CEO's Diary: No agenda?

The CEO has been summoned back to the board room

May 29 - More disruption to the holiday. The Chair says the data is good, and his team think they can raise the funds to fund a deal (assuming the shareholders are reasonable).

Then my PA called me to say I'd had a letter in the office saying that the shareholders had met and now wanted to meet the Chair and myself next Wednesday. No agenda was suggested.

Of course I must agree. But I did ask her to send a note asking for an agenda. In the meantime the Chair has his own idea, that this is a board meeting and so we have a right to table items for discussion. I agree. He and I are meeting on Saturday to agree what we're to do. Maybe, just maybe I can now have a day or so off. What’s left of this week is very child focused.

* * *

May 27 - Holiday? What holiday? I spent two hours on the phone with the Chair this morning. He thinks he has a portfolio of business angels who'd invest in the business at the right price.

What's the right price he asked?

I have to say that's not something I could answer instantly. What I could do was send him the stuff I'd done on our capacity to create free cash flows assuming we distributed all surplus cash, including that generated by reasonable gearing to the existing shareholders.

I also had to stress to him what I'd said to the ex-Mrs CEO's lawyer last week: confidentiality is key here. He must not disclose information to third parties. But I see no problem with him being aware of outline data to let people form a preliminary view so long as no breach of commercially confidential information results. I can live with this because the cash flow is highly conjectural.

None the less, I am now excited by this. The chance to take this company forward is now more exciting than being a non-exec elsewhere. And being on holiday my wife and I had the chance to discuss this in depth. Without her consent this isn't going to happen. But as she says, this all depends on the shareholders, and they're so unpredictable that nothing should be assumed.

Still, we'd knocked back quite a lot of wine by the time we agreed on that!

* * *

May 23 - The ex-Mrs CEO's lawyer called me and asked for a pile of data. I had to advise him that without her written consent I could not provide it to a third party and I did not have that.

He was not amused and suggested I was being antagonistic. I admit that this was incredibly useful to me. I very calmly made clear that this was not at all the case. I was tasked with running the company for the benefit of the members. Not one of them, I said, but all of them. And supplying company data to a third party without authorisation could clearly prejudice that goal.

He was forced onto the back foot. He had to agree to get me the authorisation I wanted. I agreed to put the package together (or rather, I delegated it immediately to my PA - now worth her weight in gold).

What I could not get is any indication of when the shareholders actually intend to meet, which leaves me in limbo. That's frustrating. I'm away next week (half term) but now have the distinct feeling that this is not going to be the chance for 'rest and recuperation' that glossy magazines always refer to when stars go away. Thankfully we're not going far. I'm hoping matters don't require me to come back, but I could do so if need be.

* * *

May 22 - I had no choice but go north after the management meeting. I was overdue for a visit and North needed my support in two things, one a negotiation and the other yet another disciplinary hearing. Actually, in this case and I guess quite rarely, the appeal I heard resulted in North's decision being changed. What was clear was that some relevant evidence as to the breach of company rules had not been available at the time the person was disciplined: the action she took was a technical breach, but was, on balance, I decided done in good faith and, she had thought for the right reasons. As such the formal warning she was given was reduced to a noted breach of regulation that was not expected to recur, but with it also being noted that more guidance was needed for those in the circumstance she faced.

This is always dangerous. North could have in turn been undermined by this. In practice I spent some time discussing it with him, assuring him that he’d also done the right thing and would not have had the authority to suggest company rules lacked flexibility to permit the compromise I'd offered, but I had. I then suggested that in future that maybe he deferred decision making on such a situation and to consult first, but otherwise I had no criticism at all.

He seemed OK. And he's done a great job with the customer we met, and we will, I am sure, win significant business as a result.

* * *

May 21 - It was the monthly management meeting yesterday. It's obvious that some of the stress in the board has been perceived by the team. Questions arose as to what is going on and I decided truth the best (indeed, the only) course of action.

