Recently, the founder of Monster Worldwide (NASDAQ:MNST), Andrew McKelvey, resigned from the board. He said he would not agree to an interview with the company's lawyers regarding the stock options backdating scandal. Until a month ago, he was the company's CEO and Chairman.
So what can companies do in this type of situation? I had a chance to interview Brad Sugars, who is a business coach and author of The Business Coach.
Things have been embarrassing for Monster. What could the company do to improve things?
From what I have read, apparently McKelvey did not know backdating was illegal. The job of any CEO is to be across everything. This also means they are ultimately accountable for all areas of the business. In a publicly listed company like Monster Worldwide Inc., this is even more important because not only do you have to answer to the board, but also to stockholders as well.
Reading between the lines, it would appear that Monster's accounting and legal staff let the side down. Or perhaps the team members in these departments voiced their concerns to the CEO, but ego got in the way and they were ignored. Regardless of either situation, the CEO is ultimately responsible and has to be the fall guy when things like this go bad.
In today's business world, it is difficult to be a guru in all areas of a business. My experience shows to be successful at a global level you need to surround yourself with the very best people who are as passionate about the business as you.
Monster is in the recruitment game so it is a little ironic my advice to them would be to hire the very best. On top of that, they need to make sure a culture exists that allows for open and honest communication throughout the entire organization, so that the good, bad and even ugly information is shared and not hidden.
What about preventative actions?
At this stage with Monster, a full investigation needs to be undertaken. Most times, this is best done by external people who can look at the situation with a fresh set of eyes. Owners of businesses want an unbiased and fresh perspective on their business. They know they cannot be across everything. Having someone come into your business from the outside who not only understands and supports your business objectives but also holds you accountable each and every business day is critical in my opinion.
When a crisis hits a company, where do companies often go wrong?
Having no response or no comment to the press is definitely not the way to go, especially with a public company like Monster. It makes the company appear as it has something to hide and often more damage can be done with what is not said. Be open and honest and always be prepared to face the press. You also need to talk with your people. You have to keep employees up to date. The last thing you want is for the productivity to go down. Overall, this mistake and probably many others in companies around the world come down to a lack of communication.
Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.
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Reader Comments (Page 1 of 1)
11-02-2006 @ 9:15PM
Mr. noitall said...
The options backdating was not isolated to just one company. Over 100 were involved. Meaning thousands of people must have been involved and maybe thousands more must have heard about the practice while it was going on. I would imagine that the question "ARE YOU SURE THIS IS LEGAL?" must have been asked thousands of times!!!! COME ON!! Let's get real, please!! These lawyers & accountants get paid big $$$ to answer complicated questions. They are EXPECTED to answer these questions correctly! I don't think the backdating question would be that complicated to figure out. I know alot of people want this scandal to go away and maybe it will. There is alot of money at stake. But, like I said, thousands must have known about it and as investors we HAVE to TRUST those SAME people to tell us the truth about the current and future finances of these companies. We also have to trust the SEC. Do we really believe that the SEC didn't at least hear any rumors about backdating while it was going on? Could that be possible with so many people involved? Just another warning, my friends.