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By now, you’re familiar with the ongoing saga of Alec Baldwin and a cinematographer’s tragic shooting accident on the set of his film “Rust.” Earlier this month, Baldwin was charged with manslaughter in Arizona, the state where the incident occurred, and faces up to 18 months in prison if convicted. This is a horrible situation. But it’s also a reminder of the responsibilities we all face as business owners. Because, as the producer of the film, Baldwin was a co-owner of the company. And with that great profit opportunity also comes great responsibility.
And these responsibilities extend to all areas of our business.
For example, as a certified public accountant, I have signed tax returns for clients in the past. And, although I have both professional and legal requirements that I must meet, in the end, a company’s tax return is the responsibility of the company’s owners. If, like most small businesses, your business is owned by you or perhaps one or two partners, any issues, errors, or issues with your tax return are ultimately your responsibility. Even if you were not aware of an omission (or commission), you are still responsible for it. You can’t blame everything on your accountant. His signature is on that statement. You are the owner and are liable, both civilly and criminally, if there is a material error. So read his statement. Ask questions. Know what you are signing before you sign it.
Related: Does your business put you at risk of lawsuits?
The same goes for mistakes made by your employees at work. If an unsuspecting bookkeeper accidentally runs over a puppy on the way to make a bank deposit or pick up a package during business hours, then this is going to be your problem. If a service technician makes an inappropriate comment to a customer in the field, he’ll know about it. If the delivery person crashes into a parked car, that obligation is yours. If someone slips on your walkway, it will also be their responsibility. That’s why insurance exists. And the claims are not reduced in this increasingly litigious environment. So meet with your insurance adviser regularly and make sure your coverages are suitable.
Unfortunately, being associated with an unpopular influencer, controversial event, or failing marketing campaign is also your fault. Pepsi was not expecting the backlash it received when the company launched a campaign featuring Kendall Jenner, who offered her product to a police officer at a protest as a peace offering. Adidas was criticized when it congratulated customers who ran in the 2017 Boston Marathon with the slogan “Congratulations, you survived the Boston Marathon.” Other brands have been accused of racism, colonialism and other transgressions as a result of their misguided marketing campaigns.
But it’s not just the big brands, and their shareholders, who suffer the consequences of their actions. There are many small businesses that make these mistakes. And for us, because of our size, the repercussions are more severe.
A Dallas restaurant chain caused controversy when it implemented an employee benefits surcharge. The owner of an Italian restaurant “triggered outrage” after a post on Facebook. Another business owner was criticized on social media for trying to scare a homeless person with a hose. There are countless other stories of small businesses that suffered the wrath of Twitter and Facebook for their actions or the actions of their employees; this includes taking a stand on a controversial social issue and losing customers as a result or even being forced out of business because of it
And there are countless other stories of business owners who, through trusting too much, had their funds stolen by office managers, accountants, clerks, financial executives, and bookkeepers. Maybe they had insurance. Maybe they didn’t. But no amount of insurance is going to cover the lost time and anguish of such a loss, let alone the public humiliation of having to admit to the world that your lack of internal controls has been duped. And then there are the countless number of small businesses, most of them unreported, that have suffered significant data loss and are facing huge lawsuits from angry customers due to poor network security resulting in breaches and ransomware attacks. You need insurance for all of this too.
But the answer is not just insurance. They are internal controls. It is management participation. It’s the care and attention to detail, scrutiny, involvement, and all the other things a business owner must do to minimize their potential liability exposure. Unfortunately, Alec Baldwin did not check that the gun he was using in an imaginary scene contained imaginary bullets. Maybe that was an honest oversight. Maybe I should have been more diligent. Anyway, he owns the movie production, so he’s hooked.
As business owners, we take risks. Substantial risks. It is what separates us from the employees. An employee can leave a job at any time and simply get another job. But a business owner can’t do that. We must meet our obligations and are exposed to financial and legal repercussions for the decisions we make. Let’s never forget that.