We were blessed (or cursed) with the mother of all startup dramas when Sam Altman was ousted from the top of multi-billion dollar startup OpenAI. How do we know that there was a big drama? Even appeared in Vanity Fair.
None of us have been to OpenAI board meetings, so God knows what happened there. However, one detail that continues to draw attention was the note that Altman "was not consistently candid in his communications with the board." This draws attention, because if there is something that is learned from startups in development, it is that you have to be direct and honest with the board of directors.
Bad news, in particular, needs to reach the board quickly for many reasons. Some of them sound downright tedious (for example, fiduciary duties), but they are very serious. We don't have any inside knowledge of OpenAI or Sam Altman and this article doesn't serve to cast doubt on whether anyone lied, but it does serve to bring back a pretty good old lesson that founders should learn from all this verbiage.
Startups have a reputation for moving fast and disrupting established normality, but that reputation usually doesn't extend to the boardroom. The relationship between leaders and their board of directors is a critical component of success story of a company. The golden rule of this relationship? Honesty.
No, you cannot lie to the board of directors. Not only is it unethical, but it also has far-reaching implications for the business, the team, and ultimately, one's own credibility.
The nature of the founder-board relationship is unique. Unlike the traditional employer-employee dynamic, this is more like a partnership in which the board is not just a group of supervisors, but rather a team of experienced people who are there to guide, guide and support employees. the founders on their journey.
As the startup landscape becomes more competitive, the stakes increase and the margin for error decreases; Maintaining a transparent relationship with the board of directors becomes essential. Honesty fosters trust, facilitates better decision making, and ultimately promotes business longevity and success.
Deception, on the other hand, can ignite trust. Lying to the board of directors not only damages this valuable relationship, but could also put the entire company at risk.
What happened with Theranos is relevant. Its founder, Elizabeth Holmes, promised her investors and board of directors that the company would revolutionize blood testing through its technology, which turned out to be completely false. The truth finally came out and Holmes is currently in prison after being found guilty of misleading investors about the company's technology.
Promoting transparency is not just about avoiding deception; it's about actively engaging in open and honest communication. Delaying delivering bad news to the board, twisting the truth, or simply telling biased news doesn't win awards. The ramifications depend on the circumstances of the lie, including its nature, intent, and impact, but could range from legal action to dismissal, fines, and even regulatory scrutiny and actions by the company's shareholders.
The biggest mistake you can make is being dishonest with your financial reports. Misrepresenting financials is a dangerous game that breaks trust and can easily land founders in legal trouble. That flows up, too: The investors' limited partners (i.e., the people who invested in the venture capitalists) won't be happy to find out that the general partners they entrusted their money to chose to trust the wrong people.
So, what to do to be at the forefront in everything?
Regular updates are a good start. Whether through a monthly update or regular board meetings, keeping the board informed about the company's progress, challenges, and plans helps create a culture of transparency. It's also an opportunity for founders to tap into the collective wisdom of the board and gain valuable insights.
Board meetings are no place for surprises: The best CEOs convey any important revelations to each board member in advance to keep the board meeting focused on leveraging their experience and advice to find solutions.
Like any relationship, it can be very disappointing to have to share hard, unfortunate or surprising news. But relationships in which bad news remains hidden don't last. Learning how to manage a board of directors is a complex skill that startup founders must develop regardless of everything else they have to do, but it's worth acquiring along the way.
