Directors: everyone in tech seems to either be one or want to be one. So should we test them?
When I was younger I looked up to the directors of Volkswagen UK: Richard Ide and others. They had their own parking spots, top of the range Audi Quattro cars and even their own directors club in the building at Blakelands called “The Quattro Club”. I knew I wanted to be one but I knew it was not something easy to do.
So who can be a director in the UK?
I ask myself this for two reasons.
- I think it's far too easy to become a director these days. Some of the ways I see people operate really make me think they shouldn't have the responsibility. Moreover, they don't even realise the liability they potentially have to take.
- Board personalities.
The thing is, I meet a lot of directors. Some grey-haired and frankly amazing. Others less so.
If you asked them:
- Do you know how to do correct and proper board meetings? Minutes? How to even correctly call a board meeting?
- Do you know when a company is insolvent and you become personally liable?
Most of them don't know the answer. Which is really, really worrying.
Some recent examples of directors I wish had just been asked a few questions before they formed a company:
- Spent all their investment, months of debt at a seriously high level. Cannot pay staff salaries.
- Companies who have not paid HMRC for months, but been paying themselves with little chance of paying HMRC.
- Companies that consistently late file with Companies House, some even trying to raise money on crowdfunding platforms.
- No contracts or paperwork in place for directors.
- Accounting records that are a pile of paper in some closet. Actually saw this with a company that had raised £500k.
The list goes on and on. The sad thing is a lot of these directors supposedly have experienced being mentored and advised, yet I have to ask them: did nobody tell you that this isn't good? Worse still some are actually mentoring other people!
If you want FCA approval you have to go through so many can and cannot dos. Whilst it's a painful experience it also means the majority, yet not all, follow the rules.
If you want to drive a car legally, you need to pass a test.
So why do we let someone jump on a website and, in less than 15 minutes, form a company for £25? Hey presto you're a company director.
Then we come to the boardroom personalities. I can see this being increasingly closely scrutinised in terms of compatibility and chemistry. This can almost be as important as how competent you are as a person.
Lots of companies run tests and psychometric profiling for execs and employees so why not your board? Apparently I was once described as Red but then a week later on a different test described as Blue.
Imagine using predictive analytics like Google's product to see if that member of your board was going to turn into a nightmare when things go wrong.
How many of you other there have been on boards and within a few months thought: "Well, he is going to damage things around here?"
I know I have far too many times. Going back to my Uber article last week, while some great founders have surrounded themselves with great directors, I have also seen far too many that don’t.
It’s well known that psychology of boards matters as much to shareholder value as a founder with a good track record.
How many times have you read about a company’ success for parts of the board to change and for a pathological character to take charge and ruin that business and people's livelihoods?
There are some very good, smart board members out there that get missed sometimes a bit like some good startups, because the startup with the rubbish product shouts really loudly. I see the same thing happen with directors getting roles.
Why don't we give them a basic test? Yes once done it’s a hard thing to make difficult but let's treat being a director as an honour, something to work towards and keep, not something that is considered to be disposable or as an easy Google search.