Judge, jury, and executive

The CEO of Four Seasons Hotels, a publicly owned and traded company, has reportedly put together a consortium of private investors to buy the hotel chain.

As a result of his contract provisions with the company, the CEO will personally net $288 million from the proceeds of the sale.

As a result of his position as the key figure behind the buying consortium, he will be reinstalled as CEO of the company, with a newly established investment position in the private successor company, above and beyond his $288 million buyout resulting from the sale of the publicly-held company.

The news item linked above quotes the CEO as saying:

This transaction, with these investors, is the only one I am prepared to pursue.

The news item also presents a quote from this CEO provided to a Toronto newspaper last year:

I’m the only one who can fire me.

Remember: this is a publicly traded company. How can shareholders be sure that this transaction - the only one the CEO, who can’t be fired, will pursue - is the best for them? It certainly doesn’t seem to matter to the CEO, who clearly, as the prime mover behind both sides of the deal, is benefiting handsomely from it.

Many CEOs are finding ways to cause their companies to go private, so they can avoid the auditing and regulatory burdens of a public company, as well as the ill-defined responsibility of accountability to shareholders, an inconvenience that is showing a troublesome prominence lately.

Let them go. And let them learn what accountability is really like under the gaze of a small number of powerfully interested investors. The world that enables CEOs to behave as in the example above is probably fading away; the increasing flight to the security from public scrutiny afforded by going private seems to indicate so. It is the ultimately untenable world of the super-executive, the one addressed for reform by such as the Karma Capitalists, discussed in the immediately preceding series of posts. But we cannot reform this world; we can, and should, only let it go.

While those sorts of CEOs learn to cope with the peculiar nature of private investor scrutiny, there remains much to be learned in the public realm. Overall, corporate guidance, management, and governance are ill-understood areas requiring considered examination of both public - and private - application to help illuminate best practices.