Board or No Board?

Matt Blumberg, founder and CEO of our portfolio company Return Path makes a compelling argument for getting a Board of Directors together for your company regardless of whether you take outside capital (and thus are required to do so). Matt says:

Boards create an atmosphere of accountability for an organization, which drives performance (and many other positive qualities) from the top down in a business.  Budgeting and planning, reporting on performance, organizing and articulating thoughts and strategy – all these things are crisper when there’s someone to whom a CEO is answering.

I agree with Matt with two big "ifs." The first is if the Board is made up of strong individuals who understand that a Board's role is oversight, not day to day management. There is nothing worse than a Board which meddles. Matt's Board, which I have had the pleasure of serving on for a decade now, is among the best I've ever served on. And so Matt's perspective is based on that assumption.

The second "if" relates to who controls the company. If you control the company and cannot be fired, then your Board doesn't have the thing that ultimately creates the accountability that Matt talks about. Boards that are just rubber stamps are worthless. And there are many out there. I won't serve on one and I would not recommend having one.

#VC & Technology

Comments (Archived):

  1. mattb2518

    The first point – totally agree – I think I qualified that in my post.The second point – the two examples I mentioned in my post were both cases where the CEO did control the company AND STILL went ahead and established a Board. I am not sure, but I assume those Boards did not have the power to fire the CEO. But I know for a fact that in both cases, the Boards were meaningful to the CEOs involved, and the CEOs did feel like they were accountable to someone. Maybe this only works with a certain kind of CEO, but I don’t think Boards of CEO-controlled companies are by definition rubber stamps.

    1. fredwilson

      i’d love to hear about how those worked. i hate removing CEOs. it is one of the hardest and most risky things you can do in business. but without that ability, what authority does a board really have?

      1. mattb2518

        Let me get some color from the two CEOs I referred to and will repost or comment then. Might take a day or two.

      2. Michael Diamant

        Those minority investors have “authority” to make management’s life miserable, stir up the other investors and get themselves exited via an internal our outside share transaction just to refocus management. Not in the company’s interest but the shareholders themselves may be satisfied with the liquidity. In the end, everyone does what’s right or the lawyers win. If a CEO is not performing, he/she should remove themselves…. you should avoid investing in businesses with maniacal CEOs.

      3. Brad

        Fred I have seen an entire founding team taken out of the company because the finance team felt they could do a better job and the company flatlined (although still in business due to a continued investment)…..In a startup phase I believe passion and realization of the dream of a founder needs to be shared by the board and every effort needs to be taken to keep those goals on the same page. Best case in point is Steve Jobs and his oust at Apple and then the return of him and consequently the huge return of Apple.I agree with you, removing the CEO is hard, but the Founder/CEO has to realize that they are responsible and should always know that they could be replaced by the board.

        1. essay help

          good conversation. interesting to read) plus the topic i very interesting – there things to think about

      4. mattb2518

        Here’s some follow-up data based on calls today with the two CEOs I mentioned in my post:The first CEO noted that with his structure, his board couldn’t fire him. But in terms of leverage, he said HE basically only had one option if he didn’t like what was coming out of his Board, and that was to fire all of THEM. So his only weapon when push came to shove was nuclear, which is enough of a deterrent in and of itself for most CEOs. But as he said to me, “Why would you have a Board if you don’t want to use one? Just have an informal advisory Board instead.” In terms of my core point around accountability, his comment was “When you go to do a Board meeting, you have a higher bar on accountability, even if you have control. But at the end of the day, CEO attitude is everything.”The second CEO echoed these he comments. He also confirmed that his Board did not have the right to fire him, although they did have rights to protect shareholder interests (including “some repercussions” for him as CEO). His main point was that the value and strength of a Board, whether they have the ultimate say or not in your employment as CEO, is a function of the caliber of the directors and the overall dynamics of the group. The tone of accountability comes from having great Board members you respect, and he always selected Board members in a very targeted way based on their areas of experience and his gaps. He noted specifically that Board members like that can add value to business operations without meddling. Bottom line: “If you’re surrounded by engaged talent at the Board level, you raise your game and perform.” In his case, his Board really helped him since he was a young, first time CEO without a classic business/MBA background. But as with the first CEO in my example, he noted that “the onus is ultimately on the CEO to use the Board to the fullest extent possible.”

        1. PhilipSugar

          Well said.I think people can misconstrue what I said, but my basic issue is that if the team owns a majority of the stock, the only way you can get ousted is that if the team in fact feesl you should. The reason for this is that unless you do, a majority of the shareholders feel you shouldn’t.The big problem is never the optimal case where you have a great board. Its the sub-optimal case where you have a narcissist (which JLM pegs at 50%) with motivations that are not in line with the teams but rather with their own. If the stock is widely held its pretty hard because many will get screwed. If its concentrated with the founders there is a big bullseye.

