Do Ethics Matter?
I just got an unsolicited pitch from a PR firm about a CEO of a software firm that wanted to talk to us about ethics. I declined because I couldn’t quite see the connection to commodity trading software – at least none that a generic software company CEO might be able to talk to. But you know, that topic, it intrigued me to want to say a few words….
I recall many Moons ago when outside PE and VC invested millions of dollars into our software firm (ETRM), lots of words were given to us like growth, revenue, profits, customers, winning and so. Ethics was a word that was well… never mentioned. Now the firms that put money in were led by a household name VC/Investment bank. Of course, they got a place of the BOD (two I recall) and all of our ‘ordinary’ shares suddenly and somehow took on a tarnish by comparison to their ‘preferred’ shares. I found out more about that a bit later. I recall meeting the new board member spouting his need for growth, a 3-year ROI of at least 20% and so on – “but we don’t want any unrealistic plans from the management team!!” followed by and “we bought in to this business because of the quality of the management team!”
Well that first weekend, we (the management team with huge vote of confidence from VC firm) was invited to spend the weekend working on a new business plan. We took the new investor seriously and built a plan we thought realistic and achievable. “No hockey sticks,” he had told us with a thumbs up sign as he left the building. Of course, when we presented our plan there was an unexpected reaction. We heard expletives and were told that the money they had just put in could be removed just as easily and our reputation destroyed in the process. He believed in this team but not if they produced plans like that!.
So, plan mark 2. More expletives and threats.
Plan mark 3. One of us had an idea. “Let’s make it a hockey stick and get out of here before Sunday 10pm?” Investors reaction… big smiles, pats on backs and “I knew you guys had it in you!! You believe in this right and will all sign up to it?”
It was about this point in time I realised where this company was going. It was about now that I saw that all of our ethical sales and marketing, treatment of customers and trying to do our honest best – that was over. This was now nose to the grindstone to give these guys from California in suits who as it turned out were clueless about our business, industry and software, a big profit on their money. Damn the employees, customers and existing shareholders. There was lots more empty talk and empty promises and no matter how much you wanted to believe – you knew it was so much BS.
It was the beginning of the end. A couple or so years later after the investor brought in their guy as a CEO – who brought his guys in as “Senior” VP’s to lord it over the management team they believed and invested in, it was sold for pennies on the dollar. Our ordinary shares were of course worthless. Our vision and sweat worthless had all been a waste of time.
Ethics?
It would have been nice to have heard that word even if only paid lip service. The fact is, I learned that day how to be cynical and an awful lot more…..
I suspect when you review the M&A activity in CTRM software, I’m not the only one who would have liked to hear a bit more about ethics and a bit less about ROI.
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