business
remaining small, failing, defaulting on other debts, etc. But it's the CEO
themselves who's sinking their business there, not HMRC (at least I've never
observed HMRC going after a small business in this way and "seizing
everything" \- even though I've frequently observed entrepreneurs who were
chronically late with their taxes for years.

------
danieltillett
Jacques the one thing that makes this advice complex is when you are both the
CEO and also the major shareholder. I do agree with you that you need to know
what the legal and moral limits are and don't cross them. Everything else is
hard.

~~~
jacquesm
Agreed, conflicts of interest are hard to resolve, especially when times are
tough.

~~~
danieltillett
When times are tough getting out of bed in the morning is hard.

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.

------
nickpsecurity
Great write-up, Jacques. Bookmarked it. :) Nice reference to Interface CEO,
too. I like what he did. His presentation style is so good I can never tell if
he genuinely cares or just wants us to think so. Just has that kind of smooth
delivery. Could've been a politician if he wanted.

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?

~~~
jacquesm
It's tricky. If someone is actively working against the company I don't mind
putting on some pressure to ensure survival, even if that's not the most
ethical thing to do. But that's one individuals discomfort balanced against
the continued employment of a whole pile of people. If it were actually
illegal or if that person was not a party to generating the problem to begin
with I would never do it. It all revolves around the particulars of the
situation so there is no 'one size fits all' advice in this particular
respect.

Exploitation, damaging outsiders, generating net negative value while
increasing your own capital, all those are well outside of what I would
consider acceptable behavior.

------
ilamont
_As a CEO you set the rules your company operates under and you determine who
else has what kind of powers within the company. For instance, you could
delegate some of your work to others that you feel are more qualified or that
can help you lighten the load. Even so, you are still responsible for whatever
it is that they do and even though it is great to work with others and to be
able to trust them because the end responsibility is yours you are still
required to check up on them to make sure that they actually do what they say
they do._

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.

------
dkopi
Given the sheer amount of laws and regulations, how easy is it really for
first time CEOs (or even experienced CEOs) to avoid breaking the law
completely?

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?

~~~
kuschku
I'm sure it's worse in common law countries, because precedence cases hold
legal weight there, but in civil law countries, it's not really hard.

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.

~~~
BjoernKW
While laws in civil law countries are indeed usually more straightforward than
in common law countries (that distinction becomes more blurred though anyway
with common law countries enacting more statutory laws and civil law countries
adopting practices from precedence law) they in many case still allow for
interpretation.

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.

------
EdwardDiego
I'd love to read more advice like this, especially about how the execs can be
effective leaders and lead an organisation to a good culture. I have worked my
way to a point where I can now call myself a Chief Something Or Rather, and
I'm terrified that the Peter Principle is in play. While I am undertaking some
training on governance and finance (which is really aimed at board of
directors rather than newbie executives), it's overly formal and doesn't cover
the implicit leadership challenges.

~~~
dilemma
The Frontiers of Management, and The Practice of Management, both by Drucker,
are excellent and inspiring. Especially the former.

~~~
EdwardDiego
Cheers mate!

------
huuu
Cleaning a wound hurts but is necessary for the healing process.

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.

------
chinathrow
Great post.

"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.

~~~
jacquesm
Spam is a real problem. The background is that the law now centers on the
sender of the message, rather than the beneficiary of the spam, so spam
services simply pop up in places that don't have such laws. Having the law go
after the beneficiaries is also fraught with danger, it would be tremendously
easy to do a joe job on a competitor.

Spam is not a simple problem, filtering and education so far seems to be the
most effective ways of dealing with it.

~~~
chinathrow
My post was not so much about spam services, more about companies, from
startup to large, listed companies who simply ignore current law (opt-in) in
the country where I conduct business. In these cases, the sender is mostly the
beneficiary too.

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.

~~~
jacquesm
Ah right, yes I understand now. Such spam I simply forward to the local anti-
spam watchdog (OPTA, in my case) with a form letter I made for the purpose and
a CC to the sender. Very very rarely do they reply (both the OPTA and the
senders), _never_ have I seen another email from a sender that got that
treatment.