        2. fredwilson

          this is really helpful matt. it shows that a board that can’t replace a CEO can have some impact. thanks for digging in and getting some data on this

      5. Robert Holtz

        I’ve worn every hat on this issue: Founder, Chairman, CEO, board member, had to fire CEOs, chosen to resign from boards, etc. A few key constants emerge:1) The CEO must understand and be comfortable with the idea that they serve at the pleasure of the board.2) The board must be comprised of people who don’t just represent their constituencies but who believe in their CEO and truly desire that the entrepreneur succeeds as well as the business.3) The board must allow the CEO and the management team to handle the day-to-day. I totally agree with you Fred that board members need to be reminded (or educated) that their role is in oversight and at the strategic level protecting the interests of stakeholders which should include the CEO.4) If the board does not understand the vision of the CEO or does not have faith and confidence in their CEO to carry out the vision, that is almost always the fault of the entrepreneur not the board. The only exceptions I’ve ever seen to this were entrepreneurs that didn’t follow rule #2. You’re not Abraham Lincoln. It is well and good to have differing viewpoints but don’t have rivals as voting board members… in a good company, your board will become the best friends you have because they should love you, love the idea of your success, and be close enough to you to be able to give you the brutal facts when you’re not seeing them yourself.5) To me, an entrepreneur that has formed a board of directors or an advisory board is naturally always more attractive for two reasons: First, it means they are already practiced in the dynamics of having a board; and Second, it shows they are able to compel other people to join them into following their vision. That is a skill in and of itself… in my opinion, a make or break skill.6) The best board members are the ones who have nothing to gain if you fail. The ones who help you fling open doors to get key strategic access and who are at a station in life where they want to pass on sage wisdom and HELP YOU control your company’s destiny. They should share your dream enough to be just as heartbroken as you would be if it didn’t come to fruition. The best board members are cheering you on like a boxer’s coach and helping you unlock your greatest potential.One of the reasons I enjoy serving on other people’s boards is because every entrepreneur’s journey is different and there are always new ways of seeing things that are exposed and illuminated by the process of trying to run a business well like no classroom or textbook in the world can ever teach you.

        1. fredwilson

          great comment robert!

        2. Jose Paul Martin

          Robert, that was a great summary!

          1. Robert Holtz

            Thanks Gents. 🙂

      6. Jose Paul Martin

        Hardest… yes. Risky? Because you invested time, energy and money into the CEO? Just curious as to why you think its risky… if he’s not performing, would it be riskier to keep him on-board and see the ship sink?

        1. fredwilson

          The new ceo could be worse

          1. Jose Paul Martin

            Ah… the known devil vs the unknown…

    2. RichardF

      I agree with you Matt 100%, I think Boards are generally meaningful even if the CEO has control.

  2. Sebastian Wain

    Completely agree: Oversight, not day to day management.What I’ve seen in many small companies are founders agendas depending on boards/investors mood. Sometimes the founders included their board/investors as beta users of their software! In that cases the company turns to live a dangerous “reactive mode” based on board/investors opinions on bugs, UIs, etc. Many inexperienced founders prioritize those opinions over the team decisions.

  3. Michael Diamant

    Even if the CEO/founders control the board (with a majority of seats) and the company, minority investors still have significant rights, and the board is crucial not only for their experience and contacts and for giving management a level of accountability and a focus on metrics, but also to make sure that their minority rights are being met. And it’s management’s responsibility to address all those rights clearly and openly. My board can’t fire management but they have increasing oversight responsibilities if our performance doesn’t meet benchmarks.

  4. ShanaC

    Ok So really this is all about accountability. How do you build in accountability into your organization?

  5. Spencer Fry

    Albert just wrote about this in his last post too. Maybe worth linking to?

    1. fredwilson

      i will go read albert’s post. thanks for the suggestion. i’ve been on vacation and not reading blogs like i normally do

  6. Rayhan Rafiq Omar

    This is exactly the reason I set up a blog to ‘oversee’ my attempt to break the 800m world record ( All the eyes keep me honest, keep me pushing and make me get out of bed earlier and into bed later without feeling exhausted.There are some who I work with that have the ability to work independently with great efficiency. I believe they are the exceptional cases and the vast majority of people, processes and organisations need a balanced amount of oversight to maintain fresh ideas and efficiency.And yes, I agree wholeheartedly that the oversight should have the power/ability to make a difference.

