Power and Leverage in a Time of Crisis
Photo by Leon Seibert on Unsplash
The sands of time on which we stand continue to shift all around us. Poised leaders who are used to being in control are constantly putting out fires. Faithful and qualified employees find themselves hunting for new jobs on LinkedIn. And the relationships between entrepreneurs and investors are as uncertain as ever.
Thankfully, leaders stepped up to lead the charge on how Christian business leaders and investors should respond to the power and leverage they have (or don’t have) during these pressing times. Below, you’ll find an email that Luke Roush & Jake Thomsen sent to Sovereign’s Capital portfolio companies. We believe their words of wisdom can encourage you as well…
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by Luke Roush & Jake Thomsen
One of the questions we've fielded in recent days is what is an appropriate vs. inappropriate use of leverage is during a time of crisis. The specific context where this conversation is that a well known private equity firm recently announced:
"We just called all the landlords of our portfolio companies and said 'We'll give you 50% of your rent for the next 90 days, take it or leave it. This is not to be repaid later...it just is what it is.' - At this point, 100% of our landlords have taken these terms."
This and other recent examples sparked an internal conversation about what is appropriate and inappropriate during these extraordinary times. As we prayed through this topic and sought counsel from our chaplain, Toby Kurth, here are two concepts we think are appropriate to reference:
1) Crisis Reveals Character - The question is what will this crisis reveal about my character? What does it look like to pursue righteousness in this environment? There are many places to go in Scripture that deal with integrity and keeping our word. Even deeper than that, as followers of Jesus, an all-of-life pursuit of righteousness should guide everything we do in personal and public life.
Proverbs 2:20-22 is instructive:
“So you will walk in the way of the good and keep to the paths of the righteous. For the upright will inhabit the land, and those with integrity will remain in it, but the wicked will be cut off from the land, and the treacherous will be rooted out of it.”
We also draw wisdom from Matthew 5:37:
"But let your ‘Yes’ be ‘Yes,’ and your ‘No,’ ‘No.’ For whatever is more than these is from the evil one."
2) Righteousness - Tim Keller’s commentary on this topic is particularly helpful - “BE RIGHTEOUS. When Proverbs speaks of the righteous and the wicked, we think it means the ‘moral’ and the ‘immoral.’ That is only part right. The Hebrew words for righteous—tzedeq and mishpat—have a strong social aspect. Bruce Waltke writes: ‘The righteous are willing to disadvantage themselves to advantage the community; the wicked are willing to disadvantage the community to advantage themselves.’” (Keller, God's Wisdom for Navigating Life)
In light of this wisdom, here would be a few points as each of you lead through your unique set of circumstances:
1) Situational Awareness - In times like these, it's appropriate to re-examine all obligations in your business. This includes supplier contracts, customer contracts, real estate contracts, employment contracts, etc. Our faith and how that is reflected in and through our work is non-negotiable, but many other things are negotiable in extraordinary times like the ones we're living through. We encourage you to engage early and often in collaborative (as opposed to combative) discussion with counterparties, recognizing that we have more in the way of a shared destiny than a zero-sum game.
2) Competing Priorities - Leaders are called to balance different priorities to include creditors, investors, staff, vendors, customers, landlords, etc. In a world where fulfillment of all obligations becomes impossible, how do we as leaders sort through these priorities? These are good things to wrestle with, and tradeoffs may be necessary. Our legal system has some definition around creditor prioritization, but if you're wrestling with this, our Sovereign's team is happy to be a sounding board - anytime day or night.
3) Our Word as a Bond - If two parties agree to re-negotiate a contract, that's reasonable and appropriate. What it looks like to "bear down" and get an appropriate deal given a host of different conditions can be widely variable. What isn't appropriate is to walk away from obligations without conversation, or with our only conversation to be a "take it or leave it...if you leave it, we'll see you in court" negotiation as we pound the table...see Matthew 5:37 above. :-)
Our hope is that this counsel is helpful, as you actively pray and discern how The Lord is calling you to act and steward what He has put in your charge.