Case Study: When the CEO Dies, What Comes First: His Company or His Family?

In the boardroom, Priya Gowda greeted four men in suits—the creditors of her husband, Partha, who had died suddenly of a heart attack 10 days earlier. She felt numb and exhausted—but also strangely reassured by the setting. The past week(1) had been spent dealing with the funeral home, lawyers, the media, and grieving family members. She had barely slept or eaten. But here, in the headquarters of Splendid Ice Cream, the business she’d watched Partha build from a small dairy farm into a major Indian conglomerate, she felt his energy animating her.

As sole heir to his majority stake in the private company, Priya was now its de facto CEO and chairperson, responsible for a diverse portfolio that included hotels, real estate, and venture capital investments as well as dairies and ice-cream shops. However, she’d learned only the day before from Splendid’s lead accountant that the company was in a precarious financial position owing to huge debts her late husband had hidden from his investors and from her. Over the past year he’d been taking out short-term, high-interest loans in the form of debentures to pay off long-term debt. Stress over the firm’s finances had contributed to his death, she suspected.

“Thank you all for coming today,” Priya ventured cautiously.

“I wish we were visiting under different circumstances,” replied Vijay Gupta, the president of a local bank. “We were all shocked by Mr. Gowda’s death.(2) He was a visionary entrepreneur. He was also our friend and partner. But he left behind a lot of debt, which is why we’re here today.”

Priya opened the document the creditors had prepared. She had seen the figures the day before, but they were still shocking. While Splendid’s core ice-cream business had been growing steadily and profitably, thanks to young urban Indian consumers with global tastes and disposable income, the broader company now encompassed more than 40 subsidiaries, many of which were in the red. Partha had clearly been trying to channel funds from his cash cow into unrelated ventures, but he’d taken on excess leverage, and the company now faced a liquidity crisis and was struggling to find the money to cover high interest payments, taxes, and legal fees. It had a net debt to EBITDA ratio of seven—well above the four considered a threshold for concern. And loans worth more than 40 million rupees would soon come due.

“Priya, I’m sorry to be the one to tell you this, but we must face the music,” Vijay said. “You need to find new sources of capital, sell Splendid to a buyer willing to take on the debt, or liquidate the business.”

Coming into the meeting, Priya hadn’t been sure what she wanted to do. So it surprised her when she blurted out, “No. I’m not willing to give up my husband’s legacy. I can save this company. If you push me to liquidate it, you’ll get pennies on the dollar. Give me time, and I’ll pay off 85% of the debt. All I ask is that you freeze interest payments for 24 months.”

Vijay leaned back. “Would you give us a few moments?” he asked. Priya nodded but didn’t budge. This was Splendid’s boardroom—she had no intention of vacating it. Vijay smiled and signaled to the other executives that they should leave the room with him. A few moments later the group returned. “We agree in principle,” said Vijay. “We just ask to see your plan in writing and that you keep us regularly updated on your progress.”

After showing the men out, Priya sat down at the conference table. She felt a steely resolve building inside her. Opening her laptop, she began typing her first memo to Splendid’s 25,000 employees as their leader.(3) “Dear colleagues,” she wrote. “Splendid has a legacy worth preserving….”

The Family’s Plea

After all the heartache, today was to be a happy day. Three months after Partha’s death, his and Priya’s younger daughter, Anjali, was getting married. As Priya and her older daughter, Garima, watched, Anjali sat on the hotel bed while a makeup artist attended to her Solah Shringar, the Indian beautification ritual.

When a mobile ringtone sounded, the sisters looked up in alarm. “Ah, this is our PR firm,” Priya said. “It’s about that article on our turnaround in Business Today. I know I said no work today, but I really should take this, since it will go to press tomorrow, and I need to make sure they have all the facts straight. It will just take a min—”

Suddenly, Anjali stood, tears welling up in her eyes. “Garima, please take the phone from Mom.”

Her sister sighed, reached over, and hit dismiss on the screen.

Confused, Priya looked back and forth between them. Now Anjali was crying.

“Mom, I’ve hardly seen you for months. I know how much you want to save Splendid—and dad’s legacy. But it’s all you’ve thought or talked about since he passed. You’re running yourself ragged. Today is my wedding day, so for once could we focus on something other than the company?”

Priya felt herself stiffen. “I’m just trying to keep the business going, to honor your father…”

“We know, Mom,” Garima chimed in, with more melancholy than anger. “But Anjali is right. And liquidating the business would give you more than enough to retire and even an inheritance to pass on to us and your grandkids(4) one day.” Garima had two sons in preschool, and Anjali had long joked that she planned to get pregnant on her honeymoon. “There’s no guarantee that you can rescue Splendid, and if you do, it will take years and years,” Garima continued. “Do you really want to spend your sixties in business meetings instead of with family and friends?(5) How much have you seen your grandsons lately? Have you done any walking with your neighborhood ladies? Are you sleeping at all? We’re worried about your health. And we can’t lose another parent.” Now tears dripped down her face, too.

