Founders Cede Control to Independent Boards: Why?

Dan Boxer discusses why founders cede control

Dan Boxer

After founders have raised funds from friends and family, and in some cases, angels, the next round of capital is likely to come from professional investors, usually venture capital (VC). Unless the demand for an investment opportunity is so great as to allow the founders to dictate the terms, it is likely that VC investment will be conditioned on election of a board comprised of a majority of independent directors. This brief article explores the reasons why such a demand for founders to cede control can be expected as well as some of the benefits founders may not have considered from such a requirement. The differences and confusion between “independent,” “outside,” “non-management,” and “disinterested” directors are also briefly explained.

 1.  Founders cede control because it is someone else’s money.

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Corporate Governance Awards 2014: Nominees Wanted

corporate secretary logo: Nominate for Corporate Governance AwardWant to nominate an individual or company for the seventh annual Corporate Governance Award, whether it’s you, your colleague or your client? To nominate, simply:

  1. Fill in our form on the Corporate Secretary site and click submit
  2. Supply an executive summary or supporting material
  3. Cross your fingers and await the shortlist announcement in September!

Deadline to enter: July 18, 2014 Continue Reading →

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Stratasys Ltd, SSYS – Proxy Vote Score 30%

SSYSStratasys $SSYS, which provides additive manufacturing (AM) solutions (3D printers) for the creation of parts used in the processes of designing and manufacturing products and for the direct manufacture of end partsis one of the stocks in my portfolio. The next annual meeting for Stratasys is July 10, 2014. ProxyDemocracy.org had collected the votes of two funds on Stratasys when I checked and voted on 7/6/2014. I voted with the Board’s recommendations 30% of the time. View Stratasys Proxy Statement. Read Warnings below. What follows are my recommendations on how to vote the Stratasys proxy in order to enhance corporate governance and long-term value.   Continue Reading →

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Video Friday: Bartley J. Madden on Capitalism

Bartley Madden

Guest Post: Bartley J. Madden. After a career in money management and related investment research that included the founding of Callard Madden & Associates, Madden retired as a Managing Director of Credit Suisse/Holt.  During his career he developed the CFROI valuation framework which is used today by money management firms worldwide.  He is currently an independent researcher and a Senior Fellow at the National Center for Policy Analysis (NCPA).  His research focuses on knowledge building and wealth creation as opposite sides of the same coin, and also on the application of systems thinking to public policy.  Continue Reading →

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Shareholder Proposal: Best Response is Not a Lawsuit

HarvardCorpGovAmy L. Goodman and John F. Olson, both of Gibson, Dunn & Crutcher LLP posted Shareholder Proposal Developments During the 2014 Proxy Season on the Harvard Law School Forum on Corporate Governance and Financial Regulation yesterday. It included some good information and analysis but seemed a bit too much like the response to a shareholder proposal should be a lawsuit — an advertisement for Gibson Dunn to this, admittedly biased, eye.

corporatesecretary

David Bogoslaw, Editor of the Corporate Secretary sent out an email in response that was more balanced with regard to shareholder proposals and lawsuits. I was heading out to Ottawa yesterday, so only had time for a brief response. The following is my open email to Mr. Bogoslaw. Continue Reading →

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The Social Value of Shareholder Value

Randall Morck

Randall Morck

The most recent issue of Corporate Governance: An International Review has plenty to digest. I found The Social Value of Shareholder Value to be especially interesting. Also available at SSRN. Randall Morck, The Social Value of Shareholder Value (May 2014). Corporate Governance: An International Review, Vol. 22, Issue 3, pp. 185-193, 2014. The Review is the only journal to take a truly international perspective on issues and developments in the theory and practice of the governance, as well as publishing professional practice articles and case studies discussing practical experiences in the field.

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Equal Energy Sale – Proxy Vote 50

Andrew Shapiro on Equal Energy

Andrew Shapiro

Guest Post: Andrew Shapiro is Founder, President and Portfolio Manager of Lawndale Capital Management, an investment advisor that has managed activist hedge funds focused on small- and micro-cap companies for over 21 years, one of the longest periods of experience deploying an activist/relational investment strategy today.

The following is a press release from Lawndale. I am an investor on one of the affiliates. I’ve added votes disclosed on ProxyDemocracy and some observations from a recent GMIAnalyst report.   Continue Reading →

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MSCI to Acquire GMI Ratings

MSCIMSCI Inc. (MSCI) announced it has agreed to acquire GMI Ratings, a provider of ESG (environmental, social and governance) ratings and research to institutional investors, through its subsidiary MSCI ESG Research Inc. The transaction is expected to close in the third quarter, subject to customary closing conditions. Said Remy Briand, Managing Director and Head of ESG Research.  Continue Reading →

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Corporate Governance WABAC Machine

MrPeabodysWayBackMachineCorporate Governance Publisher’s Note: Yes, you’ll find many broken links in the material referenced below. After 5, 10 and 15 years, the internet moves on. Many of the organization’s linked have since gone under. We’re just glad to still be here, offering our readers a sense of the history we have shared. More about the WABAC machine

Five Years Ago in Corporate Governance

Shareowners.org Launched. Finally a social networking site that will actually accomplish something. Yes, you can “friend” people and post to their “wall.” However, right now, ShareOwners.org will help engage typical investors by sending their comments in support of the group’s agenda directly to their members of Congress. Over the long run, ShareOwners.org’s broad four-part agenda focuses on the need for stronger regulation (including a beefed-up SEC), increased accountability of boards/CEOs, improved financial transparency and protection of the legal rights of investors. At some point, shareowners will also be able to vote their shares directly through ShareOwners.org. Unfortunately, the site went dark a few years later and nothing has arisen to take its place.  Continue Reading →

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Steris (STE): Proxy Vote – 100

STERIS Corporation logoSteris Corp $STE, which develops and markets surgical and critical care support products and services, is one of the stocks in my portfolio. Their next annual meeting is July 30, 2014. ProxyDemocracy.org had collected the votes of no funds on Steris when I checked and voted on 6/17/2014. I voted with the Board’s recommendations 100% of the time. View Steris Proxy Statement. Read Warnings below. What follows are my recommendations on how to vote the Steris proxy in order to enhance corporate governance and long-term value.   Continue Reading →

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A Step Toward Responsible Investment @ Harvard

Guest Post: Dr. E. James M. Gifford, a Senior Fellow at the Initiative for Responsible Investment by way of Annie Olszewski, Research Associate at Initiative for Responsible Investment at the Harvard Kennedy School. This article was originally posted in the Harvard Crimson on May 28, 2014.HarvardLogo

James Gifford headshot suit HR

Dr. E. James M. Gifford

Last month, Harvard University joined more than a thousand other global investment institutions that have signed the UN-supported Principles for Responsible Investment. For students and staff who advocate Harvard’s divestment from fossil fuel companies, signing the PRI may appear to be a small and incremental step. However, as the founding Executive Director of the PRI who has spent the last decade promoting responsible investments within mainstream institutions, I believe it is a huge step forward—and its implications shouldn’t be underestimated. Continue Reading →

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