What are potential BoD structures where CEO is majority owner?

November 15, 2020

by a searcher from University of Pennsylvania - The Wharton School in New York, NY, USA

This looks different than a traditional company/search where the searcher/CEO is a minority shareholder and the board can usually fire the CEO. What are examples of good governance in terms of board structures or minority rights when the CEO controls the business?

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Reply by a searcher
from University of California, Berkeley in San Francisco, CA, USA

Board seats and structures are typically negotiated between investors and owner seeking investments. CEO reports to the Board and Board is elected by shareholders. So when CEO is also the majority, there is inherit confilct...but this happens often. So the party that is most vested in resolving this conflict is the majority investor(s).. I am not giving a specific answer here because voting rights and board seats are highly negotiated and could be deal breakers.. This may not apply at all if investors are not "professional" investors where they have fiduciary duties to their LPs.

Reply by a searcher
from National University of Ireland, Galway in Seattle, WA, USA

I wouldn't conflate ownership and good governance. Appoint a strong independent board and if they fire you you have the option of voting them out at an AGM. And do make sure you can do that as majority shareholder. However it it comes to having to fire your board to keep your job you should think seriously about what you are best at. Professional CEOs working for an active CEO doing what she is best at should not be discounted. Maybe view having a board that you really report to as a way of holding yourself accountable. It is also a way of showing confidence.

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