I stated simply that the Chair has made a suggestion to me that I might be a non-executive director of another company. I said I had not been convinced initially, but now saw real benefit for me, and as much for the company from me doing so. I outlined why that was, and also suggested that the 'knowledge transfer' this would allow and the ideas it should fertilise would help us. I also made clear that this was a measure of our progress and of my confidence in the team that's now been built. This wouldn't be possible without their strengths. It was also good for them: it meant I was increasingly confident of my capacity to delegate.

So of course I then had to explain that despite the apparent benefits of the measure the shareholders were yet to be convinced, but that this was as much a measure of the long running feud between them as anything else. All I could say here was that the issue would not be the cause of a melt-down. It was not worth that. I hope they were reassured, but I'm not quite convinced they were.

Not one of them asked if this had other implications, like for my future or for the ownership of the company. I was pleased. I did not want to deal with that one right now. I've hardly had the chance to think this through myself as yet.

* * *

May 20 - Saw the Chair last night. We discussed how to solve the current problem.

The obvious solution is to get rid of the shareholders. I mentioned recently I'd looked at how much we could use the business itself to help achieve this aim, stripping surplus cash, financing debt, and so on. The payment could be considerable. The future profit stream would be depressed for a while by the financing cost, but we'd remain well and truly viable. What price would be needed to induce this is hard to say.

The Chair just listened. "Did I want to do a buy out?" he asked. I reiterated, it's never been my plan. And I'm not keen to assume vast amounts of debt to do it: I see that as a very perverse incentive.

"What if funding were available though?", he persisted.

"Is it?", I asked.

I didn't get a straight answer, but I gave one. I would be duty bound to consider it if the option was available.

He agreed to come back to me.

I'm still wondering if he has engineered this crisis with this in mind, but if so, I can live with it. Maybe that's what a good chair should do. And as a CEO I need to deliver the return.

We have landed that business Newc and I went to get. I'm doing my bit.

* * *

May 19 - A weekend is a good time for reflection.

I did just that.

The Chair and I have precipitated a crisis. I have no news to add on that, but it did make me think.

Is this a resigning issue? No, I concluded it is not. Will it make me think about moving on in due course if I do not get my way? Yes, it will.

It's good to know where you stand.

* * *

May 16 - The Chair and I received letters by courier last night from the ex-Mrs CEO's lawyer telling us she was exercising her option under the shareholder agreement to call a shareholder's meeting. We would not be welcome.

I got a call from the ex-CEO later on who said that she could exercise any option she wanted. He wasn't going to her meeting and as such it would be inquorate. Unless, of course, she agreed in advance to an increased dividend out of our surplus cash. And he thought that very unlikely!

And the Chair has mailed me a response this morning with a letter attached in which he notes the shareholder's right to have a meeting without the executive present, but that he wishes to point out that under my management they have done rather well. In fact since I arrived profits have more than trebled, having allowed for their somewhat generous remuneration for the tasks they now undertake, the company is in good shape, surviving the risk of any property down turn remarkably well so far, and has expansion plans that are my responsibility and which look like they will lead to more progress. In other words, he's nailed his colours to the mast and said I'm a darned good thing.

I appreciate that.

None of it was, though, the right background for today. Newc and I are going to close (we hope) our biggest deal yet for the new work, with a public authority of exactly the sort we have targeted, for the product I wanted to sell, at a price which is a clear winner for them (this was tendered, of course) but which seems to have good margins in it for us (unless there's some real sting in the tail of this work we have simply not anticipated).

If we land that then I think the investment of effort in this will have paid off.

But right now no investment of effort in the shareholders seems to be paying. All I can say is that so long as they don't agree on much I think we can pretty much carry on at will: after all, we're still paying them well and I can defend anything I do on the grounds that it's in their best interests. Even the non-exec role has the Chair's support in that respect.

But it's such a massive diversion of effort. It would be so useful if we could pay both of them a bit more and just tell them to shut up. But life is not that easy.

* * *

May 15 - What happened to yesterday, you might ask.

It was a bit of a blur. The Chair did call the shareholders about me being a non-exec. The CEO said fine, if he could have his dividend increased. Why, he said, should everyone else get what they want out of this company bar him? He has a point.

The ex Mrs CEO decided to hold out. No there was no chance I could be spared. No there was no way the ex CEO could have a dividend increase (although I'm not actually sure the Chair even communicated this demand to her, but the statement is entirely predictable).

