Читать книгу Startup Boards - Sacca Chris, Chris Sacca, Brad Feld - Страница 21

Many boards have board observers who have the right to sit in, observe, and participate in portions of the board meeting but don't have formal board roles or responsibilities. Observers don't get to vote on board matters, and are often VCs or co-founders of the company.

To limit the size of a board, many companies grant observer seats to investors. In other cases, strategic investors get observer rights instead of actual board seats to limit their control. Some strategic investors prefer board observer status, as it minimizes any liabilities their corporation may face due to actions of the board and individual board members.

VC partners who want a junior member of their firm to participate in board meetings often also ask for an observer right in addition to a board seat. In the best case, these junior members of the firm don't show up without the VC board member partner and never end up being a “proxy board member” for the actual board member. Instead, they're observers. They listen to what is going on, help support their VC partner when appropriate, and only weigh into the discussion when they have something significant from their experience to add.

Early in the life of a company, more than one founder may be on the board. As the board grows, the number of founders on the board is often reduced. While there can be a founder seat and a CEO seat, the CEO may no longer be a founder or additional founders may have observer rights.

Observers don't have a right to be in the board's executive session or closed session. Observers will respect this, but it can be taken to a ridiculous level, where there are essentially two separate board meetings. With the observers in attendance, the first one ends up being a high-level reporting session. The actual board meeting follows this, attended only by board members, where the material is again reviewed, but this time with substantive discussion. If you're going to give someone an observer seat, you should expect that they'll be in all but the most sensitive conversations.

While an entrepreneur may think they are managing the size of their board through using observer rights, we've sat in boardrooms with 20 people or more, where only five of them were board members. We've experienced VC firms who use their observer rights to “bring power to the board meeting.” Instead of one board seat, the observer seat is used to effectively have two board members. And we've been in situations where it's confusing who is a board member and who isn't.

Ultimately, it's the lead director and the CEO's responsibility to manage the observer dynamic. Creating a clear set of rules and expectations and living by them are the best way to manage and get value from board observers.