    1. vankula

      Checked out the site and it lacks some transparency. How long does it take you to run 800m now??

      1. Rayhan Rafiq Omar

        Hi Vankula,Thanks for visiting the blog. I am doing my first timed run this weekend and will post photos and times.I am literally starting this effort from unfit. So if I attempted to run without any prior training the likelihood of injury would be very high.I promise, there will be plenty of more detail as the training gets more intense.Thanks again,Rayhan

    2. Peter Clark

      If you don’t even like running why is your dream to break the 800m world record?

      1. Rayhan Rafiq Omar

        Haha, do you have to like something that is in your dreams? It’s there, it gets my adrenaline running, but when I am out there it just plain hurts.I am fast, and I needed a motivation to get up at 5:30am every morning and get more out of my day. I’m hoping after a few weeks the story will slowly become a little more interesting.Apologies Fred, I know this isn’t the place to have this conversation…

  7. andyswan

    Never lose control of your board. I was a minor part of a $1.2 billion lesson in this regard recently.The board’s independence and your maintenance of power is a balancing act.Strong people with strong opinions and domain expertise is vital to navigation….. Giving up your right to decide whether or not you run your company is insane.

    1. fredwilson

      if it is your company

  8. Michael Diamant

    This Ben Horowitz penned piece published today seems complementary to Fred’s: The CEO’s perspective-

    1. awaldstein

      Terrific post.Two great quotes in there:”Focus on where you are going rather than on what you hope to avoid”.I’ve added to my must remember mantra to guide me daily.”Ideally, the CEO will be urgent yet not insane. She will move aggressively and decisively without feeling emotionally culpable. If she can separate the importance of the issues from how she feels about them, she will avoid demonizing her employees or herself.”Love this but believe that this is mostly impossible to achieve.

    2. fredwilson

      thanks for the tip on the ben horowitz post. going to read it now

  9. markslater

    BOD comes with outside capital.Myself and my co founder are currently spending our own money. We dont need any more fiscal accountability than that.What we need is help. that help comes from an advisory board. I asked a highly successful CEO to join because i need help with the first few stones across the river. He accepted and agreed to invest in our financing. I’ll likely ask him to join the BOD on close.I’m working on the second advisor and will likely stop there and finish the financing.entrepreneurs: don’t get distracted. you need to get your product done, in the market, and circle your company with close friends who can HELP. i’ve seen it too many times where a company has a stacked board (director or advisor) – because it looks good and tries to establish some fake measure of social proof.Get a great start up lawyer (we use wilmer hale) and 2 superstar advisors and focus on product market fit.If you are taking OPM then your lawyer will guide you through the BOD.

    1. fredwilson

      totally agree mark

  10. Dan Cornish

    The biggest difference between Angel Capital and Venture Capital is control. A founder should think long and hard about taking Venture Capital and how that changes the structure of a company, because in the end they are taking on a partner who can not be fired, but who can fire them.

    1. fredwilson

      disqus is a good example of this. we did two rounds of venture capital investment in disqus where there was no board and daniel and jason completely controlled the company. venture capital doesn’t mean giving up control until you have actually sold a majority of your business to someone else

      1. Robert Holtz

        Two full rounds with no board at all? That’s very impressive that you did that. Talk about believing in the founders! Bravo, Fred.

        1. fredwilson

          when the capital at risk is low and the founders are executing well, it’s aneasy decision to make

      2. Jose Paul Martin

        Fred, a bit of topic, but which would you prefer as a VC?1. Minority2. Large Minority3. Majority4. Large Minority with Board Control.

        1. fredwilson


  11. Matt A. Myers

    When’s it too early to form a board of directors?Is there such a thing as a time that’s too early for a BOD, when you should really only have advisors?I actually just asked JLM this question this morning!

    1. fredwilson

      i would wait until you have a real business and by that i mean a product that is working and has a meaningful number of users and the potential to turn into a business

  12. Gytis Labasauskas

    I’ve recently discovered this tool to easily create to-watch video playlists. I remember Fred that in one interview you told that you are looking forward to services that could do this stuff. – Check out these guys and maybe pitch them 😉

  13. Gman

    “Matt’s Board, which I have had the pleasure of serving on for a decade now, is among the best I’ve ever served on. And so Matt’s perspective is based on that assumption.” Wow. Full of one’s self much?

    1. fredwilson

      how so? i was talking about the people on the board.

