Many ambitious founders believe that their company’s reputation will remain ‘rock solid’ in spite of concerns (and, indeed, questions) about the strength of corporate governance. The argument goes: As long as the company delivers strong growth and dividends, corporate governance doesn’t really matter. Right?
Just look at the biggest tech start-ups in San Francisco, where founders like Jess Bezos and Elon Musk continue to maintain a vice-like grip on the company and its decisions.
Who needs a strong independent Board? Or why would investors need a strong voice to challenge their decisions? They are the entrepreneurs, so they are the ones who know how to make the best decisions for the company.
THG founder Matthew Moulding to give up ‘golden share’
The current media frenzy around Matthew Moulding and The Hut Group (THG) is an interesting case study about the importance of thinking carefully about the optics of 'founder control' and corporate governance. And, why it makes a difference to companies and their performance.
Firstly, it should be said that Moulding, who is founder and current CEO of THG, is one of the country’s most innovative, ambitious, and inspirational entrepreneurs.
He has built a multi-billion-pound e-commerce enterprise over the course of a couple of years, that not only powers thousands of UK jobs but, much more than that, is also playing an important role in ensuring that the UK economy is packing a punch globally when it comes to tech and innovation.
As of Monday morning, Moulding has said he will surrender his ‘golden share’, which gives him significant control over the company, and how it is run, to regain City confidence after a difficult two weeks.
Some investors had previously raised questions about whether this gave Moulding too much control and say, and whether it is possible to properly hold the executive to account, whilst ensuring the long-term performance of the company.
THG hopes this update to its share conditions will promote “good corporate governance” and secure them a premium listing in London by 2022. The removal of the dual-class structure will certainly appeal to (and assuage the fears of) investors.
The market has responded positively since the announcement Monday morning, with shares in THG jumped 8% to 312p, demonstrating how rethinking how IPO conditions will be perceived is a necessary consideration for founders’ today.
The need for conscious consideration of founder reputation
But, should this have all been done earlier? This case highlights why it is crucial for companies and their founders to think carefully about how they are perceived by the banks, investors, and the wider markets who, ultimately, may have a different set of standards to their own.
Often, entrepreneurs need to be quietly told that, despite what they may first think, the markets do often have more power than them – and can make or break their success. Thinking consciously about how their behaviours, strategies and decisions look is paramount in today’s landscape.
Ultimately, it is critical that all founders and entrepreneurs think carefully about optics – both for the company and them personally – before undertaking an IPO, and usually this process should start 6, 12 or even 18 months before the planned IPO itself.