Top Five Causes of Boardroom Disputes
There is no such thing as a typical boardroom dispute or shareholders dispute. However there are certain common causes that are at the bottom of most disputes in the boardroom whether in brand name companies (Easyjet for example) or husband and wife businesses.
In my experience the top 5 causes of boardroom disputes are:
1. Unequal activity
This is most common in smaller owner operated companies. One shareholder / director is doing all the work whilst the other sits back and takes their share of their profits. Once this imbalance starts to grate it can soon become a festering wound that can tear a company apart.
2. Strategic Disagreement
The board and/or shareholders simply cannot agree on where the company should be going. If there is a clear majority then the company can push forward against the wishes of the minority, who will have little comeback unless they can establish unfair prejudice. Where there is no clear majority you will get deadlock and potential paralysis of the company. Either way the seeds of conflict are clearly sown.
3. Imbalance in power
Power corrupts - and often nowhere more so than as the result of a majority shareholding. When a company starts to be run as a personal fiefdom then conflict from the aggrieved shareholder serfs is an ever present threat.
4. The hand in the till
This is most often linked to #3. When a company is run as a personal fiefdom then the lines between company interest and self interest become blurred. This can result in a formal conflict of interests for a director or just lead to conflict where there is an impression that somebody is taking more out of the company than they should.
5. It’s a family affair
The complexities of family life add an extra dimension to boardroom disputes. Husband and wife directors who are hurling divorce writs at each other over the breakfast table are unlikely to be able to hold a cordial board meeting in the family business. Children with a stake in the business who are frustrated at the way that the family business is being run are another reguar source of disputes.
Conclusions
The causes of boardroom disputes are as varied as the disputes themselves but the same themes emerge again and again. Anticipation of these, and the implementation of a good shareholders agreement can go a long way to ameliorating the risk and mollifying the effect.
Tags: Boardroom Disputes, shareholder dispute, Shareholders disputes
Boardroom Disputes, Shareholders disputes | Ed Weeks | 
December 5, 2008 7:58 pm
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