  14. JLM

    This post is really about the “care and feeding of Boards” as much as anything else. There is probably nothing more important and nothing more neglected in business today.Board members come in all stripes and different experiences. Having an experienced Board is just as important as having an experienced CEO.An experienced Board and an inexperienced CEO requires one Board member — preferably an experienced former CEO — to become more of a mentor than a Board member.It is the Board itself which first has to develop its own raison d’etre and should constitute itself with a balance of skills, pertinent subcommittees (eg audit, nominations, compensation, etc) and charters for each of its subcommittees. It has to define its work.And then, it actually has to do some work — more than just dropping in and watching your Blackberry and giving a top of the brain thought.A Board has to have a committee of Independent Directors — this might turn out to be very, very important when VC funded operations turn to the VCs themselves to populate the Board thereby losing the positive impact of having truly independent Directors. Independent Directors also give credence to the fiduciary obligations of the other less than independent Directors.A Board should be an asset to a CEO — admittedly a fairly confident and secure CEO — as it should provide the only real peer to peer or peer to superior relationship in the Company.Unfortunately, new or insecure CEOs and inexperienced Board members make it the lightning electrode rather than the calming ground.

    1. David Semeria

      With all due (and very large) respect JLM – I believe you may have missed a key point here.It’s one thing talking about property deals – where the context may certainly change, but the rules of the game remain substantially unvaried over time.The web is another beast – there are no rules, or at least they change on a daily basis.What happens if the founders have a certain vision for the company – a dream?And what happens if this dream sounded good on paper but is not being borne out by The Unassailable Metrics?How should the board react?It all comes down to belief in people and their vision – and giving them time…And when is “enough” time?Hard questions – with no easy answers.

    2. Jose Paul Martin

      JLM, I like the idea and understand importance of Independent Directors. But in a country where I am right now, which is a small island in the Middle East… its very difficult to find IDs, especially when you’re almost related in some way or the other to the board or management!

  15. Austin Clements

    I agree with Matt as long as the board is selected with skills or resources complementary to the entrepreneur. About ten years ago my first business had a board of one, my Dad. It does force you to think through your ideas and actions if you know you’re going to have to explain how a monetary investment is being directed.

    1. fredwilson

      a father is a very interesting choice. could be brilliant or it could be tragic

      1. Austin Clements

        I was 17 growing up in Inglewood, CA… didn’t have too many options haha. It worked out well for what it was though. I learned a lot of lessons that I have carried throughout my professional career and into culture of the business I run today.

  16. S. Pandya

    “The first is if the Board is made up of strong individuals who understand that a Board’s role is oversight, not day to day management.”Oh man! What I wouldn’t give to have learned this lesson 2 years ago.

  17. paramendra

    Bill Gates had the smallest Board for the longest time.

  18. J.R. Sedivy

    I wholeheartedly believe in the concept of acting as if you have investors even if there are not outside investors levying such requirements on your company. My assumption is that investors request these activities to maximize the portfolio company’s chances of success. Besides, if investors were to come along then the company will increase it’s chance of securing funding if it is the habit of behaving as if there were investors present.

  19. Kaamini Sehgal

    I found this informative and interesting blog, so I think so it’s very useful and knowledgeable. I would like to thank you for the efforts you have made in writing this article. I am hoping the same best work from you in the future as well. In fact your creative writing abilities has inspired me. I really thought that blog is spreading its wings rapidly… Thanks a lot.

  20. Saul_Lieberman

    The notion that “if you control the company and cannot be fired”, the directors are “just rubber stamps” is true if you are a CEO who only listens to those who have the power to fire you. If that is the case, you’ve got bigger problems.

    1. Chipwelsh

      spot on Saul….

  21. Jamie Flinchbaugh

    I think the value of boards is often underrated. They can provide a tremendous amount of value, not just in accountability, but in input, challenges, new perspective, and even key relationships that could help in anywhere from supply to sales.Yes, if the ownership of the company lies with the CEO, then it is hard for the board to hold them accountable. I’ve been in this position. But, if you have the right, strong individuals, then they are still capable of offering strong challenges. They aren’t afraid of getting fired. And if the CEO values their input even a little, they will think twice before dismissing someone, even if it gets contentious in the meantime.Too often I’ve seen situations go bad where a board of directors would have helped prevent the condition. Of course, if you wait until that point, it is too late.

  22. awaldstein

    I’ve had boards that are a mishmash of an advisory board and a true BOD. I functioned better when they were separate.Advisory Boards, at least from my small piece of the world, are getting more traction. Makes sense at an early stage so you have experts, kinda like special team coaches, available.

  23. fredwilson

    disqus is a good example of this charlie. we didn’t bother to set up a board when we bought 20% of disqus and daniel and jason owned the vast majority of the business. it was their company and we let them run with it

  24. karen_e

    I read with interest our fellow commenter Mark Slater’s post about his advisory board of one. I imagine it’s like having a coach.

