6 ms·

The company board’s sole job is to hire and fire the CEO when appropriate: https://reactionwheel.net/2021/11/your-boards-of-directors-is-probably-going-to-fire-

The company board’s sole job is to hire and fire the CEO when appropriate: https://reactionwheel.net/2021/11/your-boards-of-directors-is-probably-going-to-fire-you.html https://reactionwheel.net/2021/11/your-boards-of-directors-i... However, having been on a team that prepares board materials and also having presented to a company board, I can tell you that the information they receive is extremely carefully managed in a way that allows responsibility to seem to flow downwards rather than upwards. What you see as an IC or as a manager or ever director is extremely different from the cause and effects a board sees in a monthly or quarterly update. Hence they often come to different conclusions than the people in the trenches would. That said, I’m sure this is true for any large organizational unit (government, military, corporations, nonprofits, etc).

NovemberWhiskey 4y ago
I've been in preparation of board materials for Fortune 100 companies (primarily for the audit committee) and honestly that is not my experience.
- whatshisface 4y ago
  The audit committee would be the one place you'd expect that not to happen.
  - deleted 4y ago
    [deleted]
- justinpombrio 4y ago
  Do say more!
- Elof 4y ago
  From the opposite side I've regularly presented in board meetings at 3 small to medium sized startups and this has not been my experience as well. One CEO was even removed at one of them.
whatshisface 4y ago
Are board members rewarded for digging in beyond what's provided to them?
- eftychis 4y ago
  They are not punished if they don't -- this is the right question. Except if they are a major-ish stock holder which is usually not the case (for publicly traded).
- goopthink 4y ago
  Insofar as board members are compensated by stock grants, they are incentivized to increase the stock price. But if a board member starts trying to do independent verification of what the CEO/team is telling them, that's a sign of mistrust. Because the board primarily interfaces with the executive team, would they know where to start? That said, I've seen some board members try this out by offering to help/chat with some under-performing teams that they have expertise working with and asking light questions/giving advice... but having been on the receiving end of a conversation like that, it often feels like there is a lot of politics going -- you don't know if someone genuinely wants to be helpful, is vetting your capabilities and fit for the role (based on the trickle-down responsibility), or is trying to do independent fact finding (trickling it back up).
- nradov 4y ago
  In some rare cases the board has retained outside counsel to conduct an independent investigation when there is potential wrongdoing or conflict of interest involving the CEO or other senior executives. The board doesn't receive any extra direct rewards for this, beyond protecting their own holdings and reputations.
MichaelZuo 4y ago
This is usually resolved by requiring a minimum ownership stake for each prospective board member, and to make sure it represents a significant fraction of their total net worth. To guarantee that the board would lose their shirts if they make decisions completely opposite to reality, thus motivating a more thorough investigation of what they see and hear.
- zeristor 4y ago
  Sounds a bit like buying a commission, by having enough money you proved worthy of it.
  - MichaelZuo 4y ago
    It is quite similar, the most widespread usage historically would likely be the 18th century trading companies such as the British East India Company which used this method along with others to operate with a relatively tiny managerial workforce by modern standards. There was another post on HN a few weeks back with an article that looked into it and the numbers were really staggering.
    - simlevesque 4y ago
      if you could find it I'd love to read that.
    - gumby 4y ago
      Could you find that article, perhaps via algolia HN search? I didn't see it.
    - gjm11 4y ago
      A couple of people asked where this was. I think the article is https://www.strangeloopcanon.com/p/some-things-to-learn-from-the-british https://www.strangeloopcanon.com/p/some-things-to-learn-from... and the HN discussion is https://news.ycombinator.com/item?id=32710002 https://news.ycombinator.com/item?id=32710002 (but I am not MichaelZuo and it's possible that I've got the wrong thing).
DebtDeflation 4y ago
Many corporate boards have an "executive chairman" which means the CEO is also the Chairman of the Board. Perhaps even more importantly a substantial number of board members are executives from other companies, meaning CEOs sit on each others boards and wash each others' backs.
- bluefirebrand 4y ago
  I have to wonder if it should be considered a legal conflict of interest for a CEO to sit on the board at all, forget being chairman. The powerful really love rigging stuff in their favor huh
  - taneq 4y ago
    > The powerful really love rigging stuff in their favor huh You say that like there's anybody that doesn't. The powerful just have more scope to actually do so.
  - dopidopHN 4y ago
    That whole setup could use some free market love.
    - paxys 4y ago
      This is going to start happening to an extent now that there actually is a free market, after...whatever that last decade was.
      - flanflan 4y ago
        > now that there actually is a free market ???
      - Extropy_ 4y ago
        Please, excuse me. But, what?! I honestly cannot make out what you're trying to reference.
HWR_14 4y ago
The board has other jobs. They have to sign off on the validity of financial statements in public companies, for instance. CEOs bring them decisions that need to be made like granting a conflict of interest waiver to a CXO employee. Just two examples that they usually are required to make. They also help with other major course setting.
- deleted 4y ago
  [deleted]
staticautomatic 4y ago
Technically, the board’s job is to represent the interests of common stock holders.
neilv 4y ago
> sometimes the co-founders really want to be the CEO for career or ego reasons (even though the investors usually don’t keep these promises: after taking out the CEO, the co-founders are usually next, partly because nobody can ever trust someone who stabbed a friend in the back, even the person who asked them to) Everything I Need to Know in Life, I Learned from Mobster Movies
ksec 4y ago
>That said, I’m sure this is true for any large organizational unit It is characteristic of all committee discussions and decisions, that every members has a vivid recollection of them, and that every members recollection of them differs violently from every other members recollection, consequently we accept the convention that the official decisions are those, and only those which have been officially recorded in the minutes by the officials, from which it emerges with an elegant inevitability, that any decision that has been officially reached will have been officially recorded in the minutes by the officials, and any decision which is not recorded in the minutes is not officially reached, even if one or more members believe they can recollect it, so in this particular case if the decision had been officially reached, it would have been officially recorded in the minutes, by the officials and it isn't, so it wasn't.
chii 4y ago
> the information they receive is extremely carefully managed in a way that allows responsibility to seem to flow downwards rather than upwards. The Plan In the beginning, there was a plan, And then came the assumptions, And the assumptions were without form, And the plan without substance, And the darkness was upon the face of the workers, And they spoke among themselves saying, "It is a crock of shit and it stinks." And the workers went unto their Supervisors and said, "It is a pile of dung, and we cannot live with the smell." And the Supervisors went unto their Managers saying, "It is a container of excrement, and it is very strong, Such that none may abide by it." And the Managers went unto their Directors saying, "It is a vessel of fertilizer, and none may abide by its strength." And the Directors spoke among themselves saying to one another, "It contains that which aids plants growth, and it is very strong." And the Directors went to the Vice Presidents saying unto them, "It promotes growth, and it is very powerful." And the Vice Presidents went to the President, saying unto him, "This new plan will actively promote the growth and vigor Of the company With very powerful effects." And the President looked upon the Plan And saw that it was good, And the Plan became Policy. And this, my friend, is how shit happens. https://web.mnstate.edu/alm/humor/ThePlan.htm https://web.mnstate.edu/alm/humor/ThePlan.htm
FrontierPsych 4y ago
This is why it is so extremely important to get out there and meet with people in the company, talk to them, look at stuff, rather than only get fed information by people. See what is really happening.

