Keep a promise to your best friend and remain middle-class, or break it and become a billionaire?

In My Humble Opinion
1

Continuing my current theme, here is the story of DAVE, DON, and CHRISTOPHER. The former two are both men in their late 30s. A year ago one might hae said the same thing about Christpher, but today only the past tense is appropriate to describe him.

Christopher and the two Ds were college classmates and best friends. All three were bright, but Dave, an engineer, was the most gifted of the group. Everybody knew it, but nobody was bothered, as he was relaxed about his great big brain. Some years after graduation he decided to start his own company and invited Christopher and Don—experts in marketing and corporate communications, respectively—to be his partners. He’d already invented several useful and lucrative gadgets,so his buddies were happy to hitch their wagons to his. Dave had one condition. Being quite idealistic, he not only refuses to work for the military but wants to stay separate from multinational corporations, so he asked his friend to promise never to sell out to the likes of Microsoft or IBM. As far as Dave is concerned, the purpose of the company is to generate incoe he canuse to finance basic research and good deeds, and of course to let him work with the two men he loves most in the world. Don and Christopher gave their word, as they were confident that Dave would make them rich.

That didn’t quite happen. Oh, DCD Enterprises was successful enough, growing to employ several dozen people and generating annual salaries of around $250K for each of its owners. But that was all; they did not become hugely wealthy. Dave never cared; he’s single and childless, gives much of his salary to charity, and is happy to live as if he were netting $50K rather than five times that. Christopher and Don, both married with multiple kids, weren’t quite as happy, but it was a good living and they were working with the best friend either of them had ever had, so they were content.

A year ago, the trio became a duo as when Christophe committed the crime of driving his BMW while black and got shot by a white cop who figured he’d stolen it. This was heartbreaking to his buddies but not crippling to the company; Dave was always the driving force behind DCD’s innovations. But it did change the dynamic. Christopher’s widow, HEATHER, now owned his shares, and she wanted more money. She’s put out feelers to a multinational company that is eager to acquire a lot of DCD’s patents—specifically those which Dave is responsible for, but which technically belong to the company. Even more so, they want to hire Dave. So they’re offering to buy the whole company. The purchase price will make Heather, Don, and Dave billionaires.

Dave is having none of this. He’ll start over before he agrees to work for those heartless warmongers at at Remyhr International, he says, or even for AT&T. But fortunately that’s not an issue; he, Don, and Heather all own equal stakes in the company. Heather of course has no obligation not to sell, but Dave is confident that Don, his best friend, will honor his promise.

In fact Don is tempted. He’s got four kids; he’d like to send all of them to an Ivy League university when the time comes, to buy his wife jewelry as beautiful as she is, to buy a mansion and have a fortune to leave his heirs. The Remyhr buyout would let him do all that and more.

Is Don ethically bound to honor his promise to Dave? Why or why not?

(Note that I am NOT asking if Heather is bound by Christopher’s promise; I don’t ee how she could be. Nor am I asking if the promise not to sell out to a multinational is LEGALLY binding. My only interest is whether DON may ethically break his promise Dave.

2

How about if we just take the company public and try for an IPO to raise cash?

After all, if you have an offer in hand of multiple billions, you’d think you’d have banks and investors falling all over themselves to buy a chunk. That way, people could also sell smaller amounts of their stock to be able to provide the schooling and mansions. All of the current investors could sell shares (I would certainly retain most of my own shares) without feeling like they’re selling to EvilCorp.

3

Yes, he is ethically bound to his promise to Dave. However, he should still sell and become a billionaire, give a lot to charity, take care of his family, and help Dave start a new company or charitable organization or whatever, all the while telling Dave he is sorry for selling against his promise and reminding him how much they have accomplished since he became a billionaire.

4

I think Don should sit down with Dave and see if Dave still feels that way, or if he can be convinced (not pressured, but convinced) to change his mind. Maybe that they’ll do more good in the world if they sell and start up a charity and lobbying organization to help out Black Lives Matter or something that was important to Christopher or is important to Don and Dave. And that while Dave’s patents are brilliant, if he doesn’t sell to Remyhr they’ll still find ways to get similar if not as good technology, so selling out to them doesn’t make a huge difference in warmongering.

Or like Chimera said, maybe work with Heather to see if another company would be interested in buying out. Maybe they won’t get as much money as from Remyhr, but it could be a compromise that would keep Dave and Heather happy.

But if Dave won’t change his mind on Remyhr, and another offer can’t be found, Don should honor his promise. He has no compelling reason to break his promise other than he wants more money.

5

I don’t see how Christopher’s death changes anything. Christopher and Don had an agreement with Dave. Don still has it.

If Don wants to get out of the agreement, he should quit the company and start his own business. But he shouldn’t feel entitled to sell Dave’s technology.

6

Either your word is good or it isn’t.

If I am not mistaken, Don and Dave have a contract.

isn’t this a contract?

