It seems that the possibility of an equitable and satisfying solution ultimately lies in their ability to communicate and negotiate to find that delicate balance between valuation and values.

First, given the highly emotional aspects of this situation, I would encourage the partners to separate the business details from the emotional ones so that each can be examined in isolation of the other. I would suggest that this be done with a goal of integrating the two, through a collaborative effort, when the realities of each become clearer.

Practically speaking, here’s what it might look like:

1. Get an independent company to evaluate the business; determine its financial worth and its potential for future growth. If possible, come up with a quantitative method of determining what each partner would be entitled to if the company was to be dissolved today and any other tangible considerations they might need to examine. This objective evaluation should assume that all partners are healthy.

2. Once you have some tangible information, then I would advise them to address the softer, more difficult issues. Here are some questions I might ask of the partners.

a. When you started this company what did you want it to be? How did you see yourselves working together in the future?
b. What values does your company espouse? What is important to you as a company? What do you stand for?

The answers to these questions and others like them should provide a guide as to the decisions they need to make and what they might need to do to resolve the problem.

This discussion should involve all of the partners if possible and may need to be a facilitated one so that all areas are explored and agreements made with respect to the kind of company they are building. As you know, it is easy to espouse a bunch of values when things are going well. It’s usually when the chips are down, as in this case, that sticking to a set of values can become difficult.

If they can come to agreement on what they stand for and what they, as a company would like to be known for, then they may have a pretty strong basis on which to make some decisions about what they are prepared to change, or give up, to maintain the business and address John’s needs (or not). John will perhaps also be in a better position to determine what he might be able to continue to contribute or live without (or not), given the hard facts that the business evaluation should reveal.

Frankly, I have no real experience with this kind of situation which, on a personal level must be heartbreaking, but I hope that there is a nugget or two in here that you might be able to use.

Gwyn

Beyond the moral and ethical issues in play here, there are key business issues that must be addressed both to resolve the current debacle, but also to address continuity issues moving forward. It is regrettably all too common that issues like this end-up in arbitration or even litigation because of the absence of astute prior planning and documentation.

Due to the public nature of this forum, I realize that personal and business financial metrics cannot be discussed in detail, but those are critical pieces to understand which are currently missing. Even though employment agreements, buy-sell agreements, and other forms of documentation may not exist, my guess is that someone has kept very close track of capital contributions and distributions, funding sources, etc.

Another key missing piece of information is whether or not the business can continue in absence of the current operating executive. If there is on ongoing concern post his departure (leave of absence, termination, etc.) then the options for all concerned parties expand considerably. If there is no business viability moving forward then the scope of the resolution gets narrowed down rather quickly.

A great place to start would be to conduct a current business valuation. This would at least give you a baseline from which to begin discussions moving forward.

My question would be, is John expected to recover? If he is, why would they want to alienate him from the business (because that WILL be the outcome)? It seems as though his contribution is measurable and valuable enough to preserve the relationship. That’s from the purely logical, forward thinking standpoint.

My compassionate stance is to pay him whatever salary the business can afford. A pay cut may be hard, but it may also be necessary.

“…this world is a comedy to those that think, a tragedy to those that feel…”

If their value continues when he’s not involved, then this is a conscience issue. Once again, they need to consider what they would like the others to do for them.

And, if the business will continue to prosper, John (and the partners) should make the sale based on a projected future value with some earn out so the value of the business in the long run reflects how his family is compensated.

Mike…