Corporate governance is often overlooked in Romanian organizations. This topic should concern you because it can influence the investments you want to make and your business development strategies. Find out how from the following material, signed by Sergiu Neguț, Business Angel and co-founder of FintechOS.
If there is one thing that is completely ignored in Romanian organizations, this is most often corporate governance. Don’t get me wrong, we do have it, when we receive some external "regulation", from an investment fund or a multinational that makes the rules. Otherwise, we stick to ad hoc meetings. So what's the deal with these Boards? Are we talking about the board of directors, the directors of the company, external advisors, the shareholders' meeting? Do you have a Board in your company? What kind? What does it do? How often does it meet? What decisions are made there? What do its members usually disagree on? Is it functional or not? Are external advisors a must have in the Board or not?
In order to better understand things, let's look at how organizations actually work and we’ll see three types of boards, formal or less formal, productive or less productive: Executive Board (Action Table) – where work decisions are made, Board of Directors (Questions Table) – where strategic decisions are made, Board of Owners (Miracles Table) – where games are made.
An Executive Board includes the officers with executive duties in the organization, they are on the payroll, have clear responsibilities and meet often, to synchronize the tasks they carry out at operational level. Almost all organizations have an Executive Board, a Management Board, an Executive Committee, Monday's meeting managers or whatever else this may be called.
They are 4-10 people who meet weekly, argue and reconcile on operational, money and people related issues. In authoritarian companies (which is almost always the case with entrepreneurial companies which are just starting out), if the boss is absent, the meeting is not held or it is a fiasco. And what’s event worse, is that many entrepreneurial companies don't hold this type of meeting, because the boss is the one who makes all decisions anyway.
The Board of Directors is the management board of structured companies or actually a Board of Advisors for entrepreneurial companies. The 5-9 participants meet 6-12 times a year, some are representatives of controlling shareholders, there may even be 1-2 independent experts, plus the organization's CEO and 1-2 other CxOs. The proper operation of this board is what actually makes a company work well or not so well, because it is at this level that the essential questions are asked, the annual strategic plans and work budgets are approved. Companies (especially entrepreneurial ones) often postpone or avoid to organize such a board because they do not understand what role they actually have. The consequence of this decision is that its duties are most often taken over by the Executive Board or by the Board of Owners. In both cases, the healthy cycle where the management leaves the operational level and rises at the strategic level every 1-2 months is no longer ensured.
The Board of Owners is the most interesting one precisely because it is most often an informal board, which makes the most radical decisions, and this not the same as the General Shareholders’ Meeting. And when I say radical decisions I think about the listing of a company's shares, the sale of its controlling stake, initiating a major M&A process. But who is the Board of Owners of an entrepreneurial company? Well it consists of the few owners who control the company.
The destiny of a company lies in the operational, strategy and vision actions of the three types of boards. This is also where companies are destroyed due to games of power, interests, ethical deviations, misalignment of interests or simple incompetence. I challenge you to analyze who fulfills the role of each type of board of the ones mentioned above in your company. What are the areas that remained uncovered, what are the toxic areas and what could be the predictable errors. Then try to imagine a structure that works better, safer, more agile, more strategically, more innovatively. It's not hard, and it won’t be long until you see some results.
SERGIU NEGUȚ - Business Angel with investments in local businesses such as frufru, 2parale, Softelligence or Intermedicas. He is also a mentor and Chairman of the Board for the teams in Startarium's incubation program.
Opinion published in Biz magazine no. 316 Author: Sergiu Neguț, mentor and Chairman of the Board for the teams in Startarium.Inc incubation program.