Situation: A company started as a collaboration of friends. Upon incorporation the leader became the CEO, and some of the original team became members of the Board. The CEO struggles with the responsibilities of being CEO while wishing to maintain the friendships that drive the company. How do you manage company and board dynamics?

Advice from the CEOs:

• While the company was formed as a collaboration of friends, once it incorporated the nature of the relationships necessarily changed. While away from work the CEO may remain friends and close to the others; however, within the company there must be one CEO who is responsible to the shareholders for operating the company according to that individual’s vision. If the CEO and company are successful, all will be rewarded.
  • Shareholders are not partners – a partnership entity is inherently different from a corporate entity based on share ownership.
• Within a corporate structure, majority control is critical.
  • While one should never trample on the rights of other shareholders, having 51% is better than having 47% ownership. Majority ownership makes it unnecessary to assemble a majority to drive the company in the direction that the CEO seeks.
  • That said, it is important to encourage the ideas and creativity of minority shareholders who are also employees. There is an art to recognizing and incorporating the ideas of others while the CEO, in the end, maintains final say.
• The CEO’s job – and preferably within a small company as both Chairman and CEO – is to develop the CEO’s vision of the company and drive this through the organization.
• Having a key employee report to the Board rather than to the CEO is likely a mistake. Employees do not do well long-term reporting to a committee.

[like]