“You’re not going to lose me,” Priya said, pulling both daughters into a hug. “Don’t cry, my sweeties. You’re right that the business can and should wait for today—and other days, too. I’ll try to be less single-minded going forward. But don’t discount your old mom, either. I’m tougher than you think.” She untangled one arm and flexed it like a bodybuilder to get Anjali and Garima to smile. When they did, she patted them each on the back. “OK, now. Let’s not keep our guests and the groom waiting!”

The COO’s Update

Priya sat in her office and looked at the financial documents in front of her. In her 40-year marriage to Partha, the pattern had always been the same. He would charm everyone he met and regularly bring new friends home for dinner, staying up into the small hours of the morning eating, drinking, and laughing with them. Then, when they were gone and Partha slept, Priya and her household staff would do the cleaning up.

And now it seemed he had left her another mess to deal with at Splendid. So what was driving her to mop it up? Love for her husband? Marital duty? Resentment? The need to tie things off and move on from him?

She heard a knock at the door. It was Tasneem Rangwala, Splendid’s long-standing COO,(6) who had been increasingly sidelined in the last few years of Partha’s tenure—something that should have been a warning sign to Priya and the board. Talented and honest, Tasneem wouldn’t have signed off on the high-interest debt.

Now, however, she was Priya’s right-hand woman, having helped articulate the turnaround vision and begun to execute on it with enthusiasm. The duo had worked tirelessly to sell off noncore assets, cut costs, renegotiate debt, and streamline operations while also trying to reinvigorate the company’s core business by opening new stores, replacing displays, and launching a campaign to reaffirm Splendid’s position as India’s favorite ice-cream brand. Tasneem had also brought some new ideas to the table, such as diversifying into cold chain logistics—the transport of temperature-sensitive products—which could not only create a new revenue stream for Splendid but also help solve India’s food waste problem.

“Is now still a good time to discuss the latest financial statements?” Tasneem asked.

“Of course,” Priya said. “Let’s sit together on the sofa.”

Tasneem opened her laptop and pulled up a spreadsheet. There was some good news. The net debt to EBITDA ratio had dropped from seven to five. Revenue had increased by 8%. Customer satisfaction had improved by 20%. However, the company’s operating margin had decreased by 2% because of higher costs associated with the turnaround, and cash reserves were dwindling.

Priya sighed, thinking back to Garima’s questions about how long it would take to turn around Splendid—and if it could even be saved. “Tasneem, what do you see as our next steps?”

“I think we’re making slow but steady progress, so we should keep on our path. We still have a few more real estate holdings and noncore interests to sell off—we just need to wait for the right buyers. We can set up meetings with the bankers to walk them through our thinking, and I think they’ll see that we’re nearly on track to meet your 85%-in-two-years promise. In the meantime I wonder whether it’s time for us to work up a pitch deck for the cold chain idea,(7) organize a road show, and drum up some fresh capital.”

Case Study Classroom Notes

1. Some argue that demands on grieving workers are unrealistic and that firms don’t make enough allowances for mourning. In 2016, for example, U.S. employees received, on average, four days of bereavement leave.

2. Grief.com’s David Kessler says to avoid these phrases with colleagues who have lost loved ones: “She lived a long life.” “I know how you feel.” “Aren’t you over him yet? He’s been dead a while.” “You can still have another child/remarry.” “Be strong.”

3. While 20% of all businesses in India are owned by women, they are overwhelmingly single-person enterprises, and many are in fact controlled by men.

4. At what point is it irresponsible to continue a doomed business? Should an entrepreneur always fight to keep a business alive?

5. In 2012, an Australian palliative care nurse published a book about the five most common regrets her patients expressed at the end of their lives. In the top five was “I wish I hadn’t worked so hard.”

6. In 2000, 48% of S&P 500 companies had a COO; by 2018 only 32% did. But COOs are making a comeback. As of 2022, 40% of leading companies had one, and the role has become bigger and more transformative, according to McKinsey.

7. Should a struggling business continue to try to innovate and invest in R&D?
   

Priya’s phone dinged with a text message. It was Garima. “Can you still babysit tonight? We need to leave for our dinner in a half hour.”

Priya looked at her watch and felt a surge of guilt. She’d lost track of time and would have to leave within the next 10 minutes to get to her daughter’s house when she’d promised to. “On my way!” she texted back.

