The Importance of Eliminating Your Fear of Losing Control of Your Company When Structuring Your Board of Directors
In this interview with Jeremy Glaser, who is a partner at the law firm Mintz Levin and also serves as Co-Chair of the firm’s Venture Capital & Emerging Companies Practice, we discuss the fear of losing control of their companies that some founders have when they bring on outside investors and the importance of board composition, transparency and performance.
Patrick: Use your common sense and business judgment in dealing with the board as you do with your customers, suppliers or team. Understand the dynamics that are involved there. I think a lot of younger or first-time CEOs don’t think about it in that way. Then it becomes problematic.
Jeremy: I think they make a number of mistakes. One mistake is this concept that you’re afraid of giving up control.
Patrick: Yes. As soon as you raise outside money, you are going to give up some control.
Jeremy: Sometimes the founder or CEO thinks, “I’m not going to give up control. I’m going to make sure I populate the board with all my buddies.” That is such a mistake, for a variety of reasons. You’ve given up all of these benefits that we talked about. You’re holding on to this in fear of losing control, your job or your baby. That is the wrong thing to do with your board of directors. I advise CEOs to let that go.
You have to view the board as an asset, not as something to be afraid of. That mindset change dramatically reduces the probability that you’re going to end up getting tossed into a different zip code, because you’re dealing with the board in a much more proactive, constructive, positive way. If you do it the way I see a lot of founders do it, where they populate it with friends and they’re worried about losing their job or company, you automatically set up a situation where there is conflict.
This is Patrick Henry, CEO of QuestFusion, with The Real Deal…What Matters.