Tony Fish – CEOs Can Defraud a Business in Very Hard to Detect Ways

Tony Fish thrives in complex, ground-breaking, and uncertain environments, bringing proven judgment and decision-making skills with cross-sectorial experience. He has a track record of sense-making and foresight, with enthusiasm and drive that is contagious. Tony is a maverick and (un)intentional rule breaker. His focus is on how the future of corporate governance, decision making, and judgment will be affected by complex data at the corporate board level. This focus leads him to speak about what board meetings will look like in 2025, and the implications and unintended consequences. Tony has founded, co-founded, sold, and listed many businesses and remains deeply passionate about new ways of creating value, inspiring, and supporting the next generation of thinkers and doers.   “You learn the most from the worst and the toughest times. There is no doubt that you go into your worst investment to learn more.” Tony Fish   Worst investment ever Tony made his worst investment ever as a board chairman. His company had a simple idea to deliver a product to three million captive customers in the UK market. Those customers had already fairly much adopted the product, but they were particularly sensitive to price. For this reason, all of the existing players, because of their large infrastructures, could not offer the price that would see the customers carry on being incredibly loyal. Getting it right from the start With this advantage, Tony’s company started from scratch with a different philosophy and different economics and got price efficiency from day one. The company wanted to create something which was highly efficient, effective, and built from the ground up. They identified a power player, which was a company that had access to their market and utter control over the digital channels to this market. They did a cross-shareholding with this supplier to get a deal, which gave them access to that market in terms they could not get in any other way. The supplier offered a superior product with a subscription model, which they could now offer to this captive audience. Capturing the customer The company raised Series A, which was just short of 10 million pounds in about four months. So basically, they were swapping existing customers from one platform to another platform with a much better cost advantage. In less than six months, they had a significant customer base, and each subscriber was paying about 20 pounds per month. After just less than six months, they were making five million pounds a month in income. Scaling the business The company needed to raise more capital for cash flow, and before they could do it, they had to go back to the supplier and get better terms because the terms they had would not go to a large scale. At the point, they had committed about 20 million pounds in debt and equity. Tony believed that the supplier would buy the business themselves because the company had built a substantial new customer base. With the supplier’s new platform, they would be able to offer something they hadn’t done before. So it was a pretty obvious strategic exit. Tony set up a meeting with them. He went as chair of the board and took one of the other major shareholders and the CEO. They went into the meeting with high expectations of getting a better deal or, better still, opening up the conversation of the supplier, becoming either a strategic funder or taking the business out when it passes a specific number. Here comes the shocker So after the pleasantries and Tony presenting their proposal, the supplier asked them how many verified customers they had. Tony was feeling quite proud of the company’s success, given the high numbers that the CEO had been giving the board. So he goes through the numbers, ready to provide them with an impressive figure. But shock on him, there was an enormous gap between the data the board had and the data the supplier had. Tony and the shareholders could not believe it. Over the next three days, the board found out that the CEO had been lying to them. Not only had he been lying but had been utterly fabricating the numbers. On top of that, there was a massive fraud issue, and all of it was hidden. The systems that the board believed were in place and working turned out to be a user interface that was completely fabricated. The friend turned foe The CEO was Tony’s mate, and they had worked together before on other projects. Tony came to find out that his mate had a hidden past and was not even qualified for a CEO’s role. He had been stealing from the company all along and misleading the board. The CEO was also about to jump ship and had found another job. Tony had made the worst investment ever when he hired the CEO. Needless to say, there was no deal made with the supplier. The board also was liable for all the mess that the CEO created. Lessons learned Directors carry all the liability The company and its shareholders have limited liability. Directors, however, are 100% liable. There’s no escaping. Be aware that sitting on the board of a company is not a nice little end of life career; it’s a serious role with profound implications. Being a board of directors requires emotional maturity To be a successful board of directors, you have to have emotional maturity with the highest emotional sense. Don’t be judgmental or controlling, but seek diversity, especially of reporting. Andrew’s takeaways Being an advisor is the better option If you want to be involved in a company, be an advisor, not a board member. Because as a board member, you are liable for any fraud going inside the company, and you can’t prove that you made an effort to try to detect it. There is a lot more risk for a board member than an advisor. Actionable advice Find additional ways to know if what you’re being told is true. Yes, this is tremendously difficult because we’re now remote, but it’s a field day for liars and manipulators, so you’ve got to be extra careful. No. 1 goal for the next 12 months Tony’s number one goal is to finish on a piece he’s working on to do board meetings in 2025. Parting words   “Just keep listening to the rest of the podcast backlog episodes—just genius. I love them. Thank you, Andrew.” Tony Fish   [spp-transcript]   Connect with Tony Fish LinkedIn Twitter Website Blog Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with...