I was in your shoes. I had a cofounder that wasn’t working out. And after a couple months of trying to fix things, I had enough. So I decided to fire “Randy”.
You have the hiring and firing authority for your company when you are CEO. So if you want to fire a cofounder, then you can fire your cofounder.
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Here were the steps I took. You will likely need to take similar steps too:
A. Let your board of directors know you intend to fire one of your cofounders.
You are not asking for the board’s approval, you are informing them because you are letting go of an officer of the company. You likely will get asked why you have decided to let your cofounder go (I was).
You should just be open and honest about the reason. You don’t have to be defensive. Then…
B. Look at your cofounder’s employment contract with your attorney.
I reviewed Randy’s employment contract with our labor attorney. We wanted to understand how much of his stock had already vested, and, most importantly, under what terms the remainder of his equity would accelerate and vest immediately.
It turned out that, in our case, as long as Randy was fired for cause none of his equity would accelerate. Randy’s employment agreement was written with a very broad definition of cause, so none of his equity would accelerate.
C. Have a final paycheck, and termination agreement ready.
Tina, our controller, prepared Randy’s final paycheck. Then I worked with our lawyer to draw up Randy’s termination agreement.
Usually the officer resigns instead of being terminated. There were non-disparagement clauses drawn up as part of the agreement too.
D. Set up the termination to happen in the most humane way possible.
Tina set up an all-hands employee meeting at the exact time I was set to let Randy go. That way Randy could leave the building with the least amount of interaction with other employees.
Finally, and most importantly…
E. Handle yourself with class and grace.
Terminating people sucks.
You are disrupting someone’s life and changing that person’s life forever. And it doubly sucks when the person is a cofounder.
Remember, this person helped you start the company. Even though things didn’t work out, you owe this person a huge amount of gratitude.
This was certainly true with Randy. Randy was the final cofounder to join the company.
Randy helped us get over the top with investors. Randy also introduced me to our one and only angel investor. I owed Randy a lot.
So handle yourself with class and grace by taking the high road. Yes, there may be a lot of anger and hurt feelings, but explain what you’re doing in a direct, but gentle way.
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