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Men's Wearhouse Ouster: Lessons for In-House Counsel

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By Aditi Mukherji, JD on June 20, 2013 10:18 AM

By now you may have heard that Men’s Wearhouse Inc. has ousted Executive Chairman George Zimmer, the iconic face (and voice) of the suit-and-tie company he founded 40 years ago.

Remember the gentleman with a smooth husky voice who coined the slogan, “You’re going to like the way you look. I guarantee it”? That’s him.

The board didn’t give an explanation for the ouster, but Zimmer thinks it was because he expressed concerns over the direction the board was taking his company, reports San Francisco Bay Area’s KNTV. As in-house counsel, you should take note of the Zimmer ouster. Here are a few lessons to keep in mind:

  1. Know your bylaws -- and make sure the board knows them, too. As in-house counsel, it's crucial that you make sure the board is complying with the bylaws. Ousters are often premeditated, which can spell legal notice troubles for the company. Before your board pulls a Zimmer, look into the notice rules on when the company must notify shareholders of any big changes to the board.
  2. Remember who you're working for. Like Olympus' ousted CEO Michael Woodford, if your founder exposes an internal corporate scandal and the board dismisses him, remember that you need to act in accordance with the law. If the founder sues the company after being dismissed for doing the right thing, you still owe your loyalty to the company. You can't let your personal morals and opinions get in the way of your legal ethical obligations.
  3. Take the board's pulse. Here's a lesson from ousted Groupon CEO Andrew Mason, who got the boot and proceeded to write a terribly amusing exit memo. He learned the hard way that the buck stops with the CEO, but thought the board had his back. To prevent a PR nightmare and a potential lawsuit, try to facilitate communication between the founder and board before the board goes rogue with an ouster.

It's important to make clear whether you have a "limited life" corporation or one whose value to society supersedes the founder. For Zimmer's company, it's a tough voice to replace.

During times of internal upheaval, you are an important link between the founder and the board. You need to bridge the gap during transitional periods. You also need to help management understand aspects of the organization so they will have the necessary tools to hire and evaluate the founder's successor.

You're going to like the way your company looks. I guarantee it.

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