THE ENTREPRENEUR AND GOOD GOVERNANCE

Solutions from the Quebec School of Entrepreneurs …

The establishment of a governance structure in a company should not add burden to its manager, but rather enlighten him in his decisions.

WHAT GOVERNANCE STRUCTURE SHOULD BE ADOPT?

In the early days of a business, a business leader will usually turn to his lawyer, accountant or a friend with complementary skills to his own for advice on certain complex decisions.

Subsequently, he may decide to form an advisory board by bringing together experts, such as professionals already involved in the company who will become his advisors. The committee, composed of three to five external advisors in addition to the CEO, meets to debate and then provide recommendations on the strategic directions to take.

Advisory board members are chosen by the entrepreneur and can leave or be shown the door at any time. Unlike a board of directors, the advisory board has no decision-making power.

More formally constituted, the board of directors (BOD) carries out specific tasks, from which individual responsibilities arise for its members. They are appointed and elected by the shareholders and management of a company for a fixed term. Certain stakeholders (such as a public funder) or a sponsor may require to sit on the board.

As a general rule, the advisory committee constitutes the preliminary step to the establishment of a board of directors, which becomes mandatory for companies entering the stock market.

HOW TO CHOOSE THE MEMBERS OF A BOARD OF DIRECTORS

Appointed members of a board of directors ideally bring expertise, experience or resources that complement those of its management. These should not have any connection with the company or organization.

One of the major responsibilities of a CA is to ensure the sound financial management of the company. In particular:

• to approve budgets;

• to ensure economical and efficient management of the company;

• to monitor financial integrity

• to approve the financial statements.

IS A CA LIMITING FOR THE ENTREPRENEUR?

The entrepreneur accustomed to making decisions alone or in simple consultation may fear seeing his decision-making power limited by a CA.

Since board members have a fiduciary duty, meaning they have a legal responsibility to the company to ensure its sound financial management, they often exercise caution when it comes to risk management.

Faced with day-to-day operational necessities, CEOs often have little time to step back from the big issues facing the business.

A well-established board of directors will listen to the entrepreneur's vision while acting as a safeguard to ensure the sustainability of the company.

Knowing how to surround yourself well is one of the pieces of advice hammered home to entrepreneurs by successful leaders. Having a good governance structure and calling on the collective intelligence of a group of professionals dedicated to making your project a success will undoubtedly have positive effects on the growth of your business. Now, it's up to you to see which structure suits you best.

Are you hesitant to choose the most appropriate form of governance?

Read the article Entrepreneurs: Advisory Board or Board of Directors?

GOOD TO KNOW

The establishment of a CA is indicated in a context where the organization manages public funds (such as incorporated NPOs), during significant investments that put the company at risk or simply when a need for expertise is felt by the management team.