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Governance Topics

Role of CEO Board Meetings
Advisors Authority
Executing Executive Power Leadership Team/Board Interaction
Evolution of Board Choosing Board Members Effectively
Compensation Committee  

 

Role of CEO

A surprising information gap typically exists between understanding all of the roles within a Company and that of the role of the CEO itself. Lots of time goes into, or should go into, creating formalized job descriptions and objectives for the leadership team, middle management and each individual employee, reviewing performance and creating structured compensation plans (as applicable to the roles). But for some reason, this level of effort tends to be missed (sometimes even avoided) for the CEO role itself. How does this hinder the effectiveness of the CEO? Do it make it harder for the Board and the CEO to operate from the same play book? How does it affect the way in which the CEO is compensated? Where does the CEO go to understand the role so that he or she can grow strong as its holder? Given there is normally only the one instance of the CEO role, its role definition requires some thought. Time to explore this further. More

Board Meetings

Most starting CEO's would say one of the least favorite aspects of their role is attending to the requirement for Board meetings. The content seems often contrived to meet presentation objectives that don't always relate to the needs of the CEO (and the initial leadership team). The meetings and their preparation take time from running the business, time more valuable if spent elsewhere (or so it seems). This implies a lack of understanding of how the Board fits into the equation of success and how to turn Board meetings into valuable events for the business. This is especially true when there is a well-defined obstacle the Company needs to overcome.

Given the Board meeting is the only forum where the CEO is effectively interacting with higher management, the nature and formality of Board meetings is critical to maximize the value for the time spent. The obvious rules apply -- have an agenda, run the meeting formally, etc, but how often do they occur? What should the agenda hold? Who should take responsibility for the agenda? What apriori information should be circulated to get the most out of Board encounters? What do the first Board meetings need to accomplish when first starting a company? Lots of questions that can be explored, so let's head in that direction. More

Advisors

If they can't work for you, perhaps they can become an Advisor. A formalized role where someone with relevant industry or operational experience is engaged to assist, typically the CEO, in carrying out the duties of the post. More often then not, it's a figurehead used to create the illusion of support between an industry-recognized resource, and a startup Company looking to align with an impact name. It's often a wasteful exercise, underused and undervalued. On the flip side, if an Advisor is used properly, they can have tremendous impact on a Company. They can act as a sounding board for key decisions, make introductions to key accounts and partners, help expand the senior leadership team by providing an interview, meet with key members of the team to act as a role mentor, convey a variety of insight into certain challenges and more. You should have some, so here is what you might look for and how you might benefit from them. More

Authority

The challenge that most CEO's face with their Board is understanding where authority effectively lies. The Board is a governing body and has a variety of formalized authorities typically defined in a Company charter and related by-laws. It also has fiduciary responsibilities that relate to tax, stock option grants and other business laws that can result in Directors going to jail if governed improperly. The CEO role reports to the Board making the Board the authority for setting and measuring CEO job objectives. The CEO has the authority to run the business within parameters set out by the Board which need to be pre-established. When these two are properly aligned, a business can run smoothly with full empowerment where it belongs. When the CEO-Board relationship is misaligned, it tends to distract to the detriment of the business. This section outlines some guidelines you might want to follow to fully define levels of authority to establish a proper working relationship between the Board and the CEO (and the leadership team). More

Exercising Executive Power

The CEO is a singular role. There is only the one instance of it and his has no peers (within the same Company). It is a powerful role, able to make decisions on all matters of concern at all levels of the Company. The constraints placed on the use of CEO power has changed over the years, mostly in a favorable way -- no longer able to abuse the power as a matter of course. Nonetheless, it is a supreme leadership role and one that the Board is counting on to make sure the business operation runs smoothly. First time CEO's often find themselves in a quandary unsure of where their power really lies -- this can lead to hesitation in their leadership which leads to fear, uncertainty and doubt in their own Company's ability to succeed. They simply start to make mistakes. Experienced leaders understand how to use their executive power and over time learn that there are few moments in the history of a Company where their leadership had to be used as a form of power. This is a crucial issue for first time CEO's to understand quickly if they want to build the most successful company they can. Follow along as we'll explore how this learning transition occurs. More

Leadership Team/Board Interaction

Building a positive working relationship between the Board and the full leadership team is a great achievement. The Board increases its exposure to the key people in the business, learns first hand about the challenges and successes of each operational area. The leadership team helps take on the brunt of challenges the Board puts on the CEO and also has a chance to demonstrate their potential for successor opportunities should that arise (a bit of a double-edged sword depending on the politics). No matter what, the Board should encourage and be encouraged to be exposed to more than just the voice of the CEO. Each side has its share of responsibilities to make sure the mutual interaction is profitable -- the Board members need to be mature in the way they press the leadership team. The leadership team members need to be prepared to enter an environment where serious and strategic business issues are discussed efficiently (ideally). Let's look at where this goes right and where it goes wrong along with who might be responsible for moving it towards a successful outcome overall. More

Evolution of Board

A business evolves through many stages as it grows from a startup towards the various plateaus that measure success. As the business evolves, so does the CEO and the leadership team. New roles are added, more senior hires are brought in, people are asked to leave the business, many times even the CEO changes in favor of someone who has the prior experience to take the business through its next plateau. What about the Board? Often stacked with original investors, Board seats are not easily changed in the same way as the CEO's role or that of the leadership team. The Board needs to evolve along with the business. How can we make this happen? Let's explore what steps you might want to take from the moment of founding a business through to key plateaus where the evolution of the Board is just as important as the evolution of the CEO and the leadership team. More

Choosing Board Members Effectively

How do you choose an independent Board member? You don't often really get to choose your Directors who invest in the Company (most people take the first offer of investment they get after all). Ideally you could apply the same principals as the ones used to hire a key employee -- but sometimes not all that practical, especially if you are pursuing an industry-recognized leader -- they won't interview the same way as someone actually looking for a job. Here are some of the areas you might want to explore in finding great independent Board members. More

Compensation Committee

The Board will often want to form a committee to oversee the key decisions related to team compensation. This would include establishing a fair structure for salaries (often by level of role), formulas for variable compensation for sales and other related roles, company-wide incentive plans and of course, stock options in their various forms. The challenge for the CEO is to prepare thoughtful recommendations in all these areas or the compensation committee will appear to be taking out of the hands of the management team a key instrument to recruit and build a strong and loyal team. We'll address this challenge and what approaches the CEO might take to establish fairness in this key area. More

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