Boost your Cannabis Board Before it’s Too Late
Conventional #cannabis wisdom puts all the blame for underperformance and #shareholder value destruction on the #CEO.
Obviously, there is some truth in that belief, but another culprit always escapes opprobrium: the #Board of Directors.
As fiduciaries, boards are responsible to the shareholders for the results of the firm, including choosing and evaluating the leadership.
The buck stops with the board.
Yet, most weed boards are under-powered, archaic, and clubby i.e. overly indulgent to management and with each other. Relative to their counterparts in other sectors, most cannabis boards pretty much suck.
The shortcomings are apparent to those familiar with corporate #governance:
▶️ They are too small to deal with the workload and provide the necessary expertise;
▶️ They lack outsiders, and consequently, independence and candour;
▶️ They function without sufficient knowledge of the cannabis industry, #risk management and #strategy development.
Boards matter a lot.
Their design, make up, and engagement tells outside #funders, #regulators and partners a lot about a company’s professionalism, decision making and commitment to stakeholders. More importantly, weak boards turn off lenders & equity #investors and will fail to prevent management folly.
Like many issues in cannabis, one needs to peel the onion to understand why this situation is tolerated.
First off, it is tough attracting talent to a weed board; a fragmented investor base is challenged to bring in new blood and; embattled founders don’t welcome more oversight and pushback.
It can be a complicated, long-term undertaking to change a board’s structure, composition and mechanics.
The CEO and CFO can get more out of their directors by tackling their information and time gaps, and insisting on accountability.
Start with these 3 questions:
1️⃣ Is the board knowledgeable enough of the industry?
Often, no. Cannabis is so dynamic that it’s hard to be current in a part time role. Plus, most directors are under-compensated which limits their engagement.
2️⃣ Is there typically enough board–management debate or information provided before a specific strategy or issue is discussed?
Most of the time, no. Often the background materials and numbers are inadequate or not delivered in time. The ‘insider’ nature of many board-managerial relationships precludes honest and systematic debate.
3️⃣ Does the board and management discuss all strategic options and wrestle them to the ground?
Probably not. The lack of formal strategic #planning activities and the reactive nature of most businesses often restricts the option set. Less choice can force a board’s hand into risky, binary decision making.
Let’s talk about how you can improve board performance. I’ve got a lot of corporate governance experience to share.