It rapidly seemed we had reached impasse. The Chair reported that to both of them, and reported that he felt it to the considerable benefit of the company that my experience was broadened.

Then without the ex Mrs CEO's permission he called her accountant and told him what was planned, since he often represents her at board meetings. This was a bit of a wild card as it turned out. He could see no problem at all with the proposal. Indeed, as someone who held several such roles himself he saw lots of benefits.

Now the Chair had 'divide and rule' in her camp. If she was angry before she went ballistic now. She demanded the resignation of the Chair. He refused to give it, pointing out he had her standing permission to discuss issues with her accountant and had only done what she had authorised. He omitted to note that this was presumed to only apply in her absence, a fact she did not overlook, but which was implicit, and not explicit in the instruction and meant he had not broken the strict letter of the agreed process.

Then she threatened to sack her accountant.

I, of course, was also to be fired.

The Chair told us all to sit on it overnight.

We did.

This morning the Chair called her, and she refused to talk. Her accountant says he's been told not to talk and we're to talk to her lawyer.

Her lawyer says he has not been briefed.

And all I want is to be released a day a week, with full compensation being given.

What I do know is that something will happen as a result of this. I have to be honest. I am not sure what, and I'm not sure I like that. But I think I'm in for a pound, rather than a penny right now and there's no real way out.

My wife is remarkably relaxed about it. Apart from releasing her pretty standard venomous comments about the ex Mrs CEO she thinks it will simply work out for the best. I'm amazed at her confidence.

* * *

May 13 - I expected an immediate reaction to my memo. I didn't get one. Does that mean they're talking? Or am I paranoid? The Chair has promised to call them tomorrow about it.

In the meantime #1 (remember her - she's not featured much for a while, simply because she's now so completely in control of accounts after her somewhat explosive entry into this place) spent much of the day with me looking at the management accounts for the first two months of the year. That's enough data to begin to get a real feel for how things are going.

How are they going? Fuel is killing us, and we haven't got escalator clauses for it. That's problem number 1. Problem number 2 is the lack of new installations, although this is not hitting margins as these are often done at low rate to win contracts. But as we're winning contracts without always getting a kit contract right now (in other words, we're currently willing to take on and service kit supplied by other people to get the work) margins on this activity are also being cut. Replacement charges for failed kit on these contracts is what redeems them but that's more erratic than I'd like.

And we've suffered some silly costs. I recently mentioned the van insurance problem because of too many repairs, for example.

Overall, fuel apart though we're OK. But that has to be remedied. I'm looking urgently at how we can renegotiate contracts and how we can reduce visits. When the kit is on auto mode (i.e. it tells us when there's a problem and so we only go on call out) we have this option. But it's still not universal, so mileage has to be done to make routine visits that add little value. Right now that's pain.

* * *

May 12 - Excuses have run out. I have thought long and hard on this issue, and I do see benefits from being a non-exec, for me and the company, if it is possible.

I saw several ways to address this with the shareholders. I could call them, write a memo to them or call a meeting to discuss it.

On refection I decided the latter best. After all, we have a mechanism to do this. It's called a Board meeting. It means the Chair is involved. I consider that a benefit.

I sent out the request for a special meeting this morning with a briefing paper I drafted over the weekend setting out the benefits as I see them.

Now I'm waiting to be sacked for insubordination.

There's always been one risk in my position, which is that the shareholders agree on something and unite against me. I'm hoping this isn't it. But I now think the Chairman is right. If it isn't now, it will happen one day and I have to prepare for that eventuality.

* * *

May 8 - Sober reality prevented me taking further action on my chosen course of action.

This morning required an appeal from an employee dismissed for losing his driving licence. These happen with boring regularity and I'm sympathetic when the cause is an accumulation of speeding fines. I'm not when the case involves drink. Given that in either case it's very hard to see how we can find meaningful alternative employment for people whose work is based almost entirely around their van I remain baffled as to why they think it worth appealing, but once they do we have to go through the motions, and I'm the last resort when one of my managers has already been involved in the case.

This one had been drinking. He's no longer with us and in his case I don't think anyone will be crying.

