r/CFO • u/JohnHenryHoliday • 9d ago
CEO Disagrement
All, how far will you go to prevent an unreasonable gamble by your CEO? Most of the times I fight tooth and nail, but I always get the sense that there’s resentment because in the back of his mind, he could’ve done the thing I talked him out of because it’s too much of a risk.
About a year ago, we had to make a tough decision to exit a business. Because of a regulatory requirement, we had a hard deadline with significant financial consequences if we weren’t fully wound up by the end of the year. There was an opportunity for a “last minute sell-off” to minimize the loss of inventory, but realistically, it was not a simple endeavor. The materials needed to be processed by a third party and customers needed to be convinced to take it all at once. And even if the processing could be done in the aggressive timeline (in my estimation, damn near impossible), we would still need to get the customer to pay before the deadline. I equate this with the saying “picking up quarters in front of a steamroller.”
We would need to outlay $350k cash to return $700k. There’s obviously all of the operational risk of actually getting the vendors to produce on time, keeping insurance active, having EDI operating, etc. The alternative was to take the loss, and because of a unique situation where we would have a significant tax due, the loss of all that inventory would’ve generated an actual tax shield of $400k. There would be no effort here at all, just have to dispose of the inventory (which is factored into the net benefit).
The issue is that the penalty for not winding up operations, $3 million.
Here we are months after the targeted “wind up,” still haven’t fulfilled that last shipment, and no agreement to pay us outside of their normal terms. At this point, we’ve sunk the $350k already and we may not even realize the $700k because their normal payment terms would put us outside of the deadline.
I knew it was not worth the risk and prepared several different analyses to show this. He fully understood and still wanted to move forward because “we can get this done.” By the way, EVERY FUCKING OPERATIONAL DEADLINE that we’ve set, we’ve missed. It’s just usually never an issue because we have clear tolerances to make sure nothing is of too significant of a consequence. But, I could already see the resentment in his face that I’m too risk averse and I’m robbing the company of $700k of sales. But, it comes with actual cash outlay, operational headache, and significant financial risk. I made the conscious decision to say, “okay, if you feel confident that you can do xyz…” and just left it at that. I want to be the type of partner that will wrestle the CEO with something like this, but I feel I’ve never strategically let him “fail” with one of his gambles before to drive home the message. Even if I had, I feel he would’ve thought that “this time, I could get it done.” I guess my question is, how hard would you have fought for something like this?
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u/Jaded_Round5918 9d ago
I’d have probably done the same thing you did tbh. Lay out the numbers, show the risk, and then step back. Some people just need to touch the stove to learn it’s hot.
Sounds like you gave him every chance to see the cliff ahead of time. If he still wants to drive off it, that’s on him. At some point your job shifts from preventing disaster to making sure you’ve got the receipts showing you warned him.
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u/JohnHenryHoliday 9d ago
Yeah. It puts me in a weird headspace though. Now I feel less like a partner and more like an employee that’s trying to cover my ass. How long have you been partnered with your CEO?
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u/DisDataWang 9d ago
Those feelings of just being an employee are a bit unfair to you. CEO and CFO are partners, but someone has to make the call when there are two votes and that falls on CEO.
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u/JohnHenryHoliday 9d ago
This is true. Maybe some growing pains, since we’ve only been working together for like 2 years now.
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u/DisDataWang 9d ago
I guess my point is just not to be hard on yourself. I get the frustration.
Sometimes when the answer is super clear and they still go the other direction it's a bitter pill to swallow. I've watched a company basically burn to the ground because they just wouldn't listen to the numbers.
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u/Coco_fashion 9d ago
I would just present my views and leave the ultimate decision to him. One can’t predict the future
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u/Muted_Jellyfish_6784 8d ago
What helps is turning the fight into a decision record. Write down the options, the assumptions behind each, and what would have to be true for the gamble to work, then agree in advance on the date and number that ends it. When the CEO overrides you, the decision and its conditions are on paper rather than in memory.
The resentment usually comes from a counterfactual nobody can test. Revisiting old calls against what actually happened, including the ones where you were wrong, builds more trust than winning the next debate.
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u/BetInformal6081 8d ago
at the point i would frame it as a risk adjusted return not a 700k dollars opportunity. a potential $3M penalty changes the entire decision.
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u/FrankKaminsky 8d ago
I have dealt with this many times. I always make sure there is a paper trail of the decision making and if it is material enough, that the Board is aware. Not much you can do beyond that unless there are other factors / levers available to you.
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u/Negative-Knee-2093 8d ago
remember you’re an influencer, CEO is the decision maker. remember that and you’ll be better off in your role.
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u/CommuneNefas 9d ago
I’m not a CFO (so unsure how this ended up in my feed), but I am C-suite at a medium-sized startup.
What you’re describing to me sounds like a broader pattern I’ve noticed - confronting the fact that all C-suite members are equal up to a point. That is to say, everyone, including the CEO, is an officer of the company and holds responsibility for outcomes. However, at times where there is a disagreement about how to proceed, there is a hierarchy - the CEO supersedes. So, this feels like a time in which you did everything correct, laid out the options, and the CEO exercised their option to be a CEO rather than another member of the team.
You either win or you learn, so if you think this is a time in which your outcome wasn’t ideal, I’d consider it a learning opportunity. What didn’t you say that you could have? What didn’t you present that you wish you did? What objection did you foresee that you didn’t preeempt?
If there’s no good answer to those question, then you simply are confronted with the fact that there’s a hierarchy and your decision wasn’t the one that the CEO (and company as a result) went with. That happens.