------
alexandercrohde
I feel like this article is an angry criticism on a situation which I am
unaware of. If he knows a company breaking the law then I propose he whistle-
blow, rather than right a legal guide on a blog and hope law-breaking CEOs
stumble upon it.

------
chris_wot
This seems like great advise :-)

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?

~~~
jacquesm
In all jurisdictions that I'm familiar with you can, but of course since
you're already talking to _a_ lawyer it would be best to open the discussion
with that question if you are unsure.

~~~
beambot
Importantly... You can make sure this is a stipulation of your employment
contract: That you can confidentially share material with your own personal
attorneys for advisement purposes. How unjust would that be if you weren't
permitted to get unbiased legal advise when you're personally liable for any
actions you take!?

~~~
jacquesm
That's a good point and worth including, I'm totally out of time for today but
I'll make a note and update the text at some point later tomorrow. Thank you.

------
ktRolster
It's a good thing for CEOs to not break the law, but I'm not sure telling them
that multiple times in a blog post will have much effect......

~~~
jacquesm
In many cases these are not things that people do consciously, and in some
cases they do it because they are pressured to make the wrong decisions
without fully realizing the consequences. For instance, shareholders could
push a CEO to expand the company when the financial situation does not
actually allow it.

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.

~~~
sgift
Somehow this reminds me of estimation in software development and developers
who give estimates they are not comfortable with if a manager pressures them
hard enough: "So long? Come on, don't be so pessimistic, we need it on xyz,
you can do that, can't you?"

~~~
jacquesm
Yes, there are definitely some parallels. My personal approach to this is to
point blank refuse to cave in to any kind of pressure whatsoever. Stuff
happens on my time-table and with what I feel is achievable or not at all, no
matter whether it is as a hired hand or as the CEO of a company under pressure
from shareholders.

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.

~~~
ktRolster
I actually just wrote a post on that topic:
[http://www.zerobugsandprogramfaster.net/essays/estimates.htm...](http://www.zerobugsandprogramfaster.net/essays/estimates.html)

------
chmike
These advises inspired me an educational simulation game like the rat race.

------
dilemma
Readers may be interested in knowing where the legal requirement to maximize
shareholder value comes from. Then it won't seem quite as evil anymore.

[https://en.m.wikipedia.org/wiki/Principal%E2%80%93agent_prob...](https://en.m.wikipedia.org/wiki/Principal%E2%80%93agent_problem)

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.

~~~
tamana
There is no requirement to maximize shareholder value, as you yourself
explained. the requirement is to not steal.

You even snuck "the company" and "employees" in your paraphrase.

------
venomsnake
> Inaction, or postponing a decision long enough that a situation spirals out
> of control is generally speaking not an option.

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.

~~~
kuschku
Well, that's not something the EU can fix.

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.

------
santiagobasulto
I'm always amazed with the capacity and skills American have to write so many
words without any actual content. Just words, ramblings, perfectly
synchronized sentences. I remember when I first read "Getting things done".
You'd get 1 valuable lesson/advice every 30 pages. Same thing here. 1 valuable
piece of content every 5 (giant) paragraphs.

~~~
jacquesm
I think that if you believe that I'm American that's probably the best
compliment I could get. Writing is hard for me, and this is not my native
language, but I'll take your criticism to heart and I'll try to tighten up the
text. Thank you for your feedback, greetings from NL.

~~~
StavrosK
Hey Jacques, reading your post, I initially have a piece of advice: Use more
commas, it helps the flow along. Currently it reads a bit urgently, here are
some examples:

> 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.

~~~
dahart
Personally, I think the proposed second example is too many commas, and does
not improve the text. It adds a halting and pedantic feeling style to put
'and' in a clause by itself, for example, and arguably bad to separate 'self-
inflicted' from 'largely'. It's not wrong, can be useful on occasion, is used
frequently by some literary writers, but best avoided for general writing. You
are making a purely stylistic suggestion, so this is completely subjective,
but in my subjective opinion, the proposed fix is a net negative.

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

~~~
jacquesm
Fixed those, thank you!

