Ibukun Awosika, former chairman of First Bank of Nigeria, has urged entrepreneurs to establish boards based on the needs of their businesses rather than the size of their revenues or headcount, saying effective governance can help companies overcome founder dependence and attract investors.
Speaking during a fireside chat at the Building Beyond You Conference on Friday, she said founders should begin by determining what they want a board to achieve and then identify individuals with the expertise to support those objectives.
She said there is no universal revenue threshold at which a business requires a board, as the appropriate timing depends on the nature and stage of the company.
‘When you start building something that has some level of substance, you would realise that there’s a lot of value that you get from thinking beyond yourself,’ Awosika said.
She said founders could initially establish an informal accountability group of two or three trusted people who can challenge their decisions before transitioning to a formal board as the business develops.
‘If you start your business with some substance, the best thing to do will be to set up a board from day one,’ she said, noting that a board could comprise three, five or seven members depending on the company’s needs.
According to her, the key is not the number of directors but whether the board provides independent perspectives, expertise and accountability.
‘What is key is that you want to set up a body that you are accountable to, people that have some knowledge and information that can add value to the process of building the business, and people that can challenge your one-man power and your actions that can undermine the business,’ she said.
Awosika said founders of incorporated businesses should also recognise that the company is a legal entity separate from themselves, making a properly constituted board important to protecting the interests of the institution.
She said good governance could also improve a company’s ability to attract investors and customers.
Build boards around skills, not relationships
Awosika advised founders against filling board seats with family members, friends, religious leaders or investors simply because they expect positions.
‘Anybody can expect anything, but it’s your responsibility to do what is right for the institution,’ she said.
She recommended that founders first conduct a needs assessment to identify the skills and expertise required by the company, followed by an audit of the existing board to identify gaps.
Awosika said she applies the approach when she takes on board chairmanships, describing it as a ‘board audit’.
‘You first do a needs audit. What does the company need? When you do the needs audit and you determine what the company needs, and then you do a board audit, you determine what are the talents at the table, what is missing,’ she said.
She said the resulting skills gaps should determine the profiles of candidates considered for board appointments.
‘It is skills that meet the needs of the company that you fill a board with,’ Awosika said.
She recalled serving as chair of an international company where financial institutions that were shareholders had nominated several finance professionals to the board.
Although the board had strong members, its expertise was heavily concentrated in finance, leaving gaps in other areas needed by the business.
‘That is your mandate as a founder or as the CEO of an organisation: to build for your organisation a board that meets its needs, so you can get the right value from your board,’ she said.
She also advised entrepreneurs and directors to understand their fiduciary responsibilities and the legal obligations attached to board positions.
‘For every fiduciary responsibility you have on the board of an organisation, you can go to jail for it,’ Awosika said.
She encouraged entrepreneurs interested in building effective boards to engage with the Institute of Directors of Nigeria and pursue governance training.
According to her, governance should not be treated as a formality or an exercise in approving management decisions.
‘Entrepreneurs go into bubbles because we’re consumed by our own vision, and sometimes we don’t see the gaps. You need the alternate voices that a board represents to help you see beyond yourself and make the right decision,’ she said.
Awosika noted that even one piece of information brought by an independent director could prevent a company from making a damaging decision.
‘Organisations that want to grow are organisations that respect structure and respect governance, and boards help you to build governance within institutions,’ she said.
Echoing her sentiments, Tara Fela-Durotoye, founder of House of Tara and convener of the conference, said that succession should not be reserved for founders or CEOs but must be integrated across all levels of an organisation, from admin managers to CFOs.
According to her, being ‘irreplaceable’ is a failure of leadership. Leaders, she said, should aim to be replaceable by empowering their teams to function independently.