In preparation for the September 23 Silicon Valley Directors Exchange panel on “Board Governance in Founder-Led Public Companies,” my firm conducted a survey of current and recent board directors to assess their beliefs about Founder-CEOs. Over 75% of the respondents reported having served on a public board with a Founder-CEO, giving them some first-hand knowledge of the issues.
Most of our survey respondents (83%) said the role of director at a Founder-led public company was MORE CHALLENGING than service at a company led by a professional/outside-hire CEO. Some of the comments provided to explain this answer were as follows:
- “You need all the same skills but you need to do them 10x better”
- “Soft skills and higher EQ are needed generally — coaching, negotiation, and persuasion”
- “Complex founder psychology and their personal feelings about the company can complicate the board director’s role”
The respondents did not necessarily agree with the common notions that companies led by Founder-CEOs are more innovative (only 35% agreed) or mission driven (only 39% agreed).
In addition, 68% of respondents felt classes of stock with superior voting rights undermine good governance and should be eliminated, with another 5% advocating for sunset provisions on these programs at minimum. These stock structures (often called DCSO, or dual class stock ownership) are very common when founder-led companies go public, and as a result many founder-CEOs enjoy voting power that vastly exceeds their actual stock ownership.
While each CEO (founder or otherwise) will have his or her own unique strengths and weaknesses and will not to conform strictly to a “type,” we asked our respondents to tell us what they generally believed to be true about Founder-CEOs. While the following statements are not presented as facts, we do share them as interesting insight into what our respondents expected to find working with Founder-CEOs:
- 91% agreed Founder-CEOs don’t know when to “hand over the reins” to someone new
- 83% agreed Founder-CEOs micro-manage more than outside hires
- 75% agreed Founder-CEOs are less accepting of constraints placed on them by the board than outside hires
- 70% agreed Founder-CEOs surround themselves with supporters less likely to challenge them
- 61% agreed Founder-CEOs have fewer checks on ethically questionable behavior than outside hires
- 57% agreed companies led by Founder-CEOs are less effective in growing top talent
As a way of summing up the respondents’ views, we asked them if they had a preference for Founder-CEOs when choosing their next board service, or in investing their own money. For the most part, the directors did NOT have a preference in favor of a Founder-CEO in either case. In fact, the proportion of respondents who said they were INDIFFERENT was in both cases the number one response, as you can see in the graphic below:
However, there was a noticeable minority of respondents (31%) who said they would prefer NOT to serve with a founder-CEO in their next role.
For our panelists’ tips and insights into ways to work effectively with Founder-CEOs, please check back on our website the week of October 4 for a link to the webinar video and a summary of some of the key learnings.