Interesting conflicts can arise when a non-CEO founder is on the board of directors of a startup.

Assume that Jim is the tech guru founder of Company X.  Jim founded Company X with Al, a self proclaimed entrepreneur.  Company X raises some venture capital, and after about a year Jim goes to his non-management board members and basically says “Al has to go”.   See my earlier post Tech Founder Wins at Early Stage.  So the board fires Al and, after a search process, hires Brett as the new CEO; Brett is thus hired in as a non-founder CEO.  After the management change there are 5 directors, namely Brett, Jim, 1 VC rep and 2 independents.

The interesting conflicts arise for Jim.  He is both a board member and also, as the tech guru (make up any “C” title you want like CTO or CSO), reports to Brett, the CEO.  Depending on Jim’s personality, Jim may find it difficult to speak his mind at a board meeting for fear of pissing off Brett “his boss”.  Jim might not want to risk management harmony day to day.  He might have a sense of loyalty to his boss and not want to show disloyalty at a board meeting by taking a contrary view or raising issues that the CEO does not think important.  These are just some examples of potential conflict.

My general feeling is that it is imperative for the non-CEO board member to truly act like a board member at all times.  He/she has to accept the dual role and so does the CEO.  I think that this should be discussed ahead of time with all parties (and by that I mean the entire board) to help ensure that it happens.   The dual role is not easy to handle for some people.

Open communication at a startup is critical.  The tech guru board member needs to be able to speak up and voice issues freely.  Granted, tech founders sometimes have a different sense of business reality than others, but having them talk freely at board meetings is super important.   Each board member should feel unencumbered and empowered.  The independent board members should be relying on the non-CEO founder board member to gain additional insights, etc.

I am not suggesting that the CEO and tech founder director should not try to work out issues ahead of board meetings.  Rather, I am suggesting that Jim be expressly encouraged to voice differing opinions openly, freely and as needed.  Discussion will follow and the board will function better for it.

Happy Memorial Day!