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I didn't understand the very last part: > Another good contingency measure is for only the CEO to hold a board seat before a significant equity fundraise. That
by elzr 10y ago
I didn't understand the very last part:
> Another good contingency measure is for only the CEO to hold a board seat before a significant equity fundraise. That will prevent board disputes during tough decisions, such as in the unlikely event that the CEO has to fire a co-founder.
Can someone please unfurl what this means? Is it arguing for the founders NOT to have a board seat before significant equity changes so that the CEO can be the arbiter betwen them? (Btw, it's odd to assume the CEO is not a founder).
- mattangriffel 10y agoNo, it's a way of dealing with the issue of deadlocked decisions between co-founders if equity is split evenly. Usually in the case of a deadlocked decision between co-founders, you can resort to a board vote, after which you resort to a vote among shareholders. If, say, two co-founders split equity and they're both on the board, then a disagreement could lead to a problem. If, however, only one of them (usually the CEO) is on the board, then there's no deadlock there. Sometimes people recommend giving one co-founder (again, usually the CEO) one extra share so their vote can break a deadlock. But putting only the CEO on a board is another way to deal with that problem without having to worry about extra shares.