I could make up a terrific story about this, but I won't
lie - I had avoided (as in postponed, side-stepped,
procrastinated) having a board of directors until now.
Frankly, I had visions of having a group of old, cranky,
humorless men telling me what to do.
Of course I was just being lazy, too. I would rather be out
making products and building a business than sitting around
trying to make sense out of Excel files, charts and graphs,
and essentially being bored to death in the process.
Our company, however, has reached the point where "proper
governance" is important...even necessary. The "let's do it
because we all think it's a really good idea" mentality had
to go. We really needed to be able to show that all of our
shareholders were represented in our decision making - and
represented fairly.
So I asked my business mentor and close friend, who knows
and understands our industry very well, to be the first
member of the board of directors. Now let's be clear - I
didn't ask him because he's my "friend." That would have
shown very poor judgment, and frankly, friends don't always
make the best business advisors. I asked him because he's
already the one person who advises me on all "board-type"
matters, anyway!
So imagine this: I felt like a "big grown-up boy" in long
pants, carrying my briefcase filled with notes, reports,
Excel printouts, etc., to my first board of directors
meeting on Friday, February 15, 2008, at 2 PM ET.
If you are picturing a large dark paneled room with a long
table, think again. Outside our "boardroom" were chickens,
squirrels, birds, and other creatures - large and small,
wild and domesticated. Inside the "boardroom" (besides the
board members) were a dog (a.k.a. The Wolf), two cats
(a.k.a. Puffy and Fluffy), and five children. Yes, we were
in my friend's home, gathered around his kitchen table.
Maybe someday we will meet in that dark-paneled room with a
long table. But I don't care how big my business gets - I
hope we can continue to meet with the same "family
feeling." There was a certain calmness, almost a serenity,
about the entire meeting. There was nothing stuffy or even
formal, although we did follow the rules of a proper
meeting.
So my first board of directors meeting started with a brief
lesson about what exactly happens at board meetings! My
friend and mentor gave a simple, five-minute explanation of
what board meetings were all about...and in the process, he
completely changed my preconceived ideas. That's what I
really want to share today.
What Do You Think Is Supposed To Happen At Board Meetings?
- Company planning strategy?
- Hiring strategy?
- Financial planning?
No, no, and no. Those are the things that I THOUGHT were
supposed to happen at a board meeting, but was I ever
wrong. The things listed above are the territory covered by
company management...not the board of directors.
The board of directors has exactly one responsibility, and
that responsibility is...
GOVERNANCE
Just like a sovereign nation, each company has what they
call "articles of incorporation." These "articles" are
actually the laws - or rules - that the management of the
company must abide by.
So the whole purpose of the board of directors is just to
make sure those laws are followed. The point is for the
board to make sure the decisions that are made in the
day-to-day operation of the company are really in the best
financial interest of the shareholders.
Of course, not ALL of the decisions that are made by
management are the right decisions - anyone can be wrong,
it's inevitable. But the decisions have to be made within
the laws laid down in the articles of incorporation. They
can't be sneaky decisions, they can't have malicious
undertones, and they can't be decisions that line the
pockets of management at the expense of shareholders.
Here is just one example of the type of responsibility
shouldered by the board of directors:
The board does not decide who is hired to fill a position.
The board simply "empowers the management" to pursue that
hire. It's still management's job to make the final
decision about who is hired to fill the position. The board
only acknowledges that they understand why the position has
been created and filled.
The board of directors GOVERNS. It does not strategize.
So in the end, I didn't need all those spreadsheet
printouts and detailed notes. What I did need was exactly
what I got - a lesson in how to think about shareholder
value, while simultaneously running the company.
----------------------------------------------------
The Mystery CEO is a young entrepreneur who started a
company now doing close to $2 Million a year right in his
DORM room!
Now he lets you watch over his shoulders as he learns more
about entrepreneurship. You can even listen-in when he
interviews CEOs who manage $100 Million+ companies!
Read his entrepreneurship blog right away for all the
entrepreneurship training you'll ever need!
http://www.MysteryCEO.com
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