The Role of the Board
We have over the last few weeks learned the 9 Entrepreneurisms and understood better why entrepreneurial management makes perfect business sense. What then is the role of a Board member? I have held Board positions in several early-stage companies and my focus was always to support the business. Think, look and develop business opportunities, help with identifying and recruiting key-hires. These activities are in partnership with management, who often are busy with the problems of the day.
I have also served on boards of public companies and unfortunately, the focus here seems to be more on governance and compliance. What are the rules imposed by the regulators? Have we set up the prerequisite committees? Is risk being reviewed? It almost seems that the Board is operating in a different universe to the management. In large companies Board members seem overly focused on managing risk and being the “policeman”. They also set financial targets, which are driven by analyst expectations and often these targets don’t support long term growth. This does not happen in entrepreneurial companies, where honesty and a clear focus on the future prevails.
Boards of large companies have 6-8 board members, the majority of whom have a financial or legal background. And, owe their loyalty to the CEO. Look at what happened at Enron, once considered the largest energy company in the world. Run by Kenneth Lay (Chairman) and Jeffrey Skilling (who took over as CEO from Lay in 2001) they had a board of experienced professionals. The failure of all levels of management control, the board, the auditors, and bankers was spectacular. Commentator John Olsen, speaking in the 2007 documentary Enron: The Smartest Guys in the Room, said: ‘It took Enron 16 years to go from $10 billion in assets to $65 billion and just 24 days to go bankrupt’. It is clear to me the board was not looking out for the long-term prosperity of Enron.
I do hope that when you take on the role of a Board member you will work to develop the long-term interests of the company, rather than serve as the policeman. Remember what celebrated Harvard Professor and author Clayton Christensen, says: “Doing the right thing for long-term prosperity is the wrong thing for most investors, according to the tools used to guide investments.”