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Advising the CEO Not to Resign

By William Vogeler, Esq. on December 11, 2017 | Last updated on March 21, 2019

After Dish Network's Charles Ergen announced his resignation, his personal stock dropped almost $1 billion by the end of the week.

He had started the business almost 40 years earlier, selling satellite dishes out of the back of a truck in rural Colorado. His resignation pushed down the company's value, but he still owns 48 percent of it and has a net worth of almost $15 billion.

Good for him, but no so much for investors. So, for the sake of the company, when should a general counsel advise a CEO not to quit?

$o Many Reason$

Nobody wants to see a successful leader leave. Circumstances vary, but Jobs, Gates, and Ergen built their companies and made money for stockholders at the same time.

In Ergen's case, he resigned to focus on other aspects of the business. He is working on the company's wireless enterprises, following its acquisition of $6.2 billion worth of spectrum from the Federal Communications Commission last spring.

Investors apparently haven't seen it that way, as shares have fallen by more than 25 percent since then. Outsiders rarely see the inner workings the same way as members in the C-Suite.

As lawyers, however, general counsel are trained to see both sides of issues. It can be a delicate balancing act when advising the CEO about when to resign, but they have to consider long-term impact of legal and business decisions.

"In fact, there are times when general counsel think more about the impact on the business over time than a short-term legal strategy," according to the Korn Ferry Institute.

Resignation Not Always Best

Ergen was great as CEO, but his timing for resigning was not. Before losing 143,00 customers earlier this year, the company's stock had risen 22 percent over the previous 12 months.

While the company was transitioning to wireless, it might have been better for him to hold onto the reigns. Of course, they say hindsight is better than foresight.

When Uber's CEO and founder resigned over fallout from a corporate culture that fostered sexual harassment, some observers said Travis Kalanick should have stayed on. He could have led the company to change.

"Kalanick's reformation would have been such a more powerful and optimistic story," wrote Davia Temin for Forbes. "(I)t could have shown that once a leader is made to, and allowed to, grow up, he or she can own it, and then transform a culture."

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