Common sense trumps common law

When your new CEO is suddenly dumped after just ten weeks and sues you for $7 million, that can be a potential reputational crisis.

But the experience of Australian clothing retailer Country Road helps demonstrate that the law court is not often a useful place to advance issue and crisis management.

After a four month global search Country Road recruited the highly credentialed John Cheston as its new CEO.  Yet just ten weeks later ( in September 2010) he was dismissed because of “irreconcilable differences with the board over the future direction of the company.”

Cheston sued the company (now majority South African owned) for $7 million in damages, but it was announced this week that the matter had been settled for $1.1 million.

The details of the case are less important in this context than the fact that common sense prevailed over what often comes down to executive ego. The company said it wanted to concentrate on trading and avoid time-consuming and expensive legal action. And MM&E Capital managing director Tom Elliott, who used to work for Country Road, told Smart Company  “These kind of disputes can happen. Sometimes it’s better to bite the bullet than persevere.”

It’s good advice, not just for Corporate Boards but for Issue and Crisis Managers.  Too often companies press on down the legal route, despite all the evidence that issues and crises are very rarely resolved in the court room.

In many cases there is doubtless an angry executive involved who says: “It’s a matter of principle” and a well-paid lawyer who opines: “We have a good chance of winning.”  However, as Richard Levick has concluded: “Lawyers have a seat near the front, but they don’t drive the bus.”

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About managingoutcomes

Issue and crisis management expert
This entry was posted in Crisis Prevention, Reputation risk and tagged , , , , . Bookmark the permalink.

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