Steve Russell was feeling some serious pain. Not only had the economy taken a nosedive in the fall of 2008, but it was now January 2009 and he had to contend with a toothache as well as bleak economic news for his company, Celadon Group Inc.

Not one afraid of putting people on the spot, Russell, Celadon’s chairman and CEO, asked his oral surgeon after a shot of Novocain for his advice.

“I said, ‘I believe the true test of someone in life is not that someone can make a good into a better, but somebody who can make a bad into a good,” he says. “This is a bad ? pulling my tooth. What can you tell me you’ve learned in life to make this a good?”

Incredulous at the question, the oral surgeon took up the challenge.

“You know what I’ve learned in life, Steve?” he says. “And I’m not talking about your tooth. So what I’ve learned into life is, ‘Lean into pain; don’t run from it.’”

Russell says that sage advice ? to face the pain ? helped him and his senior managers figure out how to freeze salaries, scrap management bonuses and cut 12 percent of the trucking company’s nondriver personnel.

“We came through the mess better than, if not the best, of any truck company in America,” he notes. “Zero bank debt. Very healthy company.”

This year, Celadon Group is on track to top the $530 million in annual revenue it made last year.

Here’s how Russell keeps Celadon on track to new heights of success.

Keep the employees happy

As an elected official has a constituency to answer to, a company CEO often has more than that.

“There are three constituencies that my principal role is to keep happy,” Russell says. “No. 1 is employees ? if you don’t have happy employees, you don’t have a good company. No. 2 is happy customers ? if you don’t have customers, you can’t pay the employees. No. 3 is happy shareholders. We’re a public company. At the end of the day, those are the three priorities.”

Treat employees as a person, not a number, and they will feel better about the company.

“No other CEO in the top 100 fleets in America talks to new employees when they join, and I do it regularly.”

Such attention will help encourage employees to want to go to work in the morning and want to go home at night.

“If they don’t want to go to work in the morning, they won’t stay ? and you don’t want them to stay,” Russell says.

Happy employees means low turnover. The 4,000-employee Celadon Group turnover rate is about half the usual rate for the industry.

Russell encourages communication by citing mottos and aphorisms that he’s collected all his life.

“One of the best ways to communicate is to make sure employees understand, ‘Don’t get ulcers, give ’em.’”

Not voicing a complaint or grievance can lead to misunderstandings between employees and managers. An open-door policy so the two parties can help iron out issues on the spot can go far in reducing problems.

“Get it off your chest,” Russell says. “Don’t put your head on your pillow at night and say, ‘Why the heck didn’t I say that to Joe, to Bob or whoever?’”

While happy employees is one goal, another is healthy employees. In a company where the average age of a driver is 47 years old, it’s only fitting that steps be taken to make medical attention more accessible.

Russell knew it was inconvenient for a long haul driver to visit a doctor or clinic. So he brought the clinic to them. It’s at company headquarters in Indianapolis ? most drivers pass through the city two or three times a month so it was the logical location.

Not to be overlooked are nutrition concerns. A nutritionist on staff can help employees find the right diet and ways to lose weight if needed.

“We had a driver who’s been with the company four or five years ? he’s lost 180 pounds since he’s started his regimen,” Russell says. “He said his sense of self has gone through the roof, too. It’s a great program.”

Keep the customers happy

To keep customers happy, determine their most critical demand and measure results on how well you deliver on that.

“In regard to customers, if you can’t measure it, don’t do it,” Russell says. “That’s a philosophy I have in life.”

Measure the performance by customer. By being able to show that customer the numbers and statistics, it motivates the company to be accountable for and focused on service. Be sure to communicate to the customer any extenuating circumstances that might have affected the figures. It will help build customer relationships.

Since service is so important in all industries, it pays to be open and honest about matters on how state or federal requirements may limit what can be done.

Don’t overlook the fact that a number of companies are into green programs and are interested in supporting environmental-friendly campaigns. The fact that a company is introducing biofuel and is taking measures to reduce greenhouse gases and air pollution can have an impact in sealing a deal.

“It’s green from the cash flow standpoint and it’s green from the environmental standpoint,” Russell says.

Keep your equipment up-to-date. Impress this fact upon customers, emphasizing that it is thus less likely to break down. Set up an equipment retirement/replacement plan to support this policy. Offer the latest in tracking abilities for your product or service.

“Young equipment is less likely to break down and therefore, service is enhanced,” he says.

Keep the shareholders happy

With regard to shareholders, it’s easy to keep them happy by answering one simple question.

“We’re a public company, so the question is, ‘How is our stock performing versus our peers?’” Russell says.

Comparing company performance with that of its peers is a necessary rule of thumb. Economic challenges appear each day and shareholders will want to know how the company is managing them as compared to others in the industry.