NovemberWhiskey 4y ago

I've been in preparation of board materials for Fortune 100 companies (primarily for the audit committee) and honestly that is not my experience.

whatshisface 4y ago
The audit committee would be the one place you'd expect that not to happen.
- deleted 4y ago
  [deleted]
justinpombrio 4y ago
Do say more!
Elof 4y ago
From the opposite side I've regularly presented in board meetings at 3 small to medium sized startups and this has not been my experience as well. One CEO was even removed at one of them.

whatshisface 4y ago

Are board members rewarded for digging in beyond what's provided to them?

eftychis 4y ago
They are not punished if they don't -- this is the right question. Except if they are a major-ish stock holder which is usually not the case (for publicly traded).
goopthink 4y ago
Insofar as board members are compensated by stock grants, they are incentivized to increase the stock price. But if a board member starts trying to do independent verification of what the CEO/team is telling them, that's a sign of mistrust. Because the board primarily interfaces with the executive team, would they know where to start? That said, I've seen some board members try this out by offering to help/chat with some under-performing teams that they have expertise working with and asking light questions/giving advice... but having been on the receiving end of a conversation like that, it often feels like there is a lot of politics going -- you don't know if someone genuinely wants to be helpful, is vetting your capabilities and fit for the role (based on the trickle-down responsibility), or is trying to do independent fact finding (trickling it back up).
nradov 4y ago
In some rare cases the board has retained outside counsel to conduct an independent investigation when there is potential wrongdoing or conflict of interest involving the CEO or other senior executives. The board doesn't receive any extra direct rewards for this, beyond protecting their own holdings and reputations.

