What happens to a CEO when their company files for Chapter 11 bankruptcy?
When a company files for Chapter 11 bankruptcy, the CEO is likely to face a lot of scrutiny. They are often the most highly paid person in their organization, and will often be asked to answer for the failure of their business. This is especially true when the bankruptcy filing is unexpected—and unfortunately for CEOs, this happens quite often.
When a company unexpectedly files for Chapter 11, shareholders are typically the first to demand that someone be held accountable. The immediate reaction is to look toward the top of the business structure, where they believe they will find accountability and leadership. But who is technically responsible when a company fails? If a CEO has been around for years and overseen multiple successful quarters, how much blame should they be held accountable for?
When thinking about if a CEO should be held accountable in circumstances like these, it's important to remember that net worth is not entirely reliant on assets or income. A CEO may have assets that could completely absorb all of the debt incurred by their business. In cases like this, it would seem unfair to hold someone accountable for an unfortunate turn of events; after all, it's not their money. CEOs also might have enough income from previous jobs to get by without worrying about money from their current position.
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Ascent Law LLC
8833 South Redwood Road Suite C
West Jordan UT 84088
801 676 5506
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