“In other words ? manage; be able to demonstrate to your shareholders whether you’re doing a good job or a bad job,” Russell says. “And the reality is, they’ll measure you completely every quarter, every announcement, etc.”

Keep the balance sheet in the black, and hope that your stock performs better than others because you are doing the right things. That requires going to investor conferences on a regular basis, making presentations and having one-on-ones with investment advisers.

“It’s a matter of communicating with your shareholders so they trust you, believe you and want to own your stock,” Russell says.

Simple good business practices go a long way with cementing a company’s image with shareholders, as well as customers. So as an indication to shareholders that you’re performing well, don’t do business with customers who aren’t responsible for their bill.

“In fiscal 2010, a lot of people took between July and June a whole bunch of write offs, companies, customers going broke and stuff like that ? we did $530 million in revenue, and we had total write offs of $122,000,” Russell says. “Awesome. Truly awesome.”

Russell, who was once president of Hertz Trucks, founded Celadon in 1985 after he ran into a former colleague who needed to solve shipping problems to Mexico. He put up $30,000, leased tractors and trailers, called the company Celadon after hearing it was the prettiest word in the English language and grew the firm to one of the largest in the nation.

Define success

Along the road to prosperity, Russell discovered four ingredients of a successful business leader and put them into an acronym.

“L.I.D.S. You’ve got to have all four,” he says.

L is for leader. A good leader is not just someone who runs a company, but someone who will get people to follow him or her. A good leader must also have integrity.

“If you don’t have integrity, nobody will follow you,” he says. “I think integrity is inborn.”

I is for intelligence. A leader must have the intelligence to learn the roles of management, including how to delegate responsibilities. Not only do you endow your people with responsibilities, but measure their performance.

“And if you are intelligent, you can learn anything,” Russell says.

D is for drive, that motivational quotient that pushes you to succeed. It’s a work ethic that makes you want to put in long hours to reach a goal.

“You’ve got to be driven to success,” he says. “My father gave me that work ethic because as a taxi driver, if you’re not working, you don’t make any money. My father would work 14 or 15 hours a day.”

S is for street sense. You learn it from your environment, and you need it to survive.

“The S is the most important of all and it’s not taught anywhere ? Harvard, Yale, Princeton, Cornell,” Russell says.

“Whom do you trust, whom don’t you trust. What’s wrong with something, what’s right with it. What’s negotiable, what isn’t negotiable,” Russell says.

Discontent or dissatisfaction by someone on the management team needs to be dealt with in respect to the larger goals of the company. The person needs to be taken aside and told to focus on improvement ? improvement of the company.

“If they have mother as the objective, and I’m defining mother as the company, that’s who they’ve got to be able to help, that’s who they have to focus on improving,” Russell says.

Post the department performance measurements, the benchmarks, the comparisons over time, on the walls. This helps employees keep those goals in their heads.

On the topic of task priorities, rank them in order, and then stick to it. Don’t get distracted by something that may seem urgent.

“In other words, a person who says this is one of our priorities ? we’ve got to do this, this and this, but then just reacts to e-mails every day and doesn’t work on those priorities, it’s the wrong way to be,” he says.

Delegation is critical if you want to be a leader.

“I feel that you should always delegate as a CEO of a company ? you should delegate virtually everything. Now if your company develops a product and you have 30 people under you, the focus is developing that product. But if you are running a business, you should try to hire people who have LIDS.

“The key in delegation is to surround yourself with people who are as good as or better than you are,” Russell says. “Be secure in yourself to do that. You are only secure if you surround yourself with good people.

“This is what makes a great company because it’s not just the CEO, and I really mean this, it’s the senior management, the middle management. Both have to be very good. Don’t tolerate mediocrity. He or she in management, who tolerates mediocrity under them, is mediocre.”

How to reach: Celadon Group Inc., (800) 235-2366 or www.celadontrucking.com

The Russell file

Born: Brooklyn, N.Y.

Education: Master’s degree, business administration, Cornell University

What’s the best business advice you were ever given?

Don’t get ulcers, give ’em.

Who has been the biggest influence on who you are today?

That’s a tough question to answer. My father gave me a work ethic; my mother gave the realization that all you’ve got in life is time. My brother, a college professor, gave me the importance of getting the best education you can, and my older sister, who sort of acted like a surrogate mother to me after my mother died when I was 6.

What’s your definition of success?

I can’t wait to get to work in the morning; I can’t wait to get home at night. And be happy.

Russell on why he got into business: When I was 12 or 13, I wanted to be an astronomer.  When I got into Junior Achievement, we had a little company. We distributed $40 to each person of us. Forty bucks doesn’t sound a lot today but that was in 1955. I decided, “Hey, I’d better go into business because I can’t make any money as an astronomer.” That’s when I decided to go into business.

