Corporate governance may not be the most exciting topic for entrepreneurs, but it’s a critical foundation for any successful business. Getting governance right can help you attract investors, make better decisions, and avoid costly legal pitfalls. In this article, we’ll explore some best practices that every startup founder and executive should know.
Your board of directors is your ultimate governing body, responsible for overseeing the company’s strategy, risk management, and executive team. Building a great board is one of the most high-leverage things you can do to set your startup up for success.
The first rule of good governance is to prioritize director independence. That means recruiting board members who have no material ties to the company or its management team. Why is independence so important? Because directors have a legal duty to put the company’s interests first, even if it means challenging the CEO or founder. If the board is stacked with insiders and friends, it’s much harder to get that kind of objective oversight.
