Working Group on Director Accountability Releases “A Simple Guide to the Basic Responsibilities of VC-Backed Company Directors”

After nine months of collaborative effort, the Working Group on Director Accountabilitiy and Board Effectiveness released "A Simple Guide to the Basic Responsibilities of VC-Backed Company Directors" this morning with formal endorsements from the Western Association of Venture Capitalists (WAVC), the Israel Venture Association (IVA), and the Women’s Technology Cluster (WTC).  This initiative is the result of a collaboration between 22 leading VC professionals, including CEO’s, attorneys, independent directors, and VCs, (to link to the press release that identifies all of the members of the Working Group, click here.)

"A Simple Guide…" represents the first practical guide to the basic responsibilities of board service in venture capital backed companies (VCBCs) written by leading practitioners for an audience of experienced and inexperienced directors. This guide should also be useful to non-directors who are senior managers in VC-backed companies and to anyone associated with a VC-backed company who wants to understand how boards should function and how to avoid some common governance problems that often arise during a company’s development cycle.

It addresses the key differences between entrepreneurs, VC’s and independent directors on a board in a concise manner. It aggregates the real experiences of 22 people into a general framework that is meant to be flexible.

Most important, while it makes recommendations and identifies common best practices, it also recognizes the fundamental fact that individual personalities will determine the ultimate applicability of the guide’s recommendations to any single company.

Why is it important?

The Guide is important because it represents a broad collaboration among 22 industry leaders with different backgrounds who share a common interest in promoting smoother functioning boards in the venture capital industry. Our industry needs more practical education documents because venture capital’s premise, new capital formation, brings people together who have never worked together before—many of whom have no familiarity with the standard practices of the VC industry.

Not every entrepreneur needs to take venture capital to be successful, but, if you do, entrepreneurs, VCs, and independent directors can all benefit from a practical guide to what it means to be part of a VC-backed board.

Why did this group write it?

We wrote A Simple Guide because we had an overwhelming "Aha!" moment at our first meeting– we collectively agreed that our industry could use a no-nonsense, practical guide about director education because, in our own experience, we all have boardroom stories about boards that experience dysfunctional behavior and about directors who still do not know the basics about their legal and business duties even AFTER they are already serving on the board.

This guide is a constructive way to address real problems. It also shows that the Venture Capital industry has the will to advocate self-regulation and to raise the performance bar for itself without having to be told to do so by regulators. Public company board scandals certainly serve as signposts that this is a sensible thing to do.

In short, Good Governance is Good Business.

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