Startup governance: one proposed rule puts management in charge when results are strong, the board when they are not

One proposed rule for startup governance is that management should lead when a company is performing well, while the board should take charge when it is not. Investors have little incentive to replace a founder, according to this view, and would consider doing so only if the company were doing very poorly. Founders are expected to meet their obligations; that may mean bringing in another CEO or a strong second-in-command. Constant fear of being removed by investors may indicate the founder chose the wrong partners.

Roelof Botha served on one CEO’s board for 11 years while that CEO was in the role and remains a board member; the CEO described Botha as challenging him at times and supporting him when needed. Separately, an observation about employee leverage used an illustrative case in which “like 50%” of a company’s enterprise value is tied to one person who is not a founder and may not even be on the management team. Such importance, the observation suggested, can give an employee economic leverage and greater influence over the company.