7

Yep, this, for me. He’s bound by his promise, and breaking it is an ethical no-no, but he can most certainly make up for that in good deeds with his new resources.

8

Yes, Don should abide by his contract/agreement. But if he needs the money (or just wants it really bad), he should sell his shares to Dave – Dave should easily be able to raise enough money to make a good offer, if not in the range of billions.

9

Yes, more or less my thoughts.

10

The question is not “What can Don do to become mega-wealthy, instead of just moderately so as he currently is?”

(After I hit submit, I realized that I’d set the annual salaries for the founders too highto call them middle-class.)

The question is “Can Don ethically break his word to Dave and sell out to Remyhr, which as we all know is probably Rhymer Enterprises and will use Dave’s inventions to hunt down and murder every hobbit left in the world?”

Anyway, I doubt Dave will agree to taking the company public. Thta’s as much as surrendering control to a multi-national.

If Don is ethically bound by his promise, then he SHOULDN’T sell, unless we are using the word “should” in different senses. Perhaps you mean he can do all that in an Elvish attempt to pretend he isn’t an honorless Smurf.

The OP is clear that Dave still feels that way. It says that not only does he refuse to sell to Remyhr (whom he characterizes as warmongers) but also the relatively benign AT&T. You might as well ask if ihe’s suddenly decided not to like chocolate ice cream.

Dave has explicitly refused to sell out to any big company. And I doubt donating millions to BLM would do anything but corrupt it. BLM’s goals are not achievable through money.

What arguments are you going to make to Dave that aren’t pressuring him? He clearly doesn’t care much about money; he’s giving away his already ample salary and living as if he were a plumber. He’s got no dependents. Don can try to guilt him, but bear in mind that Don i only in the company because Dave wanted to work with his friends. He was already doing well before inviting them to invest, so surely he could have found other investors. He wanted people he liked and trusted with him. If Don now propposes abrogating the agreement that has made him moderately wealhty, why would Dave continue to feel either affection or trust for him?

11

Yes, it is unethical for Don to sell, I agree. However, he should do it anyway and be unethical to one person while using his billions to help thousands of others.

12

What he really ought to do is point out to Dave that if they both sell out, they’ll have drastically more cash to start over and do even more good deeds and basic research and continue to work together.

There’s really no downside, other than the relinquishing of control of the intellectual assets developed so far.

13

I believe I could list a lot of people who took their companies public and didn’t lose control of it. Mostly it depends on how much you sell. The principle owners could retain as much as 60-70% ownership in the company for the IPO, raising 30-40% of the value of the new company in capital to spend/invest/buy other companies and still have a bit of a margin to sell a few shares.

Sorry if I’m breaking the premise, but IPO doesn’t mean the owners have to be, or even can be forced out.

Let’s even lay this out.

Existing offer: $5 billion (for example)

IPO issues 30% ownership of company. Dave, Heather and Don Premise each retain 23.33% ownership.

Even assuming the IPO doesn’t go well and the market values the company at a mere $2 billion, each principal owner’s share is worth $466 million. Don and Heather could each sell off 3.333% of the company, pocket $66.7 million (less taxes) and still own 20% (each) of a multi-billion company sitting on $600 million in cash to expand its operations. The $35-40 million they’d get after taxes would be more than sufficient to buy mansions, boats, the finest schools, etc, and the team would still own over 60% of the company, retaining full control.

Heck, as Don, I’d even be willing to sign a different ownership agreement before the IPO, giving Dave a higher ownership based on his value to the company.

14

In terms of not pressuring him, I’d mean Don should sit down with Dave and make it clear that he respects him and his ideals even if he doesn’t 100% share or understand them, and that he’s free to make his own decision, but that they should both hear each other out. Don will listen to what Dave wants and why he wants it if Dave will listen to Don and what he wants and why he wants it.

First Don should to find out more specifically why Dave doesn’t want to sell out. If it’s just a principled stand and he can’t articulate the reasons more than that, then obviously no arguments will change him. But sometimes younger people have high-minded ideas about not selling out when they’re younger and they’re less rigid in their beliefs on it as they grow older. Without knowing more why he objects to even selling out to a company like AT&T I’m not sure I could come up with more specifics on why he should sell to them.

But if he doesn’t want to sell out because he thinks it’d be harmful to the world, I’d discuss that with him. From your OP:

If Dave wants to finance research and good deeds, he’ll be able to do a hell of a lot more of that with billions of dollars instead of his current salary. It doesn’t have to be BLM, I just said that because of Christopher, but he could donate some money to BLM causes, and sponsor a bunch of kids getting scholarships in their city, and donate to disease research, and still have a lot left over.

But if Dave refuses to discuss things with Don and doesn’t want to explain or change his stand, then Don should suck it up and honor his previous promise. Don’s still doing better than the vast majority of Americans, and maybe his kids can’t all go to Ivy League schools but they’ll still likely be able to get in to good places. He can’t buy a mansion but I’m guessing he still has a pretty good house. There’s no reason to break his promise.