MichaelZuo 4y ago

This is usually resolved by requiring a minimum ownership stake for each prospective board member, and to make sure it represents a significant fraction of their total net worth. To guarantee that the board would lose their shirts if they make decisions completely opposite to reality, thus motivating a more thorough investigation of what they see and hear.

zeristor 4y ago
Sounds a bit like buying a commission, by having enough money you proved worthy of it.
- MichaelZuo 4y ago
  It is quite similar, the most widespread usage historically would likely be the 18th century trading companies such as the British East India Company which used this method along with others to operate with a relatively tiny managerial workforce by modern standards. There was another post on HN a few weeks back with an article that looked into it and the numbers were really staggering.
  - simlevesque 4y ago
    if you could find it I'd love to read that.
  - gumby 4y ago
    Could you find that article, perhaps via algolia HN search? I didn't see it.
  - gjm11 4y ago
    A couple of people asked where this was. I think the article is https://www.strangeloopcanon.com/p/some-things-to-learn-from-the-british https://www.strangeloopcanon.com/p/some-things-to-learn-from... and the HN discussion is https://news.ycombinator.com/item?id=32710002 https://news.ycombinator.com/item?id=32710002 (but I am not MichaelZuo and it's possible that I've got the wrong thing).

DebtDeflation 4y ago

Many corporate boards have an "executive chairman" which means the CEO is also the Chairman of the Board. Perhaps even more importantly a substantial number of board members are executives from other companies, meaning CEOs sit on each others boards and wash each others' backs.

bluefirebrand 4y ago
I have to wonder if it should be considered a legal conflict of interest for a CEO to sit on the board at all, forget being chairman. The powerful really love rigging stuff in their favor huh
- taneq 4y ago
  > The powerful really love rigging stuff in their favor huh You say that like there's anybody that doesn't. The powerful just have more scope to actually do so.
- dopidopHN 4y ago
  That whole setup could use some free market love.
  - paxys 4y ago
    This is going to start happening to an extent now that there actually is a free market, after...whatever that last decade was.
    - flanflan 4y ago
      > now that there actually is a free market ???
    - Extropy_ 4y ago
      Please, excuse me. But, what?! I honestly cannot make out what you're trying to reference.

HWR_14 4y ago

The board has other jobs. They have to sign off on the validity of financial statements in public companies, for instance. CEOs bring them decisions that need to be made like granting a conflict of interest waiver to a CXO employee. Just two examples that they usually are required to make. They also help with other major course setting.

deleted 4y ago
[deleted]

staticautomatic 4y ago

Technically, the board’s job is to represent the interests of common stock holders.

neilv 4y ago

> sometimes the co-founders really want to be the CEO for career or ego reasons (even though the investors usually don’t keep these promises: after taking out the CEO, the co-founders are usually next, partly because nobody can ever trust someone who stabbed a friend in the back, even the person who asked them to) Everything I Need to Know in Life, I Learned from Mobster Movies

ksec 4y ago

>That said, I’m sure this is true for any large organizational unit It is characteristic of all committee discussions and decisions, that every members has a vivid recollection of them, and that every members recollection of them differs violently from every other members recollection, consequently we accept the convention that the official decisions are those, and only those which have been officially recorded in the minutes by the officials, from which it emerges with an elegant inevitability, that any decision that has been officially reached will have been officially recorded in the minutes by the officials, and any decision which is not recorded in the minutes is not officially reached, even if one or more members believe they can recollect it, so in this particular case if the decision had been officially reached, it would have been officially recorded in the minutes, by the officials and it isn't, so it wasn't.

chii 4y ago

> the information they receive is extremely carefully managed in a way that allows responsibility to seem to flow downwards rather than upwards. The Plan In the beginning, there was a plan, And then came the assumptions, And the assumptions were without form, And the plan without substance, And the darkness was upon the face of the workers, And they spoke among themselves saying, "It is a crock of shit and it stinks." And the workers went unto their Supervisors and said, "It is a pile of dung, and we cannot live with the smell." And the Supervisors went unto their Managers saying, "It is a container of excrement, and it is very strong, Such that none may abide by it." And the Managers went unto their Directors saying, "It is a vessel of fertilizer, and none may abide by its strength." And the Directors spoke among themselves saying to one another, "It contains that which aids plants growth, and it is very strong." And the Directors went to the Vice Presidents saying unto them, "It promotes growth, and it is very powerful." And the Vice Presidents went to the President, saying unto him, "This new plan will actively promote the growth and vigor Of the company With very powerful effects." And the President looked upon the Plan And saw that it was good, And the Plan became Policy. And this, my friend, is how shit happens. https://web.mnstate.edu/alm/humor/ThePlan.htm https://web.mnstate.edu/alm/humor/ThePlan.htm

FrontierPsych 4y ago

This is why it is so extremely important to get out there and meet with people in the company, talk to them, look at stuff, rather than only get fed information by people. See what is really happening.