Russell on having a beard: You know why I have a beard? Because I save five minutes a day by not shaving. I’m saving, say, a half-hour a week, over 52 weeks, that’s 26 hours a year that I’m doing something more productive, plus I’m saving money. My wife trims my beard every two weeks. That’s the definition of a good wife. Basically, that’s why I have a beard because shaving is a waste of time.

Published in Indianapolis

You are an emerging privately held company originally funded by venture capital. You have compensated your valued employees with stock options. For various reasons, certain employees decide to leave your company to work for competitors or are let go. Now, these former employees holding stock options in your company decide to make a claim against you and the rest of management alleging the value of their stock interests have been diluted by your subsequent capital funding.

Whether they have a valid claim or not, are you covered for the millions of dollars it may cost you to defend the litigation? The answer depends on whether you hold the right type of directors’ and officers’ (D&O) coverage.

Smart Business spoke to Jonathan Sokol, a partner with Greenberg Glusker Fields Claman & Machtinger LLP, about how business can ensure they have the D&O coverage that’s right for them.

Shareholder suits typically represent the majority of claims brought against directors and officers of a corporation. D&O insurance, unlike other lines of insurance, is not sold on a common policy form used by the insurance industry as a whole. Each insurance company has developed its own set of forms. Because D&O insurance involves a highly specialized line of insurance, the standard of care applicable to brokers representing clients in the procurement of such policies dictates that they be informed of the different insurers and their policy terms to place coverage at the best available terms for clients.

Unfortunately, however, not all brokers, upon whom most companies rely exclusively in the procurement of their D&O insurance, possess the expertise necessary to advise their clients properly regarding various options available in the marketplace.

Companies, particularly emerging privately held companies that hope to eventually go public and provide compensation to their valued employees and executives in the form of stock options, have a particular need for D&O insurance. This affords coverage for claims brought by employees or former employees owning stock or stock options in the company.

Not all policy forms used by the various D&O insurers provide coverage for securities claims brought by employees in their capacities as shareholders. Some policies contain a form of “insured v. insured” exclusion that bars coverage for securities claims brought by employees or former employees, unless the insured company purchases a special “carve-back” endorsement to the exclusion to provide coverage for such claims.

The insured v. insured exclusion

All D&O policies have an “insured v. insured” exclusion to prevent one insured from collusively suing another to trigger coverage (e.g., management suing itself to trigger coverage). A common form of this exclusion provides as follows:

The insurer will not be liable to make any payment of Loss in connection with a Claim brought by or on behalf of, or in the name or right of, the Insured Organization, whether directly or derivatively, or any Insured Person, unless such Claim is brought and maintained independently of, and without the solicitation, assistance or active participation of, the Insured Organization or an Insured Person.

The problem arises through the definition of an “Insured Person” that typically includes employees — a seemingly harmless act of expanding coverage under the policy for claims brought against employees. However, by expanding the definition of Insured Persons to include employees, the “insured v. insured” exclusion now becomes applicable to claims brought by those same employees against the corporation, creating a potentially huge gap in coverage for securities claims brought by employees or, worse, by disgruntled former employees holding stock options.

The “carve back” to the “insured v. insured” exclusion provides coverage for claims brought by employees or former employees in their capacity as shareholders without the active participation of the company’s management. Some insurers offer this coverage as part of their basic coverage form without the payment of an additional premium. Others require the purchase of a special “carve back” endorsement to obtain this coverage.

If a company’s broker places coverage with one of these latter insurers without obtaining the “carve back” endorsement, the company could be facing substantial uninsured exposure for securities litigation brought by employees, or more typically disgruntled former employees or directors of the company. Without adequate D&O coverage, the company could have to spend millions of dollars defending such litigation — even if the case has little merit.

Such a crippling scenario begs the question, “So what should a company do to protect itself against major gaps in D&O coverage?”

  • Use a retail broker who has expertise in procuring D&O coverage. The broker should be up to date as to the various policy forms available in the marketplace so that he or she can place coverage at the best available terms.

  • Make sure your retail broker works with wholesale brokers who have access to the marketplace and are also experts in the various coverages available therein.

  • Provide your brokers with as much information as you can about the nature of your business.  Include the nature of your employee and executive compensation so that they are well aware of your particular insurance needs.

  • Involve an experienced insurance coverage attorney in the process of reviewing your existing coverage to identify gaps. Your attorney can also work with your broker when it comes time to renew coverage to negotiate necessary changes to policy language to protect you and the company.

Understanding your coverage and working with the right brokers and attorneys can provide you with the security that you have got your bases covered.

Jonathan Sokol is a partner with Greenberg Glusker Fields Claman & Machtinger LLP. He has more than 20 years of experience representing policyholders in complex insurance coverage litigation. He can be reached at (310) 201-7423 or JSokol@greenbergglusker.com

Published in Los Angeles