How can the owner of a company be fired from their own company?

Question

I was reading about the owner of a company whose board of directors terminated him from the company. How is this possible? I thought if you are the owner you had authority over everything

Answer 1

I own Serius Satellite - you know the company that hired Howard Stern. Ok, so actually I own 100 shares (lousy investment by the way) in the company, which makes me one of the thousands of minority shareholders.

When the founder gets booted from the CEOs job, he is usually like me: a minority shareholder. That means he owns less than 50% of the voting shares in the company. Consequently, he does not have control over the board.

Why does this happen? There are two common reasons:
1. It takes money to start up the company. A founder will go to venture capitalists and allow them to invest in his idea in return for an equity stake. If the stake is >50%, he can become a minority partner.
2. After an IPO, the founder may have sold enough of his shares that he is now a minority partner.

In either of those scenarios, the founder will no longer have control over the board solely due to share ownership. He will have to perform just like any other professionaly hired CEO.

Answer 2

Here is a simple version of what can happen whether the company is private or publicly traded.

Usually when a company has a board of directors the company and hence the previous owner have sold a portion of the company. If by chance he sold 51% to a investor or a series of investors the investors have put significant money into the pocket of the owner. The board of directors are responsible to the investors and must meet the covenance or the requirements as stipulated by the investors.The previous owner now only owns 49% and can remain as the CEO but only if the board has confidence that he can run it and more importantly will take direction from the board as to what they want done. The direction is usually a certain target with regards to profit and or return on invetsment.If the previous owner does not agree, this undoubtedly puts a lot of stress on the relationship and the board can eject him from running the company.
Even if the owner still holds a majority share in the company there are usually provisions that the investors can call in any loans or money lent out requiring imediate payment. This puts a lot of pressure on the owner to comply with the covenance or terms of the agreement. It is a difficult situation for a previous owner to all of a sudden be told how to run his own company.
The owner needs to have a very good understanding of what the requirements are and the fortitude to sit back and take direction from strangers directing him to do things in a company that he likely understsands better than anyone.

Answer 3

The owner of a company doesn't have to run the company. the "board of directors" is a group of people appointed or elected to make major decisions for the company, including who to hire and fire for key management roles. The owner basically agrees to do whatever the board of directors decides. The owner of the company is not necessarily the president of the company, or the chief executive officer (CEO). The owner and CEO (who "runs" the company) do not have to be the same person.
The board of directors can choose to fire the CEO, even if the CEO is the owner. In that case, the owner would still own the company, but there would be a different CEO.

It's actually a little more complicated than this because if a company has a board of directors it is probably a "public" company, meaning it has "stock". If a company is public, it has sold it's ownership to whoever wanted to buy stock in it. So there are literally thousands of owners of every public company. Most big companies are public.

Answer 4

Well...he may own the company but he has chosen to have a board of directors. Ususlaly a board had autonomous legal authority to run the comapny as they see fit and they have the ability to fire him if they are given it in the legal wording. The board of directors are usually hled responsible to the stock holders and they must protect the greater interest of the company. He's still laughin all the way to the bank because he owns it

Answer 5

Within the structure of a corporation the Board is given responsibility to the shareholders to ensure the business is being run properly. This gives them the power to make changes in leadership if they determine it is necessary for the good of the company. They cannot take away a company from the owner, they simply remove him from a position of control such as president or CEO. It is a system of checks and balances.

Answer 6

If it is a publicly owned company (shares of stock have been sold to the public), this is a possibility. He will still own whatever share of the company he owns, but he will no longer work for the company and get a salary. He was not technically the owner but could have been the founder and principal shareholder.

Answer 7

If the board of directors thinks it is in the companies best interest, then they can vote and remove him from the company even if he is a stock holder

Answer 8

seek for suggestion from a legal professional. First query would be no be counted in case you're in a community belongings state. 2d query concerns the form of possession. i don't understand of any state that would desire to furnish you administration rights through utilising being married to somebody who owns a company in some vogue. you have have been given an pastime in the inventory, yet that may not the comparable as administration rights.

Answer 9

If a corporation opens shares to the public, sells them and owns less than 50%, yes he can be fired by his own company. This is probably the most obvious scenario. There is probably a lot lot more.

Answer 10

If there are any stock holders that have more stock than you even if you are the owner you can still lose your job/ company.