The Hidden Dangers of “A Little Board Service" for Your Resume (Part I)
A successful asset manager said yes to what sounded like the perfect side gig: join the board of a buzzy CPG startup as an independent director. “Low lift.” “Great for your resume.” “Help the ecosystem.” You’ve probably heard some version of that pitch.
A year later, he woke up to see his name in a shareholder lawsuit alleging misappropriation, embezzlement, and an improper sale.
But he had:
Never touched the company’s money.
Never executed the transaction at issue.
Served purely as a governance-focused independent director, in good faith.
None of that mattered in the court of public opinion. Nobody cares to read a full pleading on Google. All prospective investors saw was his name next to “embezzlement lawsuit,” and that was it.
At the same time, he was also in the middle of raising a new VC fund. As news around the lawsuit began to circulate, investors started asking some uncomfortable questions. The legal risk was bad enough, but the reputational risk quickly became an existential threat to his fundraising.
And this is not a one-off. As more plaintiffs drag directors, funds, and sponsors into portfolio company disputes, “a little board service” can easily become the single biggest risk factor in your next capital raise.
The asset manager came to Cadet Legal with two clear goals:
Get out of the lawsuit as swiftly and cleanly as possible.
Stop the bleeding with investors and the press.
A situation like this one is complex. This wasn’t just about the lawsuit, we had to consider the client’s image and the PR side of things. And we absolutely had to act quickly, before any more damage could be done.
So how exactly could we control the narrative while simultaneously fighting this client’s lawsuit?