Then it was a support visit for East's #2, who continues to cover the management role really well, if in part by seeming to appreciate when he is out of his depth and by asking at appropriate times for help. I respect that. He's going to get a good bonus for what he's done, and we'll have to see how to develop him now, including by providing training on the issues where he has needed help. We never know when we might need to promote him. I'd prefer to have a succession plan in place for the next vacancy.

* * *

May 7 - I sat down with East and Newc today to discuss whether I should be a non-exec. This decision impacts on them, in particular, as my operational deputies.

I explained the scenario. I explained the benefits, and the risks as I saw them. I explained that this would mean more responsibility being devolved.

They were unambiguous. They want me to do it. They think that the input of another experience might help us - partly because there are some overlaps in the operational activities of the companies from which we might learn, although the markets are different.

They also think that being aware of other management experience must help us bench mark where we are and how we can improve.

I was encouraged.

I was less encouraged by our pipeline, which was the main theme of our meeting. We're winning regular maintenance, but on lower grade margins for less work, but new install is down right now. Newc's new activity is however seeing useful leads. He's running this show virtually without reference to me now. Which does rather prove the point that I can translate an idea into this place, get it going and move it on to someone else to manage.

Perhaps I can delegate when I want to. It's paying off here.

So now it's just the shareholders to tackle.

* * *

May 6 - I am amazed how distracted I have been since the Chair suggested I should think about my own career. My singular focus on this place has been hard to sustain. Suddenly there is a commercial world beyond it that seems to have all sorts of opportunities within it.

I spoke to the Chair briefly over the weekend because I have to make the decision whether I want to go back to the shareholders to pursue the opportunity to be a non-exec that is now presenting itself. I told him of this distraction. He laughed and I could tell it was indication that this was something of which he approved.

I think I know why. I think he's trying to get me to lift my eyes above the horizon. I'm aware he thinks I micro manage on occasion (but don't we all?). I think he's saying I devote too little time to looking at the big picture and too much to sweating over the detail. I know he thinks that now there is a good prospect that the team is settled that I should be really empowering them to do much more, and that I concentrate on strategy and to act as their sounding board and necessary problem solver when occasion demands.

Maybe this is what he's all about. Either way, today's meetings, internally on health and safety (why was I there?) and externally with both a supplier (who wants early payment, meaning we need to look for alternative sources, now) and a customer prospect (which as soon as we have a full team back I will not need to do with people of this size) did seem mundane.

But is that good or bad?

* * *

May 1 - I spent the day doing something I shouldn't. Well, at least it wasn't obvious at first how the company benefited. What I did was consider how I would buy this place if I wanted to.

We have an absurd balance sheet, stuffed with cash. We have an overhead bloated in part by shareholders. We have no gearing. I simply decided to see what could be stripped out for the shareholders, what could be geared, how could money be raised, what costs could we cut, what gearing could we afford if we decided to go that way.

Fascinating. The sums are significant.

Now there's another question. Should I tell them? I think the answer is yes. And I think I will. I want to show just how much the ex-Mrs CEO's refusal to allow increases in dividends for her ex-husband is costing, and how in some ways it is impacting on us.

I don't know we're inefficient as a result. But there's no doubt that more pressure would change our attitudes on occasion.

So I say I shouldn't have done this. That's because I began being interested for me. But I think they should benefit too. That's saved my conscience about a day spent sweating over spreadsheets.

* * *

For previous installments of the CEO's Diary, see:
April 2008
March 2008
February 2008
January 2008
December 2007
November 2007
October 2007
September 2007
August 2007
July 2007
June 2007
May 2007
April 2007
March 2007
February 2007
January 2007
December 2006
November 2006
October 2006
September 2006
August 2006
July 2006
June 2006
May 2006
April 2006
March 2006
February 2006
January 2006
December 2005
November 2005
October 2005
September 2005
August 2005
July 2005
June 2005
May 2005
April 2005
March 2005
February 2005
January 2005
December 2004
November 2004
October 2004
September 2004
August 2004
July 2004
June 2004
May 2004
April 2004
March 2004
February 2004
January 2004
December 2003
November 2003
October 2003