Managing your Board of Directors
Thursday, 15 September 2016 | Admin
A board can be a huge resource to a CEO but, to make it work, you must be in control of who is appointed to it. I would advise any CEO that is accelerating their company growth to start appointing board members as soon as they begin to scale the business. Don’t wait to be forced to do this by a VC – start the process yourself as early as possible so, by the time you are forced to take in NEDs on behalf of investors, you already have a well-functioning board with people who are adding value all the time.
Many start-up CEOs appoint their life partner or their business partner as a board member at the time of the company’s incorporation, simply because there is a statutory obligation to have a minimum of two directors, so you grab the nearest person without thinking about the longer term impact of this decision. As the company grows, it often makes sense to remove these people as board members and to add more experienced people from industry who will add more value to the company through their attendance at board meetings and their external connections.
Another benefit of appointing your own board early is that you have people that you know and trust, who work with you based on their expertise in an area that maybe you are weaker in and who are there to support you and help you to succeed.
When a board member is forced on you by a VC, you may not get the benefits outlined above, if you raise a significant round of investment and have more than one VC, they may appoint a number of board members who are all coming from the same place in terms of their drivers. By having an existing team of board members that you have appointed yourself and that are firmly on your side, it can help tip the balance of power in your direction.
VCs often make good NED appointments – no less experienced or as good as your own appointees – but typically VC-appointed directors are there to serve the VC, to protect their investment and this can drive different agendas at times. When everyone is focused on the success of the company and accelerating its growth, there is alignment of objectives – however, when things go wrong, you can quickly see a divide in the objectives. Remember that, when the board represents the majority of the shareholdings in the company, then as CEO you work for them not the other way around. So if they don’t think you are up to the job of accelerating the growth of the company, or things take a turn for the worse, you could find the board going against you and you yourself getting fired from the company that you created. I have seen this happen and, in each case, the CEO/founder is shocked – but it does happen.
Extracted from ACCELERATING COMPANY GROWTH: A PRACTICAL GUIDE FOR CEOs by Brendan Dowling.