- Mentor to CEO of venture-funded private companies
- Founder of many companies and a CEO many times
- Board member; VC; EIR; Professor of Entrepreneurial Management
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Lonely at the Top: Help for CEOs When It Seems There Is No One To Turn To
- A prospective customer tempts you with a business relationship that could enhance your standing with investors or the BOD by providing visible results – but it may come with ethical baggage.
The pressure on CEOs to deliver results, such as breakthrough clients, is intense. VCs are becoming more like portfolio managers. They want to invest in companies they can flip in the shortest time for 2X, 3X, 4X. They want CEOs to get results, get sales, get deals. It doesn't matter how great you did at the last board meeting. They want to know what you have done in the last 30 days. So if a prospective client offers you an opportunity for a business relationship that you can present as a visible result to the board, it may be tempting, even if the prospect is asking for something in return that may be ethically suspect.
- Board members who are professional investors bring their disagreements from the outside world into the boardroom, creating dysfunction.
If you are funded by VCs or private equity, chances are these people will hold a controlling number of seats on the board. The VCs are in a position to rule. But other than their shared interest in a favorable outcome for their firms, usually short-term, they and their firms are in competition with each other. This can produce unpredictable dynamics within the board, which can play out on matters ranging from relatively minor personnel decisions to agreeing on a valuation for a potential sale of the company.
- A key member of your team is engaging in behavior that is potentially damaging to the company.
This is a situation that can range from personal interactions, such as a VP of engineering having an affair with his or her top software programmer, to personal problems like gambling or drug use. You may suspect it is going on, but because of the pressure to meet your business goals or production demands, you may be reluctant to create the disruption that would occur if you try to address the situation. There may be legal or other risks in confiding with or seeking information from other VPs. Your board members, remember, are likely to be involved with companies other than yours, and may simply tell you: "Why are you wasting my time with that? I'm paying you to solve these problems. Just bring me results."
- As a turnaround CEO, you uncover skeletons in the closet that, if made known, could be potentially damaging to the professional investors who are members of the board.
When a board gets rid of a CEO because he or she has made a mess of things, it will look to replace that CEO with someone who is particularly skilled at cleaning up messes. But what if the new CEO uncovers information about activities that were illegal, unethical or would be otherwise damaging to the company if they were made known? Existing board members may be unaware of the activities, but could be exposed to liability because it happened under their watch. Publicly addressing the problem could also expose the company to legal wrangling and other external pressures that subsume efforts to right the ship. In these situations, it can be hard to know who you can trust to chart the best course.
- A greedy board member is demanding above-average compensation or some other consideration and may withhold support from the CEO if he doesn't get it.
Board members representing VC firms are, by definition, already invested in the company. For non-investor board members, it is common to give them 1 percent of outstanding stock. A non-investor board member who decides he wants more can become a problem. He or she may believe their time is worth more than that, or may believe, rightly or wrongly, that they are doing more for the company than other board members. Regardless, this creates the potential for a difficult dynami. Investor board members are likely to say no to above-average compensation. The non-investor board member may threaten not to support the CEO if the CEO does not insist on the additional compensation.