Every great company has at least one founder and likely several CEOs over its lifespan. Even the most revered CEOs and founders often find themselves removed from the organization they started or led for a period of time. Famously, Steve Jobs was once pushed out of Apple. When money and leadership style is at stake, no one is immune to firing. Legally, it’s a perfectly viable option when the right elements are in place.
How It Happens
Founders or CEOs are often fired by a vote of the company’s board. If the individual at the center of the drama does not own a controlling share of the company, there is little they can do to prevent themselves from being ousted. Michael L.F. Slavin wrote that he once fired his own co-founder. Each of them owned 46.75 percent of the company, but Slavin was able to convince their four investors, who owned the remaining 6.5 percent, to give him a proxy to vote their shares. Now controlling 53.25 percent, he presented his partner with a buyout offer.
Ownership share ultimately leads to a loss of control over the company. As companies bring in outside investors, their shares are diluted. Founders often end up owning less than 50 percent of the company’s shares, leaving them vulnerable to being fired. Similarly, CEOs that have contracts might find themselves fired once that contract is concluded due to new ownership or change in company direction.
Why It Happens
Founders may be the inspiration behind a great entrepreneurial idea, but they may fail at execution. Alternatively, companies may simply outgrow their founders. Don Smith writes that companies may simply let the founder go when they no longer provide value. CEOs are often fired when the company has a period of low financial performance. Differences in leadership styles also make people vulnerable, as do internal company politics.
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