What are effective ways to communicate the importance of corporate governance to founders?

Normally I would have a long and thought out answer to this question, but I sincerely think pointing to the recent OpenAI saga is all that is required. "If the most valuable startup in the world, led by one of the most successful venture capitalists of all time, was almost derailed by corporate governance; then you can be to."

From the likes of Theranos to WeWork, we see what failure can look like when corporate governance is not in play. Corporate governance is the foundation upon which the board of a company is built. Good corporate governance builds trust and confidence among stakeholders, including investors, customers, employees, and the public. When stakeholders believe that a company is managed with integrity and transparency, it enhances the overall reputation of the business.

1. It’s a risk management system. 2. It’s also a way to ensure your valuations get an edge over comparable companies. 3. Regulatory changes have made governance mandatory. 4. it’s a strategic way forward since your product / process / services enhanced by governance policies will drive profitability. 5. Finally it’s imperative for investors since we are ensured continuity of business. And avoidance of risks.

Good corporate governance results in a few key things for founders. First, it's a sign of professional maturity (which has nothing to do with the age of the founders). Second it's a signal to investors that this is a serious business being built with intention - not a side hustle, not a hobby, not an ego trip with money. Third, it's a signal to current and future employees that the company is viable and takes its position seriously. Good corporate governance is not a silver bullet and it will not solve every issue simply by its existence, but it does provide a framework to have the conversations necessary and make the decisions in a methodical manner.

Promote diversity on your board of directors by appointing members with varied backgrounds, experiences, and perspectives. This diversity can enhance decision-making and foster innovation.

As investors ; Expect entrepreneurs to respect governance policies. But don’t expect them to set up these policies. They are occupied. So it’s our job to ensure governance forms a part of their day to day processes. We need to ensure board members monitor / frame governance policies and also ensure reporting on such that the entire company follows the policies.

Stress the importance of a well-drafted founders' agreement, which outlines the roles, responsibilities, equity distribution, and dispute resolution mechanisms among co-founders. This agreement can prevent conflicts and provide clarity.

1. Understanding the best practices in the relatable industry 2. Understand the Expectation of Regulators 3. Identify the gaps 4. Develop processes and practices 5. Training of leadership 6. Evaluate the progress to identify gaps in the Governance structures 7. Modify the processes or take-up further training or learning sessions for leaders

The first step is understanding the core business, best practices, the culture, values, objectives, regulatory frame and even the location to set the main point to establish the right corporate governance. The second step is to create the right vehicle, this implies a nice and simple drafted agreement, policies or any other similar document to set roles, obligations, dispute resolutions, code of conducts and ethics among. The third step and the most important is creating a clear and well-managed communication channel.

Most founders need help establishing the various components of good corporate governance and that is to be expected. Bring in a few experts to set up the structures, drive the discussions to fill in those structures with information and priorities of the company at hand, and set up the process to review and evolve the governance structures as the company grows and changes. Founders don't disagree with the need for governance in general, it's just that they are super busy building a company and understandably invest their precious time in areas of large, immediate ROI. So get some outside help to get things set up and organized without slowing down the overall growth of the company.

Since we are speaking of investee/ Startups ; we can start with 1. Accountability 2. Diversity 3. Reporting. If a board starts with these three , it will logically lead to ensuring the overarching governance umbrella on the company. Every policy / process including manufacturing / recruitment / logistics / product / etc needs to imbibe these three.

Emphasize the importance of transparent and open communication within the startup. Highlight that good corporate governance fosters an environment where team members can express their ideas, and founders should actively seek feedback.

Adaptées aux fondateurs, les quelques pratiques ci-dessous qui contribuent à établir une base solide de gouvernance, favorisant croissance durable et réussite à long terme : 1. Définir des r?les et responsabilités clairs pour les fondateurs et les membres du CA afin d'éviter les conflits. 2. élaborer des politiques de prise de décision explicites pour favoriser la cohérence et minimiser les conflits. 3. Assurer l'équité envers les actionnaires dans la répartition des avantages et des décisions qui les affectent. 4. Planification de la relève pour assurer une transition en douceur en cas de changement de leadership. 5. Respecter des normes éthiques strictes, integrant les dimensions RSE et climatique au sein de la gouvernance.

You want to highlight best practices while showing the founders how to set up a governance structure. Putting these two areas together speeds up both the understanding and the process. Good governance provides structure to think through the really difficult, thorny, or complex aspects of business so you can focus on the topic at hand rather than having to figure out how to figure it out first. Again, not a silver bullet but definitely helpful when the chips are down. Good governance provides clarity of priorities, accountability, responsibility, and measurement as well as a methodology to evolve the governance over time.

Corporate governance in startups – it's like herding cats, but let’s talk best practices. First, regular board meetings. And by regular, I mean more than once when the stars align. These meetings are where big decisions should happen, assuming everyone's not just mentally checking their grocery lists. Then, there's the groundbreaking concept of ethics and transparency, especially with finances. In the startup world, that’s akin to finding a four-leaf clover. And let's not forget about risk assessments and succession planning, because shocker: businesses need a plan B. Follow these ‘innovative’ practices, and you just might avoid being a punchline in the startup hall of fame.

