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Management Board – Evernote Notes

Most of the stuff I post in the form of articles comes from my evernote library. 99% of my notes never get finished, because I always lack time. So here are some basic thoughts on structuring a management board. Or an assessment of risk factors.
General Concept of a management board: Strategy & Control – The Realist Perspective
 
  • The game of thrones for supervisory board / shareholder consent:
    The individuals with the strongest bond to the supervisory board and the likely power to fire and hire other MDs are running the show. Their power and cooperation level defines how
    the company works on the top and whether it works for individual benefit of the ruling parties or if the company works for a organization-intrinsic goal.
    > The inner circle of trust will always be a network of supervisory board and leading and cooperating MD players.
    > In some cases, rivalling ressorts could exist, but typically the strongest stakeholder will install a CEO that works through these issues and eradicates rivalry.
  • The tone defines the music:
    The interest of the MDs are what make or break a company. Given sufficient trust from the supervisory board and an ability to run shareholder meetings smoothly and successful,
    the brain pool of the managing directors can oscillate or focus in one area between cooperative and organization-intrinsic goal oriented and just using the organization to take as
    many rewards as possible. There is a high chance that the culture and tone of the leading MDs will be visible through the company and employees will get a sound gut feeling of
    what the top management is really looking for. Depending on loyalty and motivations of their chain of command, some lower level managers might want to hide these issues and
    divert the overall top-management culture for the benefit of their own employee retention and satisfaction. But in a well-connected lower to mid level the truth should be visible.

    In start-ups, the issue of self-interest oriented leaders can be even elevated by some founders being truly considered as make-or-break galleons figures or key men for the company.
    In that case, the chances are high that those individuals do leverage the company purely for their own benefit. This is due to the complexity of running a business smoothly will likely
    negatively affect the overall pursuit of a career and track record of the leading individuals. Being overly committed to building and running a strong company with an instable board
    whose interests are not aligned with such an organizational goal is then very likely a point of leverage that harms the CEO and leading MD members. Organization-centric leaders are
    more likely to be visible when short-term management contracts are provided and used by the CEO to built a strong reputation or if the shareholders are former founders or otherwise
    highly emotionally committed individuals that stand behind the management. This very likely is not the case in the Venture Capital setting. The goal of the VC is clearly to leverage the
    company for short-term holding and strong return profile. Good VCs of course identify foundres that identify with the company, and manage to give  them the idea that they play against
    the VC interests.

  • The strength and culture of MDs:
    Some MDs will fight purely in these meetings or leverage their control over the company to command control and respect. Some MDs will also be sheep in the MD meetings
    and will try to reap the benefits below in the chain of command. Their intent will be to sell successes, and to eliminate negative messages. While trying to offload responsibility
    and other features on the lower levels. This will be felt, too.
 
The idealist perspective on two-tier board systems and the regulation on directors and officers & supervisors and advisors:
blabla to continue (re-cap)
 
The statutory obligations – Fiduciary Duty
 
Fudiciary Duties Overview:
  • Financial prudence and goals aligned with equity mandates:
    Cost Control: Statutory for any legal entity having obtained equity investments from a third party is the protection of equity and its reasonable growth, or: reporting timely and proprely on the development as to allow third parties to re-allocate their resources to other entities. (All else equal, depending on the “purpose” of the entity.)
    All spending hence has to be conducted with due prudence and with reasonable assumptions on desired impact. Purchases and spending with a detailed description and reasoning about why it has to be spent
  • Compliance and due process:
    Originally, due process existed to ensure the protection of the abovementioned equity stakes or capital and requird sound bookkeeping, protection of capital owned by the entity, etc.
    In recent years, other factors considered due to protect rose to prominence, either via CSR/holistic stakeholder approaches, priorly via labor protection and more recently from overall increased regulation around
    risks and financials. Due process in this context is to ensure that decisions clearly impact results, results are defined, and decisions lead to outcomes which are tractable. Around this “view” concept, a total set
    of processes and systems and controls of processes and systesm came into place to ensure that such measures are taken given accurate information and sound reasoning.
    > Due process as regulatory compliance:
    > Due process as compliance with self-confined quality certifications
    > Due process as disciplined approaches towards a particular unregulated or non-standard conduct of business
    > etc
  • Culture and efficiency
    > IN hacking and enforcement of policy within organizations, all systems and processes are only as strong as the weakest elements that carry them, which remains humans so far.
Key Items I : Defense Mechanisms – Financial
  • Cost Control: Statutory for any legal entity having obtained equity investments from a third party is the protection of equity and its reasonable growth, or: reporting timely and proprely on the development as to allow third parties to re-allocate their resources to other entities. (All else equal, depending on the “purpose” of the entity.)
    All spending hence has to be conducted with due prudence and with reasonable assumptions on desired impact. Purchases and spending with a detailed description and reasoning about why it has to be spent
Key Items I : Defense Mechanisms – Leveraging the HR pool
  • The Negative Management
    • Workhorses: Who are the individuals that do all the work and how can they be leveraged to produce cost-efficiency.
    • Showrunners: Who make or break the top-line and growth potential of the firm. Who are the A, B, C candidates and what is the strategy of retention and motivation?
    • Cheap Labor: Which areas of the company are considered low-impact, low-quality workslaves and what is the policy of retention, hiring and placement here?
  • The positive side
Fun Part – Building and Designing a great company
 
Financial Items
  • Financial budgets are reviewed and aggreed upon on this level. CFO has to prepare material and sell items and cost positions.
Key Items II : Offence Mechanisms – Hiring and Firing of Key Men
  • Workhorses: Who are the individuals that do all the work and how can they be leveraged to produce cost-efficiency.
  • Showrunners: Who make or break the top-line and growth potential of the firm. Who are the A, B, C candidates and what is the strategy of retention and motivation?
  • Cheap Labor: Which areas of the company are considered low-impact, low-quality workslaves and what is the policy of retention, hiring and placement here?

    As offense mechanism, the question is not focused on leveraging the individual. But on focusing positive motivators on the strong individuals that drive the success of the firm.

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