YM778.TV Chapter 1215 - Weekend Break (4)
~ Golden Ocean Resort ~
Charlie and Emma are in their suite.
After returning from golf, the two of them freshened up and Charlie is explaining to Emma the structure of the company, assets and who from his extended family controls which part.
Emma insisted to know this before Charlie takes her to meet the family. In this way she will know who holds what position and understand the fight-for-power situation better. Charlie agrees that it will be useful knowledge for her.
On the table in front of them are printouts with information which is relevant to the topic they are discussing.
Emma didn\'t know that the Smith family is so large and that Smithsonite corp. is divided in so many areas.
In summary: Jarred is on the top of Smithsonite corp. which controls engineering, research and development of new products as well as contracts with entities outside Smithsonite corp. and legal department. Once prototype is stable and was approved (by the board), then it will go to the corresponding department for future enhancements and production which are controlled by Charlie\'s cousins.
Example is that new model of air-to-land missile guidance system is engineered and prototyped under Jarred. When he approves it as ready, it will go to the board for a demonstration and voting, and if it passes, then Charlie\'s Uncle, Thomas Smith will be in charge of production, finding any flaws and perfecting it before it goes to the customer.
In this way, the person who is on top of Smithsonite corp. (aka Jarred) has the control over the company, but other members of the Smith family have some power as well as part of the board and in managing their departments.
Most of the directors in Smithsonite corp. are Smiths, and a number of them owns 3% or more stocks and has the right to vote in board meetings.
But no matter how much power and money they have, some of them are eyeing the CEO\'s position, which is currently held by Jarred.
Emma listened to Charlie\'s explanation how it all works and summarized: "Jarred will give you the CEO\'s position and his shares. With that you will own 17.4% of Smithsonite corp. But the board can vote you out of the CEO position if more than 51% of votes are against you?"
"Almost correct. Jarred will give me his shares, but not the CEO position."
Emma sighed in defeat. Why is all this so complicated? "OK. I need to hear that part again."
"When Jarred gives me his shares, I will own 17.4% of Smithsonite corp. He will step down, and there will be voting for the next CEO to take over. In order to become CEO, I need more than 51% of votes from the board members. Each of the board members has at least 3% of stocks and they can vote."
Emma thought how 17.4% is far away from 51%. "How do you know that you will get 51% or more of votes?"
"The board members can be categorized in two groups and in two ways. The first way is the division on the ones from the Smith family vs the outsiders. Without counting me, out of fourteen board members, nine are Smiths and five are not. It is a common understanding that Smiths will NEVER allow the company to end in the non-Smith hands, so those five outsiders are not contenders for the position of the CEO."
"So… you are saying that this division is onto five people who can\'t be CEO\'s and nine who can compete with you for the CEO position?"
"Correct. Those nine are my relatives and out of them: five of them ARE waiting for their chance to take over the CEO position from me, two are happy with their current status as directors of their fields but they are not loyal to me either, and two are non-consistent. That is where we are coming to the second division: members who want the CEO\'s position and members who are looking into maximizing their profits. To simplify this, members holding 39% of shares will give me their votes as long as they believe that I am the man who will earn them money."
"That is a lot of votes which can be swayed.", Emma voiced her thoughts.
"Yes. That is why Jarred is making me shadow him for such a long time before he hands me his shares. He wants me to demonstrate that I WILL secure them profits. Another thing is that those five who are hungry for the position of the CEO are looking into their interests only. They will not vote for a Smith unless it\'s them."
"How much those five have?"
"35%", Charlie responded.
"A lot!", Emma exclaimed. "If they agree to topple you, and pick one of them as the next CEO, they need less than half of the swaying votes to take you out. Why don\'t you buy off their shares and put someone else to lead those departments?"
"That is a lot of money. Also, it\'s not just about the shares. It\'s about balancing the power in the family. Each of them has influence in a specific area."
Emma frowned. What balancing of power in the family when they are at each other\'s throats? But she understood that he is opposing to it. "What if you buy a portion of their shares, to weaken them?"
"If I do, it will be considered like a personal attack. Remember those 39% I mentioned that are looking into profits only? 17% of those are Smiths and if they suspect that I\'m doing a hostile takeover I\'m afraid that they will start taking sides, and they will not be on mine because they will fear that I\'m coming for their shares next."
Emma thought of another possibility: "What if someone else buys those shares?"
"An outsider?"
"Yeah."
Charlie exhaled. He can see that Emma wants to help, but if it\'s that simple, Jarred would take care of hungry family members a long time ago. "Let\'s say that you have a billion dollars and you decided to buy shares of Smithsonite corp. There are about 4% of shares on the stock market which can be traded on an off, and those are shares split among thousands of people who are owning anywhere from one to few hundred shares. However, for Smiths who own shares of the company, even if they own less than 3% and can\'t attend the board meetings, unless you force them to sell, they will not do it. They are not short on money. By asking them to give up on their shares, you are asking them to give up power, prestige."
Emma pushed all the papers away and plopped back on the sofa.
"How can you do this? How can you go to work and do your best while earning money for people who want to backstab you? How can you go into a meeting and have a civil discussion with them if you know that they wish you to… die?"
Charlie can see that Emma is upset. He pulled her into a hug and spoke in a low, soothing voice: "I am not thinking about them. Those five people and their children who are eyeing my position are not significant when I think about people who matter. I think about Jarred who has faith in me. I think about my parents who left me 5% of company\'s shares. I think about you and our future family. I think about thousands of employees who depend on me to keep the company prosperous so that they can take care of their families. When I think about all that, those five people are almost non-existent."
Emma held her breath while listening to Charlie. His response was on point and uplifting and it made her understand why Jarred believes that Charlie is worthy to take over after him. "You are going to be an amazing CEO."
Charlie smiled. "Thank you."
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