How RadiumOne Did the Right Thing in Firing Its CEO
Score one for good governance.
Ad company RadiumOne's board of directors displayed a rare act of bravery for corporate boards, firing chief executive (and major shareholder) Gurbaksh Chahal after Chahal pled guilty to two misdemeanor charges involving a domestic violence incident with his girlfriend.
Chahal had been facing 45 felony counts related to charges he assaulted his girlfriend 117 times in a 30-minute period. In the end, the guilty pleas were for misdemeanors for battery and domestic-violence battery. He was sentenced to three years probation, a year's attendance in a domestic-violence program and 25 hours of community service.
Chahal's firing seems like a no-brainer, but it actually isn't. There were some questions as to whether the board could fire its lead shareholder, and corporate boards -- particularly for private companies -- are notoriously hesitant to shake up management when business is doing well. Yes, Chahal was known to be tempermental, and some would even suggest hostile, but he was by all accounts a skilled leader who got results. And, as horrible as the charges were, they ended in just two misdemeanors, which don't automatically disqualify anyone from running a company.
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 because of the charges. Needless to say, Chahal wasn't happy, calling the incident a "baseless controversy," saying our decision was "completely unprofessional" and noting that other media outlets were not 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 all to not disrespect someone again." For the record, that was not a lesson we learned.
Personal dealings aside, RadiumOne's board serves as a great lesson to directors who want to be true to their fiduciary duty in managing a company. To this day, 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 can be hands-on, but many evolving companies take a more relaxed approach, particularly when they have an entrepreneur running the enterprise who has a strong track record. As a result, they often ignore bad behavior on the part of executives, notably when those executives control a lion's share of the stock.
Related: A Bronx Cheer for Silent Cheering
Private companies aren't alone. Public-company boards often are criticized for rubber-stamping the moves of executives. Many times, the chairman of the board is also the chief executive -- a dual role that makes providing good governance more difficult.
That's what makes RadiumOne's move so meaningful. The board had reasons to keep Chahal. Despite valid criticism, the directors could have punted. For instance, the company could have made contributions to domestic-violence charities. What's more, the board could have forced Chahal to perform a mea culpa tour of sorts, begging the world -- and potential investors -- for forgiveness.
But, in the end, the board knew that wasn't possible. It is tough to have a company run by a man who admits he performed acts of violence against a woman. It is harder when that man is Chahal, who found a way to try to explain himself in a blog post that not only criticized law enforcement, but blamed the media and called his accuser -- you know, the one he admitted to assaulting -- a prostitute.
Chahal will no doubt resurface, and his track record suggests he may have more innovation ahead of him. But RadiumOne was right to separate itself from him. One hopes the gravity of his actions will help him to emerge a better man. Perhaps that is a learning lesson he needs himself.
Related: The Myth of the Have-Nots