The starting point for excellent governance is, in my view, a clear and consise statement of shared destiny, together with clarity about the rights of investors enshrined in investment agreements, articles and other legal documents. It is imperative that management understands from the outset what the financial covenants mean and the undertakings, together with the conditions that will trigger step-in rights. A policy towards strategic management, risk assessment and operational performance measurement will all help but alignment has to centre upon the amplification of purpose. Everything mangement do and everything the Board considers must be judged by the direct contribution to the pursuit of purpose, optimisation of impact in the market and efficiency of flow within the organisation.

Investors who lack vision and that are linear thinkers? Step out of the way and just count the beans…don’t step in front of your own shoes, if you want the company to succeed. A 3rd party as mediator is necessary to facilitate that fine balance with the right questions, markers, and metrics. Question I have is, if VCs or investors are so into the bottom-line, revenues, and profits, why do they invest in the most futile ventures? burn rate worse than my chimney or cigars?

I hope there is logic to this..because business 101 says, build a product, sell it, make a profit, re-invest. Sell more.

Or : invest, build a product, invest, r&d, same outcome, invest, sell product, lose, invest, bankrupt.

These people should be handcuffed, in a vault and stare at their decreasing bar charts…to eternity.

Dr. Earl,

In 2005 I wrote a conference paper for the 8th International Conference on Corporate Governance and Board Leadership held in Henley-on-Thames at the Henley Management College.

The paper can be downloaded from the first link on the web resources listed below. (See just below the “my LinkedIn profile” button on the web page is a link entitled:
“Published Paper: In search of the Market Soul 2005″

In the paper I argue for more ethical decision making models to be developed.

See if this paper contributes to answering or partly answering your question.

Regards,

Rohan

Links:
http://themarketsoul.googlepages.com/home
http://themarketsoul.blogspot.com/

VERY carefully. The problem with VC, angel investors and PE is a lack of transparency and a desire for it. The Managing Partner’s reports should be as transparent as possible. The Managing Partner’s records (whether or not the Limited Partners see them) should be subject to internal and, if need be, external audit — on a quarterly basis until the record-keeping is deemed satisfactory. (I’ve worked on this. It’s a whole lot of no fun, but it cleans things up really well.)

A real problem is institutional limited partners that are funded by legislatures. At one point, Sequoia (if I remember correctly) had to terminate its investment relationships with a couple of public Ivies because the level of transparency wasn’t there.

Cheers,

Peter
5o9 Inc.