By John C. Yates, Esq.
Morris, Manning & Martin, LLP
ATLANTA—With increased government intervention in business, Southeastern technology companies should begin rethinking corporate governance in the boardroom. Tech companies aren’t facing the same government scrutiny as banks and car manufacturers, but expect tech Boards to be more vigilant and engaged.
As directors become sensitized to financial, compensation and performance-based issues, tech companies should consider several practical pointers for making the boardroom more conducive to productive discussion and decision making.
Develop a Financial and Operations Dashboard
Consider developing a dashboard of key criteria and financial metrics for your Board. A one page dashboard can also include benchmarks to be achieved by the company during the fiscal year. Provide the dashboard to your Board on a frequent basis and make it the first topic of discussion at Board meetings.
Re-energize your Audit Committee
Whether you’re a private or public technology company, your Board’s Audit Committee should include experienced financial experts (the best candidates are often retired accountants). If you’re a private company, encourage your Audit Committee to function like a public one — providing a thoughtful review of your financial statements, sales forecasts and financial condition of the company. Have the Audit Committee report to the Board each quarter on its assessment of the company’s financial condition.
Have Management prepare its Discussion and Analysis of Financial Condition
Public companies are required to prepare a disclosure describing management’s assessment of the financial condition of the company. Private companies should exercise the same discipline and prepare a written report to the Audit Committee for review by the Board.
If properly prepared, this management discussion and analysis can be invaluable in alerting the Board to upcoming problems and areas for directors to focus their attention at Board meetings.
Select Outstanding Independent Directors
Now more than ever, the Board of a technology company should include strong independent-minded directors. Investor representatives on a Board are important – and independent directors are vital.
The informed and experienced outside director has a unique perspective on the business. This director can also provide valuable objectivity on issues such as compensation, forecasting, and expense controls.
Seek a Mentor from your Outside Directors
For the CEO of a technology company, an outside director may be your best source of objective advice and counsel. Selecting a director/mentor can be tricky.
Often, the best mentor may be the current CEO’s former boss — someone who knows your strengths and weaknesses and can provide objective counseling. For this role to be productive, the CEO will need to be open to constructive criticism and maintain a channel of communication with the director/mentor.
This is a new age of greater governance for technology companies. Select your Board members carefully and seek their honest and independent input.
This column is presented for educational and informational purposes and is not intended to constitute legal advice.
John C. Yates is a partner in the law firm of Morris, Manning & Martin, LLP with offices in Atlanta, the Carolinas and Washington, D.C.
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