Monday, April 11, 2011

Mr. Board Director, You're Fired!

Most venture CEOs do not think ahead and let the wrong people get on their boards. A CEO must do proper emotional evaluation of the type of people he lets sit on his board. 

Sure a venture fund is entitled to a certain number of seats, but some venture funds assign the wrong people to boards. This DOES destroy value because these board members do not bring anything to the board or the CEO. Rather they bring their emotional baggage with them, mostly their insecurity.

Having lived through numerous venture boards, I thought I'd share with you my list of the traits of people who should NOT be on boards:
- a person who does not spend time understanding the business
- a person who wants to be the "Monday-quarterbacking" CEO of the business
- a person who "acts as if" he is a close friend of the CEO
- a person who likes to talk a lot, debate forever and never take positions
- a person who does not dare to stand up and say that he/she does not agree
- a person who thinks that surviving is enough for a company
- a person who badmouths everyone and thinks that building a leading company is easy

These are the most detrimental traits to any growth company. They discourage other board members from engaging the CEO, they make everyone regret the notion of proper governance, and finally they wind up disgusting the CEO from his job and his passion.

Venture CEOs should challenge their VCs to assign to their boards emotionally well-balanced directors, and retain the right to ask such shareholders to change "persons" if necessary. These should be as much part of term-sheets as any other financial clauses.