How Competing Stakeholders Can Align When Facing Distressed Company Decisions
Distressed companies often face a number of options. But to move forward, key stakeholders must align. Discover the most important steps for impactful alignment.
Author:James PierceReviewer:Alberto ThompsonNov 05, 2026
A board’s dutiescan shift dramatically when a company is facing financial distress. Instead of focusing primarily on long-term value creation, the board now must engage in efforts to wind down effectively and recover as much value as possible.
“No action outside of the ordinary course of business can be taken without board consent,” saysDavid Johnson, Co-founder of Resolution Financial Advisors. “So the type of decisions that come up when a company is distressed — questions focused on bankruptcy, restructuring, liquidation, and other steps associated with company wind-down — fall on the board. And making those decisions effectively requires board alignment.”
Johnson specializes in insolvency, corporate turnarounds, restructurings, mergers and acquisitions, valuations, financial modeling, and crisis management. He is an accomplished executive with more than 25 years of experience in the distressed business and financial sector who has overseen the orderly liquidation or successful refinancing of more than 500 companies. Johnson began his career at Alvarez & Marsal, providing interim management, forensic accounting, and valuation services. Prior to co-founding Resolution Financial Advisors, he spent 17 years with a middle-market advisory firm focused on insolvency. He holds a Bachelor of Arts in Mathematics and Economics from Franklin & Marshall College and has earned the CFA designation and CIRA certification.
“Once the board is aligned, things can generally move forward smoothly,” Johnson says. “But achieving that alignment often requires a level of expertise the average board doesn’t have, especially when it comes to understanding all of the options that should be considered before making a decision.”
Seeking Expert Advice Is Critical For Boards Navigating Financial Distress
Developing a clear understanding of all the options is the most important step boards should take in their wind-down process. But that step can often be overlooked as boards simply seek the simplest solution, such as filing for bankruptcy.
“Boards commonly see bankruptcy as the path of least resistance without understanding some of the weighty consequences that come with that choice,” says Johnson. “Exploring all of the options often reveals that there are better ways to move forward — ways that can allow for more value recovery and avoid some of the downsides of bankruptcy.”
To ensure they understand all their options, Johnson recommends that financially distressed companies retain counsel and tap into the expertise offered by financial advisors. Looking to attorneys who specialize in insolvency increases the likelihood of optimizing outcomes. Involving advisors who can provide pre-insolvency guidance as well as fiduciary representation and insights on value preservation and recovery makes it easier for boards to avoid pitfalls and hangups that are common to distressed situations.
“It’s part of the board’s fiduciary duty to be fully informed and make fully informed decisions,” Johnson points out. “When they don’t have the necessary expertise, bringing an advisor in is part of fulfilling those duties.”
Advisors Can Help A Distressed Business Quell Conflicts And Move Forward
As companies face financial turbulence, conflicts can arise that are difficult to work through. Johnson says it is common for founders facing insolvency to clash with other board members, who may have competing priorities.
“A founder who is bitter or disappointed about the company’s downturn can throw a monkey wrench into the wind-down process,” Johnson says. “They may want to buy the company or take a path the rest of the board doesn’t agree with. When the founder refuses to cooperate, it creates paralysis. If alignment can’t be established, the company starts to drift, which can lead to third parties imposing consequences, such as foreclosure or involuntary bankruptcy.”
Financial advisors can take emotion out of the equation and move the process forward by clarifying both the obligations and the alternatives. In cases where a founder and the rest of the board are at odds, advisors can explain how a soft landing can be achieved for all parties.
“An experienced advisor can help a founder to see that what they have built may be valuable for someone else, which means value can be recovered through things like selling patents or other intellectual property,” Johnson explains. “An advisor can also help founders to see that staying stuck — and resisting a soft landing — can deplete cash, anger creditors, and ultimately lead to creditors, vendors, and landlords pushing a company into an involuntary bankruptcy or other litigation, which introduces a lot of new headaches to the process (including potential personal liability for officers and directors). Essentially, an advisor uses both carrots and sticks to bring alignment to the board.”
Absent a white knight (and quickly!), winding down a distressed company is inevitable. Board alignment allows companies to retain control of the wind-down process and guide it in a way that leads to a soft landing. The key to achieving that alignment is evaluating all the options — preferably with expert guidance — and carrying out the board’s duty to make a fully informed decision that will result in the best value for the company.
James Pierce
Author
James Pierce, a Finance and Crypto expert, brings over 15 years of experience to his writing. With a Master's degree in Finance from Harvard University, James's insightful articles and research papers have earned him recognition in the industry.
His expertise spans financial markets and digital currencies, making him a trusted source for analysis and commentary. James seamlessly integrates his passion for travel into his work, providing readers with a unique perspective on global finance and the digital economy.
Outside of writing, James enjoys photography, hiking, and exploring local cuisines during his travels.
Alberto Thompson
Reviewer
Alberto Thompson is an acclaimed journalist, sports enthusiast, and economics aficionado renowned for his expertise and trustworthiness. Holding a Bachelor's degree in Journalism and Economics from Columbia University, Alberto brings over 15 years of media experience to his work, delivering insights that are both deep and accurate.
Outside of his professional pursuits, Alberto enjoys exploring the outdoors, indulging in sports, and immersing himself in literature. His dedication to providing informed perspectives and fostering meaningful discourse underscores his passion for journalism, sports, and economics. Alberto Thompson continues to make a significant impact in these fields, leaving an indelible mark through his commitment and expertise.
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