Challenges galore. In encompassing governance. But for startup’s and smaller corporations mainly it will be using raw material / logistics which is ESG compliant. The costs are higher and will pose an issue. Such issues need board level attention and it would behoove entrepreneurs to ensure board member are a part of decision making with ESG / governance grey areas.

Founders can and should lean on their board for help here. Yes, issues abound now and will continue to - welcome to business. I encourage executives to view good governance as support - everyone wants the company to be successful and not get derailed by something that could otherwise be mitigated or avoided all together - rather than a loss of control. If anything, good governance gives you MORE control because it creates a foundation for predictability.

"Absolutely nothing happens unless you make it happen," remarks Marc Andreessen, highlighting the essence of tackling corporate governance in startups. Aligning the board with management often feels like aligning stars in a stormy sky – challenging but essential for direction. Then, there's the task of marrying startup agility with the rigidity of governance structures, akin to mixing oil and water and hoping for a smooth blend. Navigating compliance is like walking through a maze blindfolded. In the world of startup governance, you're constantly spinning plates, but as Andreessen points out, it's all about making it happen, no matter how tricky the balancing act.

The biggest challenge here is the reluctance of the founders to share rights and responsibilities with the team as they are afraid that without them nothing will be happening or, worse, people will take bad decisions. To overcome it one needs to have a lot of patience in communicating ?? First, the founders have to acknowledge that they are the main obstacle to growth if they do not delegate-there is only 24 hours in any given day. Second, they need to recognize that there are other great people and professionals around. Third, they need to accept the fact that properly incentivized professionals will work not worse, but maybe better than them. When this triple understanding sets in, things normally start to move in the right direction.

Fortunately, some Corporate Governance Codes allow companies adopt an ‘apply and explain’ approach of implementing corporate governance principles. This gives companies the flexibility to adapt implementation to suit their size and growth phase. In view of the above, having an open approach to what works for each company, prioritising the implementation of key governance initiatives with the most impact (e.g risk management, audit, transparency), adopting technology to streamline governance processes (e.g GRC software), simplifying governance processes, and outsourcing certain governance functions, can be crucial in helping companies overcome some of governance challenges.

Having mentors / board members drive accountability / diversity / reporting policies and processes will help overcome challenges. Finally it depends on the vision of the promoter. People with long term visions usually find it easier to imbibe governance policies.

In all aspects of business, corporate governance included, it is helpful to have a trusted network for guidance. People who you can speak to in confidence for feedback, perspective, ideas, and connections are necessary. Some people are better at this than others and at times, everyone's ego gets in the way, so you need people who will tell it to you straight.

For me the best answer to that challenge is mentoring and advisory. The best advisors are Board members representing the investors. They normally have both plenty of knowledge and great network, so the founders should not be shy using them as such. Speaking of mentoring, I believe the best tool for this purpose is peer mentoring - the founders should establish such a relationship with a startup(s) ahead of them at the business development curve (not a (in)direct competitor, of course), and ask them to become mentors in regard to implementation of corporate governance. The resistance to advice from this kind of mentors should be minimal as mentors and mentees are very similar in age and values.

Entities tend to find out about and look at Corporate Governance (CG) only when it fails. Usaully following an Audit (Regulatory or Internal). Neverthless, If we look at CG as a big umbrella under which a company is managed, the corporate bodies and the regulatory environment in which operates, aiming to ensure the sustainability of the company and return to the stakeholders (founders, employees and comunity), The importance of it has to be shown in a continuous exercise, namely by trainning the Boards and Executive Managements in CG matters, thus either legislation and best practices evolve. Sharing practicle exemples of how failures in Corporate Governance lead to financial and reputacional damages, can also be key.

Illustrate how strong governance attracts and retains crucial stakeholders like investors, partners, customers, and talent. Highlight the role of governance in preventing common pitfalls such as disputes, fraud, legal issues, and reputational damage, ultimately contributing to long-term success. Clearly articulate the benefits, including building investor confidence, maintaining a positive reputation, mitigating risks, and facilitating better decision-making aligned with the company's goals. Address misconceptions, such as the belief that governance is only for large companies, and provide practical guidance and resources for its implementation.

Underline the importance to set up an effective board of directors to oversee investee’s strategy, monitoring its financials and KPIs, assist in key people recruitment to execute the strategy, guiding key people, overseeing risk, structuring appropriate processes, and acting as a “risk management device for counterfactuals”, capable to distinguish signal from noise. An effective board is not there just for the mechanics of CG but also for the spirit of governance, and with a spirit of continuous learning aiming to co-create the future with the founders, capable not to miss the “moonwalking bear”. The effective board secures good CG, a fundamental element for value creation (growth, profitability, market positioning and fund raising.

To communicate the importance of corporate governance to founders, emphasise how it enhances transparency, builds investor trust, and helps attract additional funding. Highlighting the positive impact on long-term stability, regulatory compliance, and the ability to navigate challenges can make founders recognise corporate governance as a valuable framework for sustainable growth. Sharing case studies or examples of successful companies with strong governance practices can also illustrate its practical benefits.

Governance should be recognized as subject matter expertise. Therefore, identifying and appointing, the appropriate governance leader is the first and most critical step. This can be someone within the organization, typically in-house legal counsel or a C-level executive, or via a fractional provider or outside legal counsel.