Great to read about. At O(1) Labs[^0] we've had a board that consists only of employees for about a year now. Employees who have been around for at least 1 year can run and vote. It's one-person-one-vote and we use Scottish Single Transferrable Vote[^1].
We also have a biannual meeting we call our General Assembly in which anyone can make proposals, and then we debate and vote on them as a company. For anyone trying to inject more democracy into their company, I think having a structure like that which more explicitly empowers workers to shape company policy is essential.
What are the arguments for incorporating democracy into a company? Why must it be a democracy? What if your employees all have short term personal interests in mind, want 6 months a year of PTO, and overthrow the CEO to get it?
I always felt like seeking input from employees, especially those who have contributed significantly and that you value a lot, is extremely important, but it's not necessary for them to have board seats and votes to consciously take steps to obtain their feedback and make good use of it.
Since participation in a company is entirely at-will, what's wrong with "Join if you agree with the founders' vision, leave if you don't"?
> What if your employees all have short term personal interests in mind, want 6 months a year of PTO, and overthrow the CEO to get it?
How does being a non-employee make an outside board member less self-interested? What if an outside board member wants to get paid $500K a year in cash for serving on the board and overthrows the CEO to get it?
At the end of the day board members have a fiduciary duty to shareholders that applies regardless of whether they're an employee.
The idea that someone who spends almost all of their waking hours on a company would be more likely to tank a company than someone who spends a few hours a month as an outside board member seems odd to say the least.
> What if an outside board member wants to get paid $500K a year in cash
That's the thing, they (assuming you're talking about an investor or cofounder) wouldn't want to. They're holding onto a chunk of equity that would be worth maybe $10M, $100M, maybe even $1G, if the company gets to IPO, so they would NOT want to sabotage the company by taking a $500K salary from it now and have their shares be worth nothing.
Employees who have peanuts in equity have different incentives. They couldn't give three hoots about the company's long term success if they can get $500K this year for a downpayment on a house to send their kids to a good school district.
If it's a VC-backed company, the board member merely represents the VC fund and wouldn't personally enjoy the entire upside of the equity the fund owns. I think it's possible that they would still take $500K risk free today over the value of future potential compensation that might trickle to them.
However, they also don't sabotage the company since word would get around that they or the VC they represent are terrible board members that sabotage companies.
Besides reputation damage, they can also be sued by the shareholders for failing to uphold their fiduciary duty.
It's similar to why the CEO doesn't just pay themselves their entire series C, close the company, and retire (assuming the bylaws allow the CEO to pay themselves).
> merely represents the VC fund and wouldn't personally enjoy the entire upside of the equity the fund owns.
Not always true. I've had VCs who want to split their investment between fund and personal at the last minute when you pretty much don't have a choice and don't have time to shop around.
That equity is still a short term interest, no? Sell it now and you don't have to care what it's worth in 10 years. It's a meme nowadays that companies have been entirely short term oriented for the past while, influenced by stock buyback programs for executives.
An employee has incentives like needing the company to survive so that they can maintain their healthcare, pay rent/mortgage each month, maintain a work visa, and recieve a pension. Getting a big downpayment on a house makes the employee even more tied to their employment, since now they have a bigger monthly cost to fill than before.
> Sell it now and you don't have to care what it's worth in 10 years.
Unless you're already clearly a unicorn it's not particularly easy to find a buyer for your founder equity in a startup at the prices it might IPO at if things go well.
Founders selling their own equity too early will also destroy morale and investor relations to the point where the company isn't likely to succeed anymore. Buyers realize this, and aren't going to hand you IPO prices for it.
Employees aren't idiots. They'll realize that the business still needs to run, but instead of a top-down approach from someone who thinks they're smarter that the people actually doing the work, the decision making is made by people who really know what they're deciding on.
The issue is that they're not idiots but rational intelligent people that can understand different rewards. They can always get a new job and if the payout if higher from nuking the company along the way then it's rational for them to be biased that way.