15

Eh, I can’t think of anyone who doesn’t share the same last name as me I wouldn’t break a promise to for a billion dollars. Especially if they get a billion dollars out of it too.

I mean, what happens if Don wants to quit? Does his promise mean he has to work with Dave forever?

16

Sorry, Dave. If you were serious, you’d have written it down.

Any company like this should have a buy-sell provision in the bylaws or operating agreement. The whole purpose of this provision is to dictate who can sell and under what conditions. The buy-sell agreement would also have covered whether the widow could inherit stock. In my experience, it’s much more common for the buy-sell provision to require that the widow be bought out at a predefined price, thereby limiting ownership only to the founders or to people the founders agree to sell to.

If D, C & D signed or otherwise approved bylaws that do not contain the promises they made verbally and do not prevent acquisition of shares by people who didn’t make the verbal promise, then it seems clear to me that none of them thought the promise was important and didn’t think about how to enforce the promise in the future. It sounds to me like so much daydreaming among friends thinking about their future.

Breaking this promise is the ethical equivalent of a white lie as far as I can tell.

17

There’s a missing piece here. It’s clear that Dave will not go and work for MegaEvilCorp, so what happens to the deal then? (Emphasis added.)

18

Hopefully Bricker or Oakminster will wander in, but I’m not sure how such a stipulation ciykd be written to enforceable. Dave was depending on the fact that the people he was making an agreement with were his best friends.

Before I was married I had an agreement with my baby sister that, if I died before her (which I surely will), she would make sure I was cremated. That’s not written down; I simply trust her to do it. (And of course my wife has those instructions now and intends to follow them, so the agreement with BRAINY THE RHYMER is moot. But she’d be wrong to violate it, no?

As I wrote in the OP, I don’t care about the legal aspects. That’s partly because laws have only practical meaning to me, but partly becaue I am sure that Don can legally vote with Heather, but mostly because what concerns me is the matter of honor.

The question I posed is not whether Don would be well advised financially in a financial sense to betray Dave’s trust, or if he can legally do so. The question is whether there is any ethical basis for doing so. And I’ll add a codicil: Are posters who would break their word in his case bothered by that?

Remyhr wants both the products and Dave’s brilliance, but I’m sure the products and patents are worth more; there’s no guarantee that Dave will continue producing, after all. So I expect that if Dave absolutely refuses to work for RI, and they know this before a deal is struck, the offer will go down from the current minimum of $3 billion to somewhat less but still life changing for Don and Heather.

Also–Dave may or may not have an employment contract. I doubt it, but let’s say he does. Such a contract would probably have a non-compete clause. I suspect that, if Don breaks his word and votes with Heather, Remyhr will be able to keep him working anywhere else for a year or so.

The fact that Dave will also “benefit” – or, rather, profit – from the sale is a facile rationalization for the breaking of one’s word. Dave doesn’t care about money. He gives away 4/5 pf his salary and lives as if he were managing a Best Buy. You might as well try to persuade ME – a man who hates football – to cheat on my wife by offering me Superbowl tickets…

Of course Don doesn’t have to work forever. His promise is simply not to sell his stake in the business to a big company. His ownership stake will remain if he steps down from whatever his job is. And given that Dave doesn’t seem to care much about money, may even be able to keep drawing a salary as well as participating in profits.

I don’t see that Don has any NEED to sell. He WANTS to buy a mansion, sports cars, and so forth Legally I’m sure he has the power to do this, but the cost will be breaking his word to the man who i not only is best friend, but is also largely responsible for his current cushy position.

If DCD sells out to Remyhr International, Ri gets controls of Dave’s inventions. Dave calls RI “heartless warmongers.” He’s not going to do that any more than I am going to sell non-booby-trapped arrowheads to Rivendell.

19

And paid some real consideration for it, even if only a nominal sum like $20.

What we have here is a promise, not a contract. It’s perfectly legal to break it.

As for the ethics, I dunno. I don’t much care. I won’t judge him harshly if he sells out. I’d be mighty damn tempted to sell out. Who wouldn’t?

Business and ethics are at odds with each other. Landlords have to evict poverty-stricken tenants who can’t pay the rent. That’s about as ugly an act as you can find…and it has to happen, else apartment blocks would become homeless shelters. If there’s a third person involved, the Heather of the story, then it is immoral for Don to keep the promise, because he’s denying her the billion dollars she wants and is entitled to. Don has to screw over someone. There is no “morally perfect” choice here.

So, instead of harming Heather in real terms, screw the promise: he made it under very different circumstances. Dave can call Don all the rude names he wants.

20

I wouldn’t. How can I be tepted to sell out when I would have already done so? RI isn’t going to pay me that billion TWICE.

:smiley:

But as to the contract issue you brought up in the part of your post I snipped, what possible consideration could Dave have offered that would be adequate? Doesn’t consideration have to be commensurate?