  25. awaldstein

    I missed that one Karen…I’ll find it and check it out.In my own experience, being a coach/mentor is more general and broader and in some ways more personal than being an advisor/expert who brings deep expertise in let’s say, early market development or structuring sales compensation and channels.Many people end up playing different roles in different circumstances.

  26. markslater

    Karen – exactly. this guy (I actually went to undergrad with his wife and we were friends way back) is the scrappiest entrepreneur i have ever met. He got turned down by every investor under the sun. he got thrown on the curb by all sorts. He got told a million times his company would fail. I know this because i helped him start it, and when he was in a pinch i invested my own money. today he since on top of what has to be a multi hundred million dollar company (or close to it). 2 years ago insight ventures invested $30M – i am going to guess they killed it too. He’s a rare breed.I just came off a large exit – turned failure in my last company that i founded and invested in and i saw too many problems at the top and on the board.I wont let myself get in that position again. My advisor managed to avoid that minefield and he’ll help me do the same. he’ll take anyone’s call about me and the company – try it!here he is:

  27. andyswan

    I completely agree. I’m a minority shareholder most of the time and I fightfor my protections and rights. I just want to make sure foundersunderstand what they give up when they give up board control…..a lot oftimes it’s not worth the money….and it’s never worth the warm fuzzy ofcalling yourself “accountable” or “transparent”. You can be those thingswithout being a martyr for them. 🙂

  28. Guest


  29. J.R. Sedivy

    I would add that as CEO, even prior to receiving investment, the company is not truly yours, even if it technically is yours on paper. The company CEO should serve at the will and pleasure of the board, management team, and collective employees that comprise the organization.

  30. Jose Paul Martin

    “The power that comes with majority interest is not the only power–it’s the power of last resort.”- So true!Having a large minority is just as bad as having a minority. Minority ownership doesn’t really move companies. If you want power/control, you have to pay for it.

  31. awaldstein

    That was my third choice, ‘curated’ out of my Tumblr post at the last momentGreat quote for certain. Really terrific post by BenH.

  32. PhilipSugar

    I’m all for founding teams. Therefore if the founding team owns the majority then they should control the board.That doesn’t mean there is no way the CEO could get fired. It means they’d have to lose confidence of the board and the team. It doesn’t mean they’ll always be the majority, but somebody needs to buy that right.If you don’t have a team that leaves the field with the ones they came on the field with unless something egregious happens then shame on you.If you personally own a majority of the stock, I’m not sure you need the formality of a board.As to giving up board control when you still own a majority of the company…….you’re f’ing crazy.If you don’t think that 10% of people that have gained enough power to be wanted on a board are narcissistic then you are either a naive rube or just plain stupid.In addition, if you think you understand everyone’s motivations and desires when they come on the board…..So when you own a majority, you control the board. Period. Frankly, almost nothing comes to a board vote, except when people that only have one horse are thinking about replacing the jockey, because it can’t possibly be the horse.People can buy that right from you. The important word there is BUY. Because many times people would like to take that right from you.People get wrapped up in the word fiduciary, and I agree there is a fiduciary responsibility to the shareholders, and guess what???? if the majority of the shareholders think you should not get fired you shouldn’t.I wrote about using the word “fiduciary” in my “screw you euphemisms”. If you have to use the word, it means you are f’ing me. If you really are fulfilling your fiduciary responsibly you don’t need to tell anybody. Ranks up there with “its the best for both of us”, “this is going to hurt me more than its going to hurt you”. “let me be totally honest”, “l’ll love you in the morning”

  33. RichardF

    great comment Phil

  34. PhilipSugar

    I guess disqus cuts off replies at five deep.Charlie not sure if that is a complement or not, kind of like when my developers ask me to look at outside code, and I point out the flaws, and they exclaim “look how bad their code sucks, even Phil can find the flaws!!!”

  35. JLM

    Phil, you way under estimate the narcissism threshold — it’s north of 50% — EASY!

  36. Matt A. Myers

    It didn’t work

  37. David Semeria


  38. Dave Pinsen


  39. Matt A. Myers

    David’s FAKE GRIMLOCK? *shock*But thank, you made me laugh and then laugh once I saw who made the comment. 🙂



  41. fredwilson

    the power to replace the CEO is also the power of last resort

  42. Jose Paul Martin

    Totally agree with the last point! Paying for board control, in the form (price) of persuasion, excellence, knowledge, relationships and last but not least capital.

  43. fredwilson

    great idea to get a mentor/coach/advisor

  44. Jose Paul Martin

    Haha… tell that to David of 37Signals @DHH.