Board members often have the same issue, but in a different way. Probably the favorite two step approach:
1. Guide the company to do things that boost the stock price in the short term (1-3 years) but destroy the company's ability to compete on longer time lines
2. Dump your stock position
This doesn't usually happen with founders, but I can personally attest to the fact that this has been done intentionally by board members of billion dollar businesses.
There are also more subtle approaches, e.g. board members pushing for strategies that hurt the company, but boost the board members' other holdings.
Exactly my point except their interests tend to be aligned with the other stockholders of the company since they all make money from the stock. The cases where they don't are well known such as VCs insisting on massive growth (go big or go bankrupt), activist investors and so on.
I'm suggesting NOT being top-down, getting their feedback and letting them make decisions, without formal board seats and votes.
It's possible to not have a top-down approach on a day-to-day basis, but for the founders to still maintain veto power at the end of the day if shit happens.
I guess the question I would ask is the following. Assuming you're already doing a decent job of soliciting feedback from employees, what's the argument for effectively giving one employee a louder voice than everyone one else? Because I don't see how that doesn't happen to at least some degree.
The argument is along the lines of John Rawl's theory of justice: I would prefer to work at a company where the culture is such that I feel comfortable joining it regardless of my place in the org structure. (Or at least -- the company where I would feel least uncomfortable doing so.)
A democracy would certainly give a company a huge advantage. I would take a significant pay cut for that. But it does have to produce tasty soup as well, and in order to exist at all, pay salaries.
I'll be candid in saying that I haven't found a company that meets my high expectations. :)
Participation in a company is not entirely at will. We all have to work for some company to survive. If all companies that I have access to are all authoritarian dictatorships, I'm forced to live under that kind of rule.
Your thinking doesn't seem to take into account the social and economic power dynamics at play. The working class has less bargaining power than the capitalist class right now in general. We are forced to live under their terms and have very little say in what the status quo is.
In many cases, you don't have a choice to be born into a state. You're subject to it just by virtue of being there. It's not a choice. That's the difference.
That said, like pure authoritarianism, pure democracy as a state governance system also has failure modes, and its merits are also debatable.
Quite different than those arguments for incorporating democracy into a company, and also quite different to those arguments for incorporating democracy into a family structure.
I believe workers as a class should democratically control the economy so that production can occur for human need rather than profit of owners of capital.
That's only possible if every workplace is organized along those lines, and workplaces are networked together to coordinate their action. It's not possible by people just leaving a company, you need to also construct the structures of democracy.
I don't understand how this applies. If anything, having only employees on the board would mean fewer total cooks (i.e. stakeholders influencing decisions) compared to having those same employees in the company plus a board of outsiders.
In Germany some companies (depends a bit on size, form of incorporation and industry) employees by law can elect members to the board. In some cases 1/3 of the members, sometimes 7/15. But then a German board is more distinct from operational business and executives can't be on the board. (Thus no CEO&Chairman etc )
Actually those boards are a very popular secondary source of income for politicians. Boards are supposed to also supervise compliance to law, but often you get the feeling it is the other way around: make law comply to company interests. Not saying that the system is all bad...
One thing about an employee being on the board, especially if it is a large company, is that the board is not going to be where the real decisions are being made.
Many of the board members are together a lot outside the board. Many board members serve on the boards of several different companies. These board members likely see each other at expensive charity events and political events and cultural/art events. Their kids likely attend similar private schools or colleges. They will often go to the to the same ski resorts in Colorado or Switzerland.
Having a board member who is not part of that socio-economic class, sounds nice in theory, but in practice will get left out of the real decision making and real discussions.
> the board is not going to be where the real decisions are being made
Are you basing this on supposition or experience? Yes, Board business happens off the clock. But that's prep. If a Board member is being systematically excluded from material negotiations, that exposes the Board to a host of liability.
Are readers clear on whether the author was appointed as a voting member of the board or not?
I read the whole article and I didn't have any sense of the author performing the activities that directors are generally expected to perform and there was some discussion about non-voting members being asked to leave during "administrative" parts of the meeting but not whether that included him.
