LESSON: Policies, protocols, and people need to be set with a view to what is the worst that could happen. Hope is not a strategy. Blind optimism is not a strategy. I urge all leaders to reassess their own vulnerability in the same manner the US military constantly war games scenario after scenario of terrible events befalling the country.
The below lesson is an excerpt from my recently released Amazon #1 Best Seller, When Not If: A CEO's Guide to Overcoming Adversity, Forbes Books.
I spent a career advising clients how to protect their assets, diversify their investments, and plan for rainy days. The irony is that I ended up being the poster child for unpreparedness. Beyond the trauma of the events that sent me to prison, it is incredibly embarrassing how dumb I was in regard to protecting our company, our employees, our shareholders, and, of course, my personal assets and my family’s security.
I had 20-20 vision for seeing what was right in front of me for everyone we helped, but I was blind-sided by the barely visible when it came to my own destiny. As many overburdened and overextended leaders can relate, I rarely reviewed the financing closing documents, the voluminous trust paperwork, the audit disclaimers, or the legal engagement letters. I had a team of advisors to read documents. I was a leader who delegated. They told me that was good!
But I never considered—and I should have—that my signatures on documents and personal guarantees would come back to destroy everything I worked for and devour the assets I had so carefully constructed for our employees, shareholders, and my family. I had too much confidence in the limited liability entities, holding companies, and intricate corporate structures my attorneys and accountants assured me would protect our assets. As it happened, regulators and prosecutors easily pierced all the veils and swapped millions of dollars from the Assets column to the Liabilities column on our balance sheet.
I put too much trust in the army of attorneys I hired to defend me against the type of adversity I was facing, and early on I was too weak to take back the responsibility myself for correcting the failures I had put in place. I never anticipated that as soon as I was under federal investigation, all the lawyers on my team would scatter like cockroaches when the kitchen light was flicked on. One by one they either withdrew or ghosted me in a manner I never imagined could happen. I suppose the lawyers concluded I didn’t have much of a chance and their own career prospects would be better served by representing clients who needed LLC documents updated or new registered agents filed for their Wyoming organization.
Many nights through the investigation, indictment, and trial, I imagined all the lawyers and accountants meeting up at Todd Jurich’s Bistro in Norfolk, Virginia, and raising drinks at my expense. Everyone knew what was coming and where the bread was buttered, except me. Throughout my career, I always had an irrational fear I would die a young man with my tombstone reading, “Not nearly as smart as we thought he was.” My fear was not irrational.
I had personally guaranteed our company financing and obligations, as nearly all entrepreneurs and business leaders must do until their organizations reach significant asset levels. I could have shifted this burden away from my personal balance sheet numerous times. I knew what to do. I just never got around to it.
Worst of all, I had zero fear this was even an issue. I had set up a sophisticated family trust that took care of everyone and minimized taxes. That’s the good news. The bad news is that I never implemented an irrevocable asset protection structure that would have preserved the financial security of my family. Another good thing I did was buy life insurance. The policy would pay my estate $13 million at my death. More than once I lamented the fact that the adversity I faced took everything from me but my life. Many nights I thought my family would have been better off without me. Of course, I could not continue these premium payments, and this benefit to was also erased.
Please learn from my long list of mistakes.
You talk about seeing around corners as an element of success. That’s what differentiates the good leader. Not many people have it. Not many people can predict that corner. That would be a characteristic of great leaders.
—Jack Welch, CEO, General Electric
Have a great week!
Order Amazon #1 Best Seller When Not If (Hardback, Kindle, Audio: https://www.amazon.com/When-Not-If-Overcoming-Adversity/dp/B0CKWTYSFF/r
