Management Buzz 1/03 Why you may want to have your lawyer give your company the once-over; the consequences of firing your CEO

Make It Legal
Asking your attorney to give your company the once-over should beon your New Year's resolution list. January 1 is a popular datefor initiating laws. Maria Karos, a partner at the Dallas firmBell, Nunnally & Martin LLP, suggests three major aspects toexamine:

1.Structure: Make sure the corporate structure and formatstill meet your needs. "That's the foundation of thehouse," says Karos.

Five years ago, for example, you may have established yourbusiness as a partnership. Now you've got employees--some ofwhom you want to give a stake in the firm. Incorporating allows youto do that.

2.Contracts: Karos suggests taking a close look at yourcontracts, especially for employees and independent contractors. Ifyou've expanded across state lines, or if your employees livein a neighboring state, your contracts could be invalid.

3.Policies: Your employee handbook needs regularrevision. It'll be difficult to fire an employee for, say,downloading porn at work if your handbook doesn't spell outthat this is not allowed.

"It not only helps employees know the policy," saysKaros, "but also helps the employer think about what thepolicy should be."

Get What You AxFor
Kicking yourself upstairs is usually a good move for entrepreneurs.You bring in a chief executive to handle details, while you focusyour energy on other endeavors. But should something go wrong, bewary about a knee-jerk reaction. Firing a CEO rarely improvescompany performance, says Margarethe Wiersema, strategic managementprofessor at the University of California, Irvine.

Wiersema conducted a study of turnover among corporateexecutives. She found that CEO dismissals now top retirement andvoluntary departures as the reason for executive change in theFortune 500. "The main reason is the pressure on shareholderperformance," she says. And it's not just among thegiants. Smaller firms are feeling the pressure, too.

When she sifted the numbers, Wiersema found that companyperformance didn't improve after CEO firings. "Thatdoesn't mean you shouldn't get rid of someone who isn'tperforming," she says. To get your firm back on track,however, you need to identify the root problem before letting theaxe fall.

If you do end up firing your CEO, take plenty of time beforedeciding on a new one to take the reins. Look for a candidatewho's had success in reorienting a company's workforce--not just a great salesperson or marketing whiz. Of course,this is not as quantifiable a skill as sales growth. That's foryou to investigate, which is why no one said that giving up the topspot would make your life easier.

Business writer Chris Sandlund works out ofCold Spring, New York.

Contact Source

• Bell, Nunnally & Martin LLP
  (214) 740-1400, www.bellnunnally.com