Extract from Chapter 1 of Realpolitik “Eight Essential Aspects Of Small Company Boards”
Essence 6 – SmallCo Boards Are CEO-centric Not Chairman-centric
A further substantive difference between SmallCo and BigCo Boards is that SmallCos are founder/CEO-centric whereas BigCo Boards are Chairman-centric. BigCos easily survive changes of CEO, however, until they have quite some momentum, SmallCos do not readily survive the departure of the founder.
Power in BigCo ultimately rests with the Chairman, whereas in a SmallCo, for quite some time it is with the founder. This is for two reasons. Firstly, on day one, the NewCo founder has 100% control – it is their company. Only over time does their degree of ownership/control reduce. Secondly, the founder is the creative driving force in the Company. As one founder put it to me:
“If you are from Mars and you read the FT about big companies you will believe that the Chairman is the most important person in a company. But this isn’t the case in a Startup. If I walk there is no business.”
BigCo will keep moving for a long time in absentia a CEO. SmallCos will not. Although the BigCo CEO is a very important figure in the world of business he is nowhere near as vital to the business as the SmallCo CEO/founder. BigCos have sufficient momentum, franchise, deals, resources and structure that whilst the departure of key individuals may make a difference, the BigCo has a life of its own. This is fortunate as the median BigCo CEO tenure in both the UK and US is a mere five years.
In SmallCo land it is generally some considerable period of time before a founder or all the founders can depart from a NewCo without the company dying.
As a result, as a thumbnail sketch, BigCo Boards are somewhat Chairman-centric whereas SmallCo Boards are CEO-centric. The Chairman runs the SmallCo Board meeting (it’s their role), however, in crude terms, in SmallCo the CEO tends to fire the Chairman and vice versa in BigCo.