Reorganization - Some New Employees were placed as Managers over some Owners

[Rickser]

During a recent reorganization, some new employees were placed as managers over some owners (minor shares)(We are privately held). Nothing has happened yet, but I foresee a firestorm. Is there a legal prohibition of this.

[mguilbert]

I can not answer to the legality of this. But many companies are partailly owned by employees ie Publix, Southwest, etc. I am sure that they hire new management as needed.

[somashekar]

The 'some owners' who hold minor share, would have already given the consent to the major share holder (s) to operate and manage the organization.
As a share holder, you certainly will get your due dividend returns as the management fixes, but you will not be having the operating and managing authority.
Your being a minor share holder and an employee of the same organization are independent of each other.

[Rickser]

Thanks to both for your replies. I would agree that you are both correct in a publicly held company. However, we are 22 people. The 6 owners have input to the decision making process a far as Operations. Our ownership is not predicated strictly on a financial basis. I think that the first time one of these new managers tries to discipline or even fire an owner, problems will arise. Just sayin...we will see.

[somashekar]

Our ownership is not predicated strictly on a financial basis.

I guess legally it is only the financial basis (extent of the share holding) that matters.

I think that the first time one of these new managers tries to discipline or even fire an owner, problems will arise.

As a part owner of the organization and executing your part of the task in its operation, it is better to utilize the knowledge and skills of the new managers to promote the business. I have seen one time owners sell the company out and continue to work as an employee, under the new management with little or no share capital.
I certainly hope your situation mentioned will not come up and you will not let it to come up as an owner yourself. If you foresee red, you can most certainly rise it with the management owners before any event does happen.
Good luck...

[Wes Bucey]

In my previous life as an investment banker, we frequently dealt with "re-engineering" closely held non-public companies. I'm aware of a lot of scenarios which could play out once non-owners are brought in as managers. To run through all of the scenario possibilities is one of the actions which should have occurred BEFORE the new folks came on board. It's difficult to understand for sure YOUR position.

1. Are you an owner?
2. Is your share of ownership large or small?
3. Are you an owner with a new, non-owner boss?
4. Are you already aware of some conflicts between owners and non-owners?
5. Are you directly involved or just an observer?
6. Is this just a theoretical query or are issues already beginning to surface?

[Rickser]

Thanks Wes, the answers to your questions:
1. Yes
2. Small
3. Yes
4. Yes
5. Observer
6. already started

It's gonna be interesting to see how this shakes out. There have already been some bumps that have mostly been slight, but there is one starting now where a Lead Engineer (Part Owner) is being "disciplined" by a non-engineer, non-owner manager. I have advised both of them as well as I can from the HR viewpoint, but am getting nowhere. This is what gave rise to my original question.

[Wes Bucey]

In Reply to Parent Post by Rickser

Thanks Wes, the answers to your questions:
1. Yes
2. Small
3. Yes
4. Yes
5. Observer
6. already started

It's gonna be interesting to see how this shakes out. There have already been some bumps that have mostly been slight, but there is one starting now where a Lead Engineer (Part Owner) is being "disciplined" by a non-engineer, non-owner manager. I have advised both of them as well as I can from the HR viewpoint, but am getting nowhere. This is what gave rise to my original question.

FWIW:
There are a number of consultants [like me] who are very good in resolving Change Management issues. See my thread ( Wes Bucey offers service as "Strategy Advisor" - Seeking Case Studies for Book) for ideas in what to look for in such consultants, should you and other owners feel a need to screen some before hiring one to help you.