Score one once and for all governance.
Ad company RadiumOne’s board of directors displayed a rare act of bravery for corporate boards, firing leader (and major shareholder) Gurbaksh Chahal after Chahal pled guilty to two misdemeanor charges involving a domestic violence incident along with his girlfriend.
Chahal have been facing 45 felony counts linked to charges he assaulted his girlfriend 117 times in a 30-minute period. Ultimately, the guilty pleas were for misdemeanors for battery and domestic-violence battery. He was sentenced to 3 years probation, a year’s attendance in a domestic-violence program and 25 hours of community service.
Chahal’s firing seems just like a no-brainer, nonetheless it actually isn’t. There have been some questions concerning if the board could fire its lead shareholder, and corporate boards — particularly for private companies — are notoriously hesitant to shake up management when business does well. Yes, Chahal was regarded as tempermental, and some even would suggest hostile, but he was by all accounts an experienced leader who got results. And, as horrible as the charges were, they ended in only two misdemeanors, which don’t automatically disqualify anyone from owning a company.
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Yet, the board acted, replacing Chahal with current chief operating officer Bill Lonergan.
Some disclosure: Chahal was a contributor to Entrepreneur.com until he was charged with assault. We terminated our dealings with him due to the charges. Obviously, Chahal wasn’t happy, calling the incident a "baseless controversy," saying our decision was "completely unprofessional" and noting that other media outlets weren’t distancing themselves from him.
And, he ended our correspondence with this gem: "Please remember, the entrepreneur community is small. Hopefully, this serves as a learning lesson for you personally all never to disrespect someone again." For the record, that had not been a lesson we learned.
Personal dealings aside, RadiumOne’s board serves as an excellent lesson to directors who wish to be true with their fiduciary duty in owning a company. Even today, many board members at private companies are hand-picked by founders and chief executives, and sprinkled in with representatives from the venture-capital firms that finance the organizations. At some startups, boards could be hands-on, but many evolving companies have a more relaxed approach, particularly if they have a business owner running the enterprise who includes a strong track record. Consequently, they often times ignore bad behavior for executives, notably when those executives control a lion’s share of the stock.
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Private companies aren’t alone. Public-company boards often are criticized for rubber-stamping the moves of executives. Often, the chairman of the board can be the principle executive — a dual role which makes providing good governance more challenging.
That’s why is RadiumOne’s move so meaningful. The board had reasons to keep Chahal. Despite valid criticism, the directors could have punted. For example, the business could have made contributions to domestic-violence charities. Also, the board could have forced Chahal to execute a mea culpa tour of sorts, begging the world — and potential investors — for forgiveness.
But, ultimately, the board knew that wasn’t possible. It really is tough to truly have a company run by a guy who admits he performed acts of violence against a female. It really is harder when that man is Chahal, who found a method to make an effort to explain himself in a post that not merely criticized police, but blamed the media and called his accuser — you understand, the main one he admitted to assaulting — a prostitute.
Chahal will without doubt resurface, and his background suggests he may have significantly more innovation before him. But RadiumOne was to separate itself from him. One hopes the gravity of his actions can help him to emerge an improved man. Perhaps that is clearly a learning lesson he needs himself.
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