The author contrasted their role with that of a union and implied that they had less influence (leading me to guess they were non-voting, but wondering the same thing you asked).
As a solo founder, I had promoted one of my early employees to be on the board. He was an excellent Chief of Staff. But looking back you’re right he went off the board when a VC came in. But still was an important member in board meetings. He really scaled personally, became indispensable to the company, I trusted him completely and employees liked the idea. I even made employees 20% shareholders apart from an open 7% esop pool just before the VC round. Unfortunately the firm shut in the lockdown since it was ops heavy, but today he works on several things including an M&A firm, apart from his own startup. In fact I feel proud that post the 4 year journey, during the acqhire core team employees made 20x their first month salary, and today are all doing well, some even Angel investing themselves.
Interesting what he says about funnels. If a lens is so pervasive I must assume it's ticking some boxe/scratching some itch -- but it's not clear to me what that is.
I can see that it has strong predictive power on company revenue, which the board must be very interested in, but is it really stronger than just a time-series? Perhaps it affords a set of knobs that can be twiddled to try to improve the outcome, but how much of that control is illusory? (After all, most startups fail, even -- especially? -- VC-backed ones.)
Outside of that discussion, going a bit more meta, it feels like the experience left a fairly bitter taste in OP's mouth. I continue to believe that corporations and startups, even friendly ones like Honeycomb, are not pleasant places to work at.
> I continue to believe that corporations and startups, even friendly ones like Honeycomb, are not pleasant places to work at.
I have lots of thoughts about the necessity to work and how that can drain a lot of enjoyment out of intellectual pursuits, but I will say that, of profit motivated companies, Honeycomb is an exceptional one to work for filled with wonderful humans who care about each other. I really enjoyed my tenure there, made lifelong friends, and became a better engineer. It's a really special place and I hope they keep that up as they grow.
How do you distinguish 'funnel leaks' (people who could have been converted by hiring a better sales director) from 'bad leads' (people who would never have been converted because they mistakenly clicked on a deceptive ad).
"Bad leads" are often obviously in the wrong segment. E.g. for B2C either too big, too small, or wrong industry.
Every business and product are different, so there are no specific numbers you should expect in general. You can sometimes find benchmark data from similar companies, but usually you just compare to your own company over time. E.g. if you do a new marketing campaign and conversion rates go down, then you are probably introducing relatively more bad leads rather a sudden poor performance from sales. Although, in the same situation, an influx of a new kind of customer might just need a different sales strategy without changes to product or marketing.
Our venture-backed cooperative startup board has 1/3rd of its seats reserved for its employees, which incorporates both corporate staff (devs, marketing, etc) and operational staff (drivers, support).
The other 2/3rds are divided equally between our restaurant and consumer members. Each member class votes exclusively for their portion of the board seats.
We’re nearing year three,
and this arrangement has been working well for us. We’ll see if it can continue to scale as we expand geographically.
The statement that he is the first employee at a US venture-backed software company to sit on the board is comically wrong. Venture-backed companies have had employee board members as regular practice for at least as long as the 20+ years I have been in the industry. While not necessarily the norm, it is certainly not uncommon for an employee other than the CEO to have a seat (often a co-founder). The seat is usually designated as elected by the holders of Common Stock (which usually is the founders and employees with stock). The only thing I see unique here is that he was elected by the employees with one vote per employee, rather by common shareholders with one vote per share.
In particular: it's clear from the context they're talking about non-founder employees; simply by the principle of charity you should assume the author --- who sat on the board of a pretty successful VC-funded company --- knows that founder employees are often on boards.
Mostly though, this "who was first" discussion is an attractive nuisance for us to bicker on about, and we're asked by the guidelines not to take the bait on that stuff.
Added a clarification: first non-founder/executive employee to sit on a board. If there's another venture-backed software company in North America who's put a rank and file employee on their board, I'd love to hear about it!
That's a pretty massive statement to make that is almost impossible to prove correct and needs only one counterexample to be proven incorrect (which has already been provided in this thread).
I mentioned in another comment but at O(1) Labs (which is VC-backed) we've had a board composed