How the CEO’s Divorce May Affect You
In Florida and many other states, income earned and assets purchased during a marriage are considered marital property, subject to equitable distribution between the couple if they divorce. But what happens when those assets include shares of stock in a publicly-traded company? In the divorce of Kforce Inc. Chair and CEO, David Dunkel, the divorce court judge ordered Mr. Dunkel to transfer hundreds of thousands of shares of Kforce stock to his ex-wife.
According to an article published by Stanford University, “Separation Anxiety: The Impact of CEO Divorce on Shareholders,” a CEO’s divorce can impact on the company’s investors in a multitude of ways: 1) the CEO’s loss of control or influence in the company; 2) the CEO’s reduction in productivity, concentration, and energy levels due to the stress of the divorce; and 3) the possible change in the CEO’s attitude toward risk.
The collaborative approach to divorce, rather than the traditional litigation route, can eliminate, or at least mitigate any changes that a CEO might experience by virtue of her divorce, and, thus, reduce shareholder fears:
- Loss of Control. In the collaborative divorce process, the team of professionals helps the clients to determine and attain their most important goals and interests. If a goal for the executive is to maintain control in the company, then the clients have the flexibility to distribute the assets in such a way as to minimize the divorce’s impact on the CEO’s company holdings.
- Change in Productivity. While any divorce is stressful, collaborative professionals seek to make the process as comfortable as possible for the clients. The team encourages the clients to communicate openly and respectfully, to maintain transparency, and to meet regularly until a resolution is reached. Collaborative cases usually resolve in a matter of months, with each client and the family incurring far less in fees. This reduction in stress allows clients to rebound to their regular levels of productivity much more quickly than in a litigated divorce.
- Change in Attitude Toward Risk. Stress and a decrease in wealth may cause a CEO to become more risk averse due to a more concentrated portfolio, or to become more risk-seeking to gain back wealth lost in the divorce process. But in the collaborative process, the team is constantly looking out for both clients, including making sure that the CEO stays grounded in reality.
Perhaps one of the most important aspects of the collaborative divorce process, especially when considering a divorce that involves the CEO of a large corporation, is that the privacy of her divorce’s details is maintained, rather than made a part of the public court file in a litigated case. If shareholders aren’t privy to this personal information, they will be far less likely to sell off their shares of stock just because they hear their CEO is going through a divorce.
Follow Open Palm Law to learn more about the collaborative divorce process and how it can help you!
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About this week’s authors: Joryn Jenkins.
Joryn, attorney and Open Palm Founder, began her own firm here in Tampa after a 14-year career in law, 2 of which she served as professor in law at Stetson University. She is a recipient of the prestigious A. Sherman Christensen award, an honor bestowed upon those who have provided exceptional leadership to The American Inns of Court Movement. For more information on Joryn’s professional experience, take a look at her resume.