Does your start-up already have a board of directors?
Corporate or good governance is about the rules as well as the behavior by which you run and control a company. But did you know that such corporate governance is also useful and necessary for startups? In his book "Corporate governance in startups" Luc Sterckx overwhelms you with practical tips from his rich practical experience as entrepreneur and director.
Good governance: a must?
Governance for startups, while 'different,' is not quite so. Even for a startup, 'Good governance' is the appropriate way - or an 'inconvenient necessity'? - to build a young company 'sustainably' and 'virtuously' from day 1.
This concretely applied corporate governance has an essential role for the well-being of the company from its inception. It is at once a necessity and a blessing. A necessity because it allows you to better respect the legal obligations of the NV or BV. A blessing because governance reduces the risk of rapid demise due to poor management or policy. Experienced directors help you avoid the many pitfalls and encourage you to do the essentials correctly from the first time!
Tailored to your startup
Granted, a startup is smaller and less complex than a regular company. But founders and management typically have little business and managerial experience. And barely a clue about the finer points of good governance processes. Moreover, because they are completely concerned with their product or service, their network, their market, their technology and their deadlines, they pay too little attention to it. This immediately implies that directors must first and foremost provide relevant entrepreneurial experience.
Thanks to these tips
Therefore, these 10 practical suggestions from Luc Sterckx to motivate you to pay more attention to a true board of directors:
- Every board of directors has the same responsibilities: defining strategy together, exercising control and monitoring how things are done: Are the right people doing the right things? Furthermore, a board of directors balances the interests of different stakeholders. It ensures good decision-making, defines a clear focus and vision, oversees the sustainability agenda, avoids conflicts of interest, helps define your strategy and monitors its progress.
- Install an active board of directors right away and not an advisory board. The latter may be easier and more non-committal to start with, but when it comes down to it, it doesn't carry enough weight in terms of decisiveness and checks and balances.
- First think carefully about which managerial competencies are really essential and/or complementary to you: for example, knowledge of the startup world or your specific niche, knowledge of strategy, human capital, financial reporting, corporate law and so on.
- Your board of directors need not be large: a few external directors inclined to the same values will suffice. Ideally, the chairman should be an independent director who can also be your coach and mentor.
- Be vigilant if (all) your investors also want to sit on the board of directors. Because they should serve the startup's interest and not that of the investor. Have them meet a specific competency profile and do a professional selection, however difficult that may be. Make sure founders and investors are on the same page in terms of future and exit. This said, pay attention to the shareholder agreement from the outset and the define the rights of shareholders.
- Director compensation is a delicate issue because startups typically have limited financial resources. All directors should receive some compensation anyway because of the task load and responsibility. Don't make them volunteers. There are all different formulas of variable, fixed compensation or deferred payments possible.
- Let the directors look ahead to the various policy areas based on accurate information: the quality of the information and discussion topics provided is more important than the quantity of it.
- Four or five meetings a year are more than enough. Committees are not really necessary yet. But of course the directors remain flexibly available to attend an extra meeting if they really have to.
- Ultimately, you have to balance the creative, risk-taking and free enterprise with the right processes to operate efficiently and mitigate risk. Again, a vigilant and disciplining board of directors is worth its weight in gold.
- Don't believe in fairy tales: Of course, it is perfectly possible for a startup to manage to run a flawless course without a board of directors, fully in line with all its plans. Unfortunately, such success stories are very rare. Usually the trajectory of a startup is bumpy and difficult: so much can go wrong. Never give up and keep relying on the alert experience of your board of directors is then the wise advice!