Owners and Board of Directors: What to Do If You Are Not Ready?
Ukrainian companies are growing, and with them the risks of making hasty, emotional decisions. Companies like air need external expertise and an outside perspective. But does this require a Board of Directors?
Over a glass of wine, there was never a time when a former member of the former Board of Directors did not complain to me about the owners of the company. Boards of directors rarely take root in Ukrainian companies. Usually the board works with independent directors until their opinion coincides with the opinion of business owners.
In defense of the owners
Why are company owners cold about the idea of a Board of Directors? Let’s consider two objective reasons.
Most of Ukrainian business is young growing companies.
At this stage, it is the founders who play the key role in their lives. Or their entrepreneurial talent. I call this function of the owner – the architect.
Like it or not, it cannot be outsourced, delegated to management or even a board of directors.
It depends only on whether the founder of the company has entrepreneurial talent. Unfortunately, entrepreneurship cannot be taught. Neither the business school nor the board of directors will help. If you feel that being an architect is not for you, I advise you to find an entrepreneurial partner. Or sell the company before it’s too late.
The second objective reason is the increased instability of the external environment.
In this case, managerial talent, flexibility and speed in decision-making often outperform corporate governance with a board of directors.
“You delve into the work of your company once a year – you have only one chance to change. If you want to have 12 chances, delve into it every month, ”my friend and talented entrepreneur say about business in an unstable environment.
Mysterious word board
Despite the above nuances, the enthusiasm among Ukrainian entrepreneurs for the word board is growing. True, few people understand its meaning.
Ukrainian companies are growing, and with them the risks of making hasty, emotional decisions. Despite the fact that companies like air need external expertise and a view from the outside, more than 90% remain closed. For example, in Sweden, the picture is just the opposite. But does this require a Board of Directors?
First, let’s figure out what a “board” is.
If we keep in mind the presence of independent (external) participants, there are three phrases with the word board:
- Supervisory board – supervisory board / naglyadova glad.
- Board of directors – board of directors / board of directors.
- Advisory board – advisory board / doradcha glad.
Unlike the Advisory Board, the Board of Directors and the Supervisory Board are related to corporate governance. Look at the root of the word – it is the same as the word “corporation”. Which hints at the size and maturity of the business?
My advice to business owners. Board is not a game of democratic management style.
Before creating it, ask yourself at least two questions:
- Do you need protection of your interests as an owner?
- Are you willing to share the power to make strategic decisions with independent directors?
If the answer is “no” or “doubtful,” read on.
Ways to solve the problem
The problem is solved by a more flexible format – Advisory Board. This is an advisory or advisory council. I call it a board of advisors.
Its fundamental difference from the supervisory board and the board of directors is that, having listened to all independent directors, having received external expertise and a critical eye, the owners make decisions themselves.
Check here for more business owner advisory boards at The Moose Consulting.
Sometimes people object to me that, they say, our Board of Directors is working successfully. In large companies in Ukraine, this is often a formal body of convenient people or external directors, whose role is reduced to the control of figures or legal procedures.
In medium-sized companies, the problem is different. There we meet the substitution of concepts.
The owners claim that they have a Board of Directors, but in fact, this is a board of advisors. That is why he works. Or is it the Management Board – the board, as we usually call it. It has no independent outside directors. This is a board of subordinates, from the top management of the company.
An advisory board is a lightweight, non-committal form that works successfully in the world for young growing companies. I would call it a good mental bridge to the board of directors.
have been dealing with this issue for about ten years, and I am a supporter of the Board of Directors. But I would strongly recommend that the owners, before deciding on corporate governance, check themselves on the board of advisers. Especially self-confident “democrats”.
As my Swedish partner says: “Don’t try to outsmart you.”
