A Model for Board Governance

By Geoffrey Moore

Author – The Infinite Staircase: What the Universe Tells Us About Life, Ethics, and Mortality

There are cartloads of checklists and commentary on the duties and responsibilities of a board of directors, none of which are particularly surprising, but collectively, somewhat mind-numbing.? As a frameworks person, I need to see things in a more simple and integrated way, hence the diagram below:

Public boards should tackle this framework from the bottom up as they are liable for damages if the company fails to address risk and compliance properly, or improperly reports performance results.? Foundational to their recruiting and staffing efforts should be securing strong chairpersons for each of the three anchor committees—Nominating and Governance, Audit, and Compensation.? That’s table stakes.? High-performing boards do their best to handle these obligations in committee so they can spend quality time on the upper levels of the framework.? The obstacle here tends to be management’s presentation of the past quarter’s performance.? This is necessary to bring the board up to speed on the current state of the company, but it is something that most boards spend way too much time on, given how little the board can do to move the needle.? This limits the time available to devote to strategy and resource allocation, where their outside-in perspective can add a ton of value.? Big bets, on the other hand, do get the full attention they deserve—they just should not happen very often given the risk-averse nature of public market shareholders.

Venture-backed companies, on the other hand, are a different kind of animal.? They should approach this framework from the top down.? They are big bets, and their first responsibility is to get those bets across the chasm and inside a tornado.? Resource allocation and strategy are core to accomplishing these ends.? Performance matters, but early on it is more about accumulating power than delivering profits.? Risk and compliance are still relevant, but the shareholders have a higher tolerance for risk, and the relatively small size of the enterprise as a whole makes compliance a whole lot simpler.? And finally, the board is typically comprised primarily of investors and founders with an independent director for balance—not really a governance model, built more for guidance instead.?

The disparity between the public and private market board models creates a shock when venture-backed companies get acquired by public companies.? The newly acquired team wakes up one morning inside a public enterprise with all its established processes and procedures and feels like it is being smothered to death.? There is no halfway house here, so when we talk about acquisition integration, we need to include a deep-dive orientation to public-market expectations, and the work enterprises must do to address them.? In parallel, the acquiring company needs to adopt zone management to ensure that they are holding the acquired company accountable to the right goals and metrics.? This goes all the way up to the board, where people are likely still smarting from the high premium they had to pay and looking to get it back as fast as possible.? Thrusting the new team into the Performance Zone is a proven path to crushing innovation and destroying shareholder value.

That’s what I think.? What do you think?

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