OWhen sanctioning or firing senior managers found guilty of violating disciplinary or corporate rules, employers often need to formulate and implement a more meticulous plan of action than that required for regular staff. This is due to the special status of senior management within the company, their potential influence on the company and other employees, and the risks that can arise from mishandling such situations. Having advised numerous multinational companies on the dismissal of their senior management in China, the authors wish to share their experience and practical suggestions in designing and implementing such action plans.
After being made aware of a breach by a member of senior management, companies often have to conduct lengthy internal investigations to lock down relevant facts and evidence. Manipulation of employees’ personal information is unavoidable in such investigations. In some cases, they also require the engagement of third parties such as investigative agencies or law firms, or the cross-border transfer of information, for example to a parent company abroad. With increasing legal requirements for the protection of personal information, companies must take steps to ensure compliance in the handling of personal information during investigations.
Members of senior management often hold important company assets such as official seals, financial seals, business licenses or permits, and key business contracts. Companies should therefore confirm the whereabouts of these assets beforehand and, preferably, recover or move them without alerting the senior executive concerned.
Given their critical positions in the company and the departments, a preliminary reflection must be carried out on the candidates for succession, the succession and the transitional arrangements. Specific company or department personnel may participate in the preparation and implementation of the action plan, provided secrecy is maintained. With their cooperation, the company and the department have a better chance of a peaceful transition, mitigating the effect of the senior executive’s departure.
The design of the action plan is a crucial step in its success. A well-designed plan should include not only basic information such as a schedule, location, participants, and operating steps, but also contingency plans for unforeseen situations.
For example, for an action plan to materialize, the senior executive in question must show up on the scheduled date. In practice, companies tend to get the older person to show up at the right time and place on an unsuspecting pretext, but things don’t always go as planned. If the person refuses to come forward, goes into a fit of rage, or otherwise acts aggressively, what would be the most appropriate response? Where possible, these scenarios should be deliberated upon and included in the action plan, along with corresponding strategies for the future.
In addition, companies must anticipate the different directions and results of the negotiation. Alternative legal documents that may need to be delivered or signed by senior management should be prepared in advance, such as a unilateral termination notice, mutual termination agreement, or suspension notice.
DAY OF ACTION
Given the likelihood of having to face the member of management one day in the context of arbitration or labor litigation, it is advisable to conduct an investigative interview before announcing the dismissal or engage in negotiation, in order to obtain more evidence favorable to the company. The participants in the action plan must determine in advance the scope of the investigators and their respective roles.
In many such operations, outside lawyers are engaged to conduct the interview, who may compile a list of questions based on the findings of the preliminary internal investigation. During the interview, lawyers tend to catch the interviewee off guard by using a host of communicative tactics, such as granting feigned advantages or diversion, in an effort to entice the interviewee to blurt out his misconduct or even to confess wrongdoing. .
As many of the cases discussed by the authors show, even if the interview does not lead to the optimal result of a confession, employees, even senior managers, tend to make mistakes, make contradictory or illogical statements. when they are caught off guard for an unexpected interview. These records could prove very useful in future legal proceedings.
While the parting of ways is the common theme of all of these deals, the manner in which the senior executive leaves management varies widely. In some cases, companies are inclined to obtain a voluntary resignation or a mutually negotiated termination, after taking into account the results of preliminary investigations and interviews, the degree of fault of the member of management and the internal and external ramifications of a unilateral dismissal. This requires careful planning and conduct of exit negotiations.
Considering the influence of the senior management member among the employees, the authors recommend that companies prevent them from staying unnecessarily in the workplace or communicating more with other staff members. If the handover of works and goods cannot be made within a short period of time, the companies may agree on another time and place for this purpose. Additionally, to avoid excessive general speculation, discussion or disruption in response to the senior executive’s departure, companies should inform their staff in a timely manner by offering a well-rehearsed and well-rehearsed explanation.
Externally, the news of the departure must also be correctly passed on to the customers and business partners concerned. If the senior executive in question was a legal representative, director or supervisor, the company must make timely changes in business registration and other related procedures such as changing the bank seal or information about certain licenses or permits.
Since a unilateral dismissal greatly increases the likelihood of subsequent arbitration or litigation, companies should take special care to gather and preserve existing evidence, and to collect other necessary facts and evidence with the assistance professional lawyers so that all the bases are covered for a possible lawsuit. .
Tracy Liu is partner and Larry Lian is vsousel to Jingtian & Gongcheng
Jingtian and Gongcheng
34/F, Tower 3, China Central Place
77 Jianguo Road, Beijing 100025, China
Tel: +86 10 5809 1026
Fax: +86 10 5809 1100