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Dimitry K., Esq.
Dimitry K., Esq., Attorney
Category: Business Law
Satisfied Customers: 41221
Experience:  Run my own successful business/contract law practice.
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I am an officer and CTO of a software company headquartered

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I am an officer and CTO of a software company headquartered in San Jose. I have worked for the company since 1998. The division I run is in Ohio. We used to be public but now we are "dark". I was recently told by our CFO about a couple unethical things that have to do with money in regards XXXXX XXXXX CEO (and the CEO's wife who has been at the company for almost four years).

I have gone to the majority stockholder (51%) (and he is a board member) about the ethical dilemma I am having. The majority stockholder told me he would take the appropriate steps and get back to me. The CEO is the chairman and he is the one doing unethical things. The CFO has also admitted to compromising his principles and allowing certain matters to occur as the CEO told him he had to do them. The CFO has also gone to the majority stock holder/board member. The CEO, CFO and I have employee contracts. My question is as follows. If things do not change in terms of ethical behavior what should be my next steps, if any? I have to respect the people I work for or with. Also note that the majority of the company is in Ohio and people are very loyal to me. I started the Ohio division with me working out of my bedroom and now I have 61 people. The company is also in a financial pickle as our newest product is not selling as quickly as possible. The majority stockholder/board member has invested a couple million in the company over the years.
Thank you for your question. I will be happy to try to assist you with your concern.

Ultimately as an officer of the company you owe a duty to bring it to the attention of the Board or the attention of the CFO who owns a fiduciary responsibility to the company and the stockholders in investigating and maintaining the company in good financial shape and in compliance with state and federal laws. If they fail to rectify the next step might be to contact the DA in the county where the unethical decisions are being made and see if the issues can be also considered to be criminal. That is not an ideal situation to be in, but because you are an officer, should there be a criminal violation, you can be liable also, and therefore early detection and review protects you from possible future prosecution.

Good luck,
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Customer: replied 5 years ago.
Thanks! There has been some progress. A neptisom policy and the 51% stockholder who is on the board is taking steps. I don't know what they are exactly but I think they will be good for the company or I hope so. We three executives have employee agreements with a Cause clause.

It is: "Cause" shall mean (i) any act of personal dishonesty taken by personal enrichment of Employee, (ii) the conviction of a felony which the Board reasonably believes had or will have a material detrimental effect on the Company's reputation or business, and (iii), a willful act by Employee which constitutes gross misconduct and which is injurious to the Company. Would you mind interpreting the "Cause" clause in your opinion?
Thank you for your follow-up.

I will be happy to interpret it for you. This clause means that you have a duty to use your personal judgment and where you reasonably believe actions took place that affect, typically financially, although by reputation also, the company as a whole, and in any circumstance where an employee's action profits him in lieu of the company. This is a very good clause for the company because it keeps you responsible if you fail to report something material.

Good luck.
Dimitry K., Esq. and 5 other Business Law Specialists are ready to help you