What Price Does The Company Pay In An Executive's Divorce Or Custody Battle? Without Some Forethought, A Hefty One

Monday, October 1, 2007 - 01:00
Lynne Z. Gold-Bikin

Editor: Ms. Gold-Bikin, would you tell our readers something about your role at WolfBlock?

Gold-Bikin: I am the managing partner of both WolfBlock's Family Law Practice Group and the firm's Norristown office. The group represents clients in all aspects of this practice area, including divorce, custody and visitation, spousal and child support, alimony, adoption, property division and related matters. We negotiate and prepare premarital, post-marital and separation agreements tailored to a client's specific circumstances. Our attorneys regularly analyze complex financial issues and work with accountants, appraisers and other professionals to evaluate assets such as business enterprises, licenses, professional practices, and so on. Practicing family law for the past 31 years, I focus on high-end divorce cases, custody, support, adoption and division of property cases.

Editor: Over the course of your career, I am sure you have seen extraordinary changes in the family law field.

Gold-Bikin: When I started my practice, the field was very different from what it is today. For starters, no-fault divorce did not exist and discovery did not occur in divorce cases. There was no such thing as joint custody. And there was no equitable distribution of property - the person in whose name the property was titled was the owner. Needless to say, gay marriage did not exist.

Editor: As you know, our readership consists of general counsel and corporate legal department members. In your experience, what impact does an executive's divorce or custody dispute have on a company's overall well-being?

Gold-Bikin: The impact can be very substantial. For example, if I am representing a wife whose husband works for a company, I am certainly going to issue subpoenas to obtain information on what the husband is being paid, the perks he receives and their value, his pension and 401(k) rights, and so on. In the case of a small enterprise, I will look to see whether there are any loans to officers from the company as well as the reverse - loans by officers to the company. Some findings may not put the company into a very good light.

While each case is unique to a certain extent, there are cases entailing a considerable amount of time in court appearances for key executives. This can have a very dramatic impact on the company. Subpoenas, deposition requests, requests for the production of documents - all requiring the presence of some corporate executive to explain and respond to a multitude of questions - take important people away from the workplace and can have a very disruptive effect on the company's business. The process can also result in the appearance of information in the courtroom, as part of a public proceeding, that the company has no desire to see aired in public.

Suppose there is a domestic violence issue. An ex-spouse - armed, dangerous and waiting for a company employee - is a nightmare for any company, to say nothing of the threatened individual. Employees who don't appear for work because they are embarrassed over their bruises are another issue.

Editor: What are the most common pitfalls for the individuals involved in these situations?

Gold-Bikin: The single most common mistake that people make in this type of case is to assume that they will be awarded custody of their children simply because they are a parent. This is simply not the case.

Everyone makes mistakes. Very few people anticipate, however, the fact that these custody cases place them under scrutiny, highlighting and exaggerating every parenting error they have ever made. The sudden realization that everything is going to come out in the public arena of a courtroom is often a very great, and unpleasant, shock.

Editor: What are the most prevalent issues facing the parties in these situations?

Gold-Bikin: Finding money and dividing assets. Supporting an ex-spouse and children can be a very expensive proposition. For that reason, we advise the executives we represent in divorce matters to try to resolve as much of a case as possible without recourse to lawyers. Otherwise, they wind up paying an extraordinary amount of their money to lawyers, something that might not have been necessary had they injected a little more reason and a little less emotion into the process. The absence of any notion of reasonable compromise - something that often characterizes these cases - requires people to spend time they do not have in depositions or in a courtroom. For the same reason, it is important that they retain lawyers who are tough but reasonable.

Editor: What advice do you offer to a company, in anticipation of senior executives being involved in these kinds of disputes?

Gold-Bikin: For starters, the company should prepare appropriate documents for signoff for their senior executives and their spouses. This should be standard procedure whenever someone is promoted to a certain level in the corporate hierarchy - the purpose is to protect the company's confidential financial information, trade secrets, etc. Senior executives are privy to an extraordinary amount of crucial corporate information, and, inevitably, their spouses are too. If the company does not want the information to be the subject of public discussion and review, it should take steps to ensure both the executive and the spouse sign confidentiality agreements.

And, if information winds up in the public record, most judges will not take it upon themselves to cause the information to be withheld. Inevitably what appears in the transcript of the case will appear in the newspaper. The GE Capital case comes to mind. A little defensive thinking at the outset can be of enormous value to the company over the long term.

Editor: Can you provide us with some particulars about the GE case?

Gold-Bikin: During the divorce of then GE Chairman and CEO Jack Welch, the public became aware that the company paid for his private apartment, housekeeper, automobile, flowers for his wife, and so on. When all of this surfaced, it was acutely embarrassing for him, the board of directors and the company's public image. The lesson, of course, is that the company is much better off with cash compensation, even if that compensation is part of the public record, than if it tries to get away with perks that are going to fool no one once exposed to the light of day. It is much better to pay compensation in cash than by way of flowers.

Editor: What effects do cases, like Welch's, have on business operations?

Gold-Bikin : Well, obviously, senior executives who are spending their time in depositions or in a courtroom are not working. The fortunes of the company, as a result, may be temporarily in the hands of people who are not as astute. Such people may not even be qualified to make decisions they are called upon to make. Less obvious is the fact that, even when a senior executive involved in one of these cases is on the job, he or she is going to be distracted and under considerable stress. That, too, can take a toll on business operations.

While the focus is often on senior management, nasty divorces, custody battles and other domestic disputes involving the rank and file can have a dramatic impact on business operations. Work attendance and productivity almost always suffer as a consequence of these cases, and violence in the workplace is not unknown. We have experienced stalkings in the parking lot and cases where employees do not appear at work because they have been beaten and are reluctant to have their co-workers see their injuries. These things happen with a great deal more frequency than people realize. Companies seldom understand how much they lose on an annual basis as a result of domestic violence.

Editor: What proactive steps can a company take to minimize its exposure?

Gold-Bikin: Of course, no one expects to be attacked by their spouse. In that sense, it is really difficult for a company to minimize its exposure. Nevertheless, a company has gone a very long way in protecting itself if it lets its employees know that, in the event of a problem of this kind, they have a company-sponsored program available to receive confidential counseling and legal advice. They should be made to understand that abuse of this kind is not something to be stigmatized, and there is a support system within the company for them.

Editor: How do you work with other practices at WolfBlock to help clients resolve these matters?

Gold-Bikin: We call upon people from a wide range of legal disciplines and practice groups in addressing these issues. The firm's employment services practice is of particular importance to our work. Many of their attorneys work with us and companies to develop and implement the supportive policies critical to the right workplace culture. As but one example, I encourage companies to put information on the inside of stalls in women's restrooms about where they can go for help in the event of spousal abuse. They will be able to get this information where others cannot see them. If companies really care about their employees, this is exactly the kind of thing they should be doing.

Whatever the domestic dispute, it's essential for employers to take proactive steps to ultimately curb potential fallout. Not doing so could be costly for the company and its employees.

Please email the interviewee at lgold-bikin@wolfblock.com with questions about this interview.