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Tips to help entrepreneurs navigate governance and creation of a board of directors
22 November 2021
Point of view of Déborah Cherenfant and Alan MacIntosh
Governance isn’t always the first factor you consider when you start a business. For some entrepreneurs, it’s important to deploy efficient governance processes quickly, while others see this as a necessary evil to be managed at the last minute. Do you recognize yourself in one of these profiles?
In all cases, this is a concept that too often is associated with the mere fact of creating a board of directors, while instead it transcends corporate management. It also has the potential to add plenty of value to your organization if you know how to take advantage of it.
In the context of our Startup Wednesdays, we discussed good governance practices to deploy with Déborah Cherenfant, Québec Director, TD and Alan MacIntosh, Founding Partner, Real Ventures, both members of the Board of Directors of Bonjour Startup Montréal. This content-rich subject benefits from more frequent discussion.
Demystifying the concept of governance
Often governance doesn’t appear to be essential at a company’s beginnings. You focus on the product or the service you want to offer and the market you want to conquer, and that’s normal! However, having a board of directors can quickly become a strategic pillar of your startup’s development.
A board of directors helps you stay aligned with your goals and your vision. It plays a leading role in the integrity of your operations and compliance with the laws in force. It also represents a network outside your company that is there to support you in developing your key orientations. It then keeps you on course, even in turbulence, like a lighthouse guides a ship.
“Governance is like a muscle of your company that you must train early if you want it to be in shape at key moments when you need it. Whenever possible, you must avoid waiting for an emergency or treating governance as an unpleasant obligation. Consciously choose the type of governance you want to have.”
How do you address the question of governance at first?
It’s important to mention from the outset that creating a board of directors is a dynamic process that will evolve with your company. It will first be composed of a few people (3 to 5) and then may become a more imposing entity, depending on your ambitions for your company.
When should you establish a board of directors?
It’s never too soon to think about it. During your company’s first steps, a board can bring in vital forces that you don’t necessarily have on your team. This can happen in the precommercial phase or, if you want to think about it longer, you can wait for the first financing, but be sure you are well prepared to recruit your members.
To do this, you must anticipate how you want to structure your board of directors and choose people who will add value to your project.
What should you consider when recruiting your board members?
- Make sure to have varied profiles that will give you access to different perspectives and competencies.
- Select committed and trusted people with whom you like to work. You will want to keep them adequately informed and be completely transparent with them.
- Set high expectations for the professionals you recruit to support you. This will stimulate their commitment and invite them to contribute efficiently.
- Think about creating chemistry among the people around the table. This will take your thinking farther and maximize their contribution.
- Avoid creating a board of directors with your friends. This is tempting at first, but it’s a good way to deprive your company of the objectivity you need to make future strategic decisions.
What are good practices for board meetings?
- Number of directors: between 3 and 15, but with an odd number so that in a close vote, you can still have a majority.
- Time allowed for a meeting: between 2 h and 3 h
- Frequency of meetings: 4 to 6/year. A few more meetings may be held if there are issues to discuss that arise between meetings or if governance and its basic principles are being deployed.
- The agenda: the strategic issues under the responsibility of the board of directors, without going into the operational details. Maintain the conversation at a high level to obtain the board’s opinion on the key decisions affecting the company’s operations.
- Holding a meeting in camera: Time reserved so that the board of directors can validate certain governance factors in the absence of the permanent team and management. This segment could be used to settle questions as crucial as dissolving the organization or removing the CEO.
- Indicators and presentation mode Having a uniform dashboard for senior management and the board of directors greatly streamlines meeting preparation. Whenever possible, always reconfigure what is presented to the directors to simplify follow-up.
- Sending material: It’s important to send your board of directors the content for the meeting at least one week in advance. You can then avoid reading a presentation out loud and you can raise the level of the discussions to real strategic aspects.
- Creation of ad hoc committees: It’s important to involve certain directors in more specific issues so that detailed discussions are held upstream of the meetings. In particular, the treasurer should be involved in everything concerning the organization’s finances.
How can we stimulate board participation by entrepreneurs?
We must emphasize the fact this is an excellent way to learn as business executive. Even though this may seem like a major investment of time at first, it pays off through all the learning and perspective it will offer you regarding your own decisions and your company’s governance.
The discussions were very rich in ideas, so we invite you to listen to or watch the entire interview of this Startup Wednesday in video format. You can learn more about how boards of directors have evolved over the years and the current importance of diversity and inclusion.
Startup Wednesdays are offered in collaboration with Cisco Designed.