Is Your Board of Directors Contributing to Your Success?

Understanding and effectively establishing and managing Board performance is pivotal to the success and longevity of your Startup. 

One of our most popular education sessions has been How to set up a high performing Board of Directors for your startup from Startup Board Academy, an organisation established in 2015 together with EFPL Innovation Park in Lausanne specifically to offer training for Founders, Board Members & Investors on governance, roles and duties of board members for startups and SMEs.  

During this session, Managing Partner Virginie Verdon leveraged her extensive experience with Swiss startups to delve into the roles and responsibilities of Boards, offering valuable insights that have the potential to impact your startup’s success.  This article summarises just a couple of key takeaways from her presentation.

Defining the Role of the Board

Swiss law provides a precise definition of the Board of Directors role: 

The board of directors manages the business of the company unless responsibility for such management has been delegated.  Art. 716; III. Duties, Swiss Code of Obligations

Despite this, Virginie noted that these responsibilities are sometimes misunderstood.  Directors should not be mistaken for advisors, consultants or ‘box-ticking’ strategic decision-makers; nor can they transfer away their responsibilities.   

Directors can delegate management provided legal requirements are adhered to, but remain responsible for the careful selection, instruction and supervision of the person tasked with management of the company.

And with that great responsibility comes accountability: the risk of Directors having personal liability. This is specific to Switzerland – there is no protection or insurance to protect Directors from this liability in the event of mistakes or failures.  Directors should mitigate risk by only accepting the board positions for which they have the necessary knowledge and time.  

The Startup Challenge

For Startups, the stakes are higher.  Virginie underscored the greater complexities faced by Startup Boards, illustrated with numerous examples from her experience. 

These complexities for Startup Boards stem from the development stage Startups are in: small, fast moving/ changing, resource-constrained and still establishing processes, roles & responsibilities.  Moreover, Startups have an array of stakeholders: founders, investors, shareholders, and managers. 

Startup Boards need to be more ‘hands-on’, make faster decisions and understand that their decisions have more impact on the business.  Startups have less margin for error, and less capacity to survive mistakes – making Board decisions more critical.

The range of stakeholders in startups can introduce further challenges for the Board.  Just two potential examples:

  • addressing conflicts of interest arising when Directors who are investors must make decisions in the startup company’s interests vs. their investment interests.
  • delegating management to people competent to manage the company eg. what if the majority-owning founder is not the right person to manage the company? 

The Impact of a Strong Board on Your Success

The Board of Directors has a very significant impact on the health of small companies.  This webinar underscores the necessity of having independent and professional Board members, who understand the company and know what it means to be a Board member.  

Board members should bring experience that you don’t have, bringing knowledge and expertise to the company.  They should bring independent and external perspectives, ensuring there is clear strategic direction and making the right decisions for your company, considering risk, regulations and compliance.

Experienced, professional Board members can add to your company’s reputation, helping attract talent, investors and customers.

Ready to Learn More?

If you’re interested in diving deeper into how the Board of Directors can contribute to your Startup’s success, we offer our SSA members a full video on the topic in our Education Session Library. Not a member yet? Become a member of the Swiss Startup Association now to unlock more valuable knowledge and join the SSA Community!

 

Author: Suzanne Leighton

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