Horror startup stories constantly plague the headlines in Techcrunch, Wired, and even Business Insider these days. High-profile cases like WeWork’s crash landing, Away Luggage’s toxicity-filled Slack rooms, and Oyo’s questionable business practices, are indications of how workplace culture can be influenced by one person sitting around with his/her cronies.
A board of directors is meant for accountability. Unless, you’re Adam Neumann, who simply established his dynasty and had total control over his other board members (at one point in time, he had enough shares to veto any vote, even if every board member combined their shares).
It’s tough to part ways with control for founders. As a former co-founder, I understand it best: you have the vision and the strategy. Now that you need other people who weren’t there with you at the start to vote on your vision, it can be suffocating. Ceding control means that you would need everyone to be on the same page, regardless of the decision being made.
Neumann’s situation isn’t unique. Tech startups are often like this with their supervotes (i.e. Class A shares). Neumann envisioned a world unified and operating within a WeWork ecosystem. For the board, that’s not going to be good business and it’s their money and reputation at stake when things go awry.
However, a well-built boardroom will complement the founder’s vision and ambition. It is there to fill in gaps in experience and expertise. Without the boardroom, the founder would be propelling the company by him/herself, which can get ineffective in the long run.
In any situation, however, a startup ceases to be a startup when the boardroom usurps the vision.
Take WeWork for example. Now that Neumann is busy selling off some of his properties and swimming in Benjamin Franklins, WeWork has no longer become a startup. Softbank-installed chairman Marcelo Claure is there to resuscitate the company, and the new executive team is meant to operate the company like a real estate company.
Gone are the days of having a WeWork living ecosystem: today, it’s just like IWG and Boston Properties, only less loaded, not listed on an exchange, and much younger.
To build a boardroom that works, the roles of the boardroom must be clearly defined.
1—Every Other Huge Decision
By huge, it means that the decision concerns the company’s fate. This includes acquisitions, fundraising, pivoting, big expenditure, equity distribution, budgeting, and legalities.
2—Offer Guidance to Strategy
If the ship is steering off course and the captain can’t see it, a midshipman or a direct subordinate would suggest changes in the route. The boardroom is there to identify blind spots, predict market changes and industry trends, and provide guidance as to how the CEO can steer the company.
For instance, if the profit is too low and a general market downturn will be coming in the next few years, the boardroom might suggest a high-acceleration initiative to grow profits first before reeling back. If there’s too much burn, the boardroom can suggest a shift towards a conservative budget.
3—Fire the CEO
Unless you’re part of Neumann’s boardroom, then the boardroom has the power to fire the CEO. They’re the only ones who can.
4—Approve Senior Level Management Hires
Hiring a new CFO? That has to go through the boardroom.
5—Stay out of Day-to-Day Operations
Unless it involves a board matter or member, the boardroom must stay out of the company’s operations. Management and execution is part of the CEO’s job, not the directors. For instance, low-level partnerships, low-level hires. Firing anyone else is also part of the CEO’s job, even if its the COO or CFO.
The boardroom should be a big help, not a dark cloud hanging over the company. A founder must build a boardroom that complements his/her abilities, rather than restrict and suppress. It may difficult when there’s ego involved, but in the end, the goal is to grow the company. That can always be the starting point for consensus.