Recommended Corporate Governance & Accountability Framework for VP Companies
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A quick checklist of recommended corporate governance & accountability actions for companies that are being built to last. "Startups" not exempted. http://venturesplatform.com/
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Recommended Corporate Governance & Accountability Framework for VP Companies
- 1. Understanding the why & how of Corporate Governance & Accountability for startups. The VP Way www.venturesplatform.com
- 2. What is Corporate Governance? • Corporate governance is simply establishing and maintaining a set of systems or processes to direct and control a company. • Corporate governance involves balancing the interests of a company's many stakeholders and distributing the rights and responsibilities among these different stakeholders. • It is about creating an ACCOUNTABILITY FRAMEWORK under which the company’s management is responsible. • Better results are delivered when everyone is held accountable. • Corporate governance is critical to the long term success of a company. www.venturesplatform.com
- 6. Internal Stakeholders • Shareholders • Board of directors • Cofounders • Executive management • Employees External Stakeholders • Customers • Creditors (including noteholders) • Service providers & vendors • Regulators • Community www.venturesplatform.com
- 7. 1. Shareholders (Investors) How? • Ensure you send regular monthly (early stage), quarterly (growth stage) reports to shareholders. • Reports should be in a standardized template, timely, complete and not rushed. • Inform, notify and seek consent of current investors of any further financing decisions. • Ask for help, advice and introductions from your shareholders. • Board members are appointed by shareholders and it is better when appointments have the unanimous buy-in of all shareholders • Statutory Obligation – Hold Annual General Meetings (AGM) and send audited annual reports as you progress. (Nigerian Law) • Other meetings, known as Extraordinary General Meetings (EGM) can be held on a need basis. (Nigerian Law) Why? • They are Co-Owners of the business. Most times, the primary purpose of buying into a company is to maximize value by making returns so it is imperative that shareholders are properly managed and informed. • When interests of co-founders and shareholders are aligned, it is in the best interest of the business as the shareholders will look to adding further non-cash value to the business. www.venturesplatform.com
- 8. 2. Board of Directors How? • Develop an annual budget and business strategy plan and get board to approve same. • Leverage board influence for networking and business opportunities • They are voted in by shareholders and can be removed by shareholders • Be deliberate about choosing experienced and knowledgeable directors into the board (and not just family or friends) • Recommended frequency for board meetings is quarterly especially at growth stage. In the early stage, recommended frequency is twice a year • Ensure you send regular monthly (early stage), quarterly (growth stage) report to the Board for their buy-in and input before sharing with shareholders. • Get legal and non-legal advice as you set-up your board. • Have a clear Terms of Reference for the Board stating: rights, responsibilities and rewards (if any) Why? Directors are responsible for the company’s strategic management. When strategic directors are appointed, their experience provides value that the company may not be able to afford. Consider it free consulting. www.venturesplatform.com
- 9. 3. Cofounders How? • Be transparent with your co-founders • Take all major decisions together. • Manage disputes and conflicts proactively • Communicate effectively and ensure a sense of shared vision for the company • Your cofounders are shareholders Why? You own the business together and all have vested interest in the success of the business. www.venturesplatform.com
- 10. 4. Executive Management How? • Have clear-cut responsibilities and reporting lines • Fair compensation (that may include equity) in order to motivate a sense of buy-in. • Open communication channel and ensure a shared vision for the company • Be quick to fire when needed as management influences the way an organization is run and employee behavior. Why? They are responsible for daily operations of the company. www.venturesplatform.com
- 11. 5. Employees How? • Clarity in terms of expectations and goals • Honesty, transparency and fairness • Buy-in, participation in decision making, stand-up meetings recommended. • Communicate values and culture. Consider an orientation process for every hire. • Feedback, motivation and fair compensation • Consider Employee Share Option Pool as you progress. • Create a performance based reward system which is tied to company’s performance • Identify employees that you need to build a growth plan around • Have a HR policy from 25 employees. • Recommended to hire a HR professional from 50 employees and above • Make all statutory contributions and deductions – PAYE (tax), pension etc Why? Shareholders interest (and by extension, company’s interest) is actually better served by including employees in your corporate governance accountability framework. Happy employees equals happy customers. www.venturesplatform.com
- 12. 6. Customers How? • Consider all legal implications of your business. Do you need disclaimers, do you need to indemnify? Networked / Platform businesses watch out! • Be obsessed about fulfilling your brand / product promise and provide adequate information on products. • Build an effective feedback system and a highly responsive customer service system to ensure adequate connection with customers. Why? Customers are the reason the business exists. No customers, no business. Be responsive but better still be pro-active to their needs. That’s how to win! www.venturesplatform.com
- 13. 7. Creditors How? • Differentiate between straight-out creditors, (i.e. debt owed to be repaid fully) and convertible noteholders (who are investors) • For straight-out creditors, pay when due. When unable to pay, be proactive and propose an arrangement before payment due date • Treat noteholders as shareholder/investors especially as it pertains to information sharing. • Leverage your noteholders experience and network Why? You owe them money! www.venturesplatform.com
- 14. 8. Regulators/Government How? • Identify who your regulators are and understand their requirements • Ensure that regulatory compliance is someone's KPI • In cases where you operation isn't regulated yet, be pro-active. • Comply with all tax, audit and regulatory expectations Why? Breaching of regulatory obligations can result in fines, reputational damage or even total closure of business www.venturesplatform.com
- 18. In Closing…. A startup is a company & should be treated like One. www.venturesplatform.com