When a CEO is asked to step down

[911WhoDis]

Ok so I want to know, when VC's ask a CEO to step down, are they essentially kicking that person out of the company? Does the former CEO keep his/her shares in the company and still make money from the company? Or is it basically like getting fired?

 

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[Ninjakid]

Ok so I want to know, when VC's ask a CEO to step down, are they essentially kicking that person out of the company?

Okay, try this: tell me to step down as CEO of my company. No really, try it.

Tell me if it works.

A VC can't make a CEO step down from his company any more than a homeless man can.

A board of directors on the other hand, can ask a CEO to step down.

If the VC owns a significant amount of shares in the company and is dissatisfied, this can entice the board of directors to appoint a new CEO.

Does the former CEO keep his/her shares in the company and still make money from the company?

If you own a car, would you have to give it to your boss if you got fired? No. You own the shares whether you're still the CEO, a janitor, or you decide to live on the moon.

Or is it basically like getting fired?

Or

Owning shares and being employed is not even close to being the same thing.

Yes, when CEO has to step down, it's a lot like getting fired.

When you own the majority of stakes in a company, you can basically do whatever you want. However, in a public company because there are many shareholders, and one person doesn't own the majority of shares, the power is in the hands of the largest shareholders. The shareholders appoint members to form a board of directors. The board has the highest authority in the company. The board appoints a CEO to run the company, and the CEO and board members make their terms. Oftentimes, the original founder of the company is the CEO because that person brought the company to where they are now. However, it's possible that the board could ask the founder to step down as CEO. That person still owns their stakes in the company, assuming they don't sell. But the founder may decide to sell their shares because they don't like the direction that the board is taking their company. This is kinda what happened to Elon Musk, and he ended up selling his stake in Zip2 for like $22M.

Hope this helped.

 

[911WhoDis]

Helped a lot thank you very much, cleared things up for me.

 

[jazb]

From a fastlane point of view, you would want to fire yourself and have better people running the company anyway.

 

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[Ninjakid]

Helped a lot thank you very much, cleared things up for me.

Glad I could help, man

From a fastlane point of view, you would want to fire yourself and have better people running the company anyway.

I don't see how that qualifies as fastlane, but I do agree that a person should know their strengths and weaknesses, and be able to decide whether or not the're suited to manage a company.