As the founder of a company, you likely believe you will remain in charge for years to come until you are ready to retire or otherwise move on. The founder had the idea behind the enterprise and worked to build it from the ground up, so they should continue to be an integral part of the company, right? The reality is that many founders of companies all of a sudden find themselves terminated as employees, and sometimes, they never regain the control they once had.

While the removal of a founder may seem unfair, especially after all their hard work to start the business and find investors, those investors may decide the founder is no longer the right person for the job. When investors believe their money is on the line, they often will not hesitate to take action – even against the founder of the company. In fact, several founders of large and well-known tech companies found themselves ousted and out of a job, including:

  • Steve Jobs, Apple (he returned to the leadership of the corporation a few years later)
  • Noah Glass, Twitter
  • Martin Eberhard, Tesla
  • Andrew Mason, Groupon
  • Jerry Yang, Yahoo!
  • Eduardo Saverin, cofounder of Facebook

While terminating a founder may seem wrong, it does happen and sometimes, to founders of companies that went on to be highly successful. Firing founders is also completely legal if done in the correct manner.

The Removal Process

To fire a founder, the board of directors generally votes to do so. A board oversees the corporate management of a company, including who leads operations. As a company grows bigger, founders often own less than the majority share they initially owned, as new investors dilute their shares. Therefore, unless they do still own a controlling interest, the board can simply vote to fire them.

There are many reasons a board may come to the decision to remove a founder as an employee. Some founders have the spirit of a true entrepreneur, but not necessarily of an executive. Creative ideas and hustle can help start a business, but overseeing substantial growth and large-scale operations requires another skill set altogether. Some founders may falter in the execution of corporate strategies and the company may begin to suffer financially. Instead of risking any further losses, the board may decide to call a vote to fire the founder, and they may then hire someone with executive management experience with larger enterprises. Some founders may return to control in the company at a later date, while others may simply take their cut and move on.

Contact a Skilled Houston Business Attorney to Discuss Your Situation Today

No company should ever take the decision to fire a founder lightly. If you are a terminated founder, you may wonder whether the board’s actions were in line with Texas law. If you would like to discuss any questions or concerns about your company with an experienced Houston business law attorney, you should not hesitate to call The Weisblatt Law Firm at (713) 352-0847 or to contact us online.