The board member wanted us to buy machines from his company

We need a new machine for the factory. It costs more than $250K. We looked at all the alternatives and decided on the Northeastern-10. As the expenditure was over $200K, it needed Board approval. One member of the Board was associated with a local company that sold a competitor to Northeastern. He asked if we had looked at his machine and we said we had.

He insisted that we buy his company’s machine even though it wasn’t the best for what we want to do. Our shareholder agreement said we needed 80% approval for expenditures of this level. He blocked all approvals.

It takes a unanimous vote of the Board to change the shareholders agreement.

The CEO was setting unrealistic expectation with the board and investors

No matter how much time and effort we put into controlling our project costs everything always cost more and takes longer than we expect. We’re not dumb – we just can’t get it right.

We tried to figure out what was going on. After a lot of discussion, we focused on what the CEO expected. It emerged that the CEO made promises to the board and investors that he knew he couldn’t keep. He then tried to impose these targets on us and the projects. He just thought it was easier to manage the board this way.

We told him this wasn’t the way we wanted work. We needed honesty and transparency and it was better to face reality than to create expectations that we knew were unrealistic from the start. He and we couldn’t rely on this type of behavior as the business grew.