You would not believe how many executives come to us with sensitive scenarios involving demands for company financial, confidential, and proprietary information when his/her private life goes unexpectedly sideways. These scenarios, which are so personal by nature, frequently involve assessing the individual’s net worth and demands for company financial information to ensure the opposition (in the personal matter) gets his/her just and fair share.
Consider two “based on real life” fictional scenarios:
A CEO of a business has an affair at a company sales event with a non-employee that results in a demand for a paternity test, followed by demands for confidential, detailed financial documents of the company to determine child support upon establishing paternity.
A partner in a business is going through a contentious divorce and his soon to be ex-spouse (who is not particularly fond of the other spouse’s partners and with whom the other spouse is good friends) demands company records and other sensitive or proprietary information in a manner that is completely disruptive to the business and daily operations.
Personal overlaps professional life all the time.
In both hypothetical scenarios, the company, if required to respond, would incur significant legal fees and costs associated with producing the proprietary information, which would also present legal and other problems between the company and the affected executive.
As an owner of the company, our CEO/partner would likely believe he or she was entitled to the company documents. His or her partners, on the other hand, would reasonably push back on revealing sensitive financial and/or other proprietary information in a personal problem not relevant to the business of the company. On many occasions, an agreement could be reached to provide the documents under a protective order/confidentially agreement to be filed under seal and not included as a matter of public record.
The divorcing spouse, on the other hand, might require a court visit or two, where we would seek to quash the motion on grounds the claim was too broad or other novel legal theory.
What exactly, then, is the “moral of the story”?
These scenarios could have been avoided or greatly mitigated in terms of cost and response. It all goes back to a creating a comprehensive and clear business/partnership agreement at the very start of the business. Most everyone wants to believe that personal issues are personal and these types of situations are few and far between.
However, we can assure you that they are very, very common predicaments. Whether the statistics can be substantiated or not, the old saying that “50% of marriages in the United States end in divorce” started somewhere and for some reason. Furthermore, 10,000+ babies are born in the US a day… I am assuming you are getting the gist.
As business co-owners or partners (or however your business is set up), make sure to incorporate clear provisions in your LLC or other ownership agreement regarding your business documents and proprietary and financial information that expressly specify what company information is and is not within individual owner control. Moreover, your business arrangement should also clarify who is responsible for incurring the cost of coordinating the documents, etc. demanded. A simple indemnity clause would have addressed these issues and more, as well as saved our fictional clients time, money, and stress.