“Tasneem, I’m so sorry. Can we pick this up tomorrow?”

“Sure,” the COO responded. “Shall I go ahead and set up a meeting with Vijay for later this week? And with the REIT that was interested in acquiring the technology park? And start putting together that pitch deck?”

Priya felt a wave of exhaustion wash over her but mustered a smile as she responded, “Yes, please do. Thank you.”

After the COO left, Priya hastily gathered her things from her desk but then found herself pausing to stare at a framed picture of Partha. She realized she hadn’t wept since he’d died—not even tears of joy at Anjali’s wedding.

“I’m still mad at you, but I love you and miss you,” she said to the photo, a sob catching in her throat. “So tell me, Partha: What do you want me to do?”

The Experts Respond: Should Priya try to save Splendid, let it go, or find a third way?

Charles Read is the president and CEO of GetPayroll.

Priya faces a hard choice: liquidate or sell the firm, which could make her relatively wealthy, or strive to save it and upset her daughters.

Liquidation seems like the easy choice, but it would have its own set of repercussions. In India bankruptcy has a significant social stigma and often leads to personal and professional ostracism. But more than that, I sense that saving the company is Priya’s true calling. Too often talented women opt out of leadership roles because of family responsibilities or societal expectations. If Priya steps away from the company, it will be a loss not only for her personally but also for the business world.

That isn’t to say her journey will be easy. I’ve faced the profound grief of surviving the loss of both my wife and my daughter while running a company. I also know the stress of managing a cash-strapped business. Navigating all that at once requires immense strength and resilience. I cannot emphasize enough the importance of self-care in this context. For instance, I know from my own experience that Priya is likely to find dates like Partha’s birthday and their wedding anniversary overwhelming, so it might be best to avoid being in the office on such days. The good news is that it does get easier. The sun continues to rise. Life overtakes mourning.

In addition, as a widow Priya might be able to open hearts and doors for Splendid that would otherwise be closed. Her creditors are human and not impervious to her situation. Their sympathy could translate into increased patience, giving her an advantage in the quest to save the company. Priya should set up regular meetings or calls with them—perhaps weekly or monthly. You want to overcommunicate with creditors; never hide from them.

Most important, Priya needs to have an open and honest conversation with her daughters. They may yearn for her to assume the role of doting nani (grandmother), but she seems drawn to a different path. She needs to explain to them that she has chosen to be a warrior. She loves them dearly and will make time for them on Diwali, birthdays, and other special occasions, but for now she is primarily focused on the business. This is not a negation of her affection for them but a testament to her strength and determination to carry on her late husband’s legacy.

Sarahjane Sacchetti is the chief business officer of Cleo.

Priya’s focus on firefighting to save Splendid, while commendable, is causing her to neglect the task of reforming its governance, the most important step to getting it back on track.

To start with, a detailed report that exposes the root causes of the company’s missteps is needed. Unanswered questions, such as how Partha’s actions went unchecked and why his COO felt voiceless, must be addressed. That will pave the way for an environment with greater transparency and accountability and a “no surprises” rule.

Second, it’s vital for Priya to avoid the myth of a corporate savior, which led Partha (and Splendid) astray and could recur if she’s not careful. Instead of heroics, she should invest in building a strong team that can work to prevent misconduct and ensure higher levels of transparency. Private companies that let charismatic founders run unchecked often become cautionary tales, as Theranos and FTX illustrate.

She should also consider a co-CEO model. That approach was instrumental for me when I had to step back from my CEO role and become a caregiver for a parent with ALS. I’d recommend that the co-CEO be an external hire—someone from industry who can bring a fresh perspective and dilute the cult of personality that grew up around Partha and could be re-created with Priya. While this move may risk alienating Tasneem, it will prepare the organization for future contingencies and transitions.

Last, Priya’s determination to shoulder the burden of Splendid’s survival is not only damaging to her health and family but also potentially detrimental to the company. Traditional perspectives might suggest that she should just lean in to the work and let her mental and family health suffer, but doing so can be unsustainable for her and risky for the business. The fact is, about 70% of U.S. caregivers are women, and the percentage is even higher in other countries. Rethinking the executive team with a sustainable model is a solution that can help all leaders—not just female ones—balance competing demands and future-proof a company. At Splendid it might better ensure long-term success.

HBR’s fictionalized case studies present problems faced by leaders in real companies and offer solutions from experts. This one is based on the Xavier Institute of Business Administration Case Study “The Turnaround of Café Coffee Day,” by C. Maria Rex Sugirtha.

Copyright 2023 Harvard Business School Publishing Corporation. Distributed by The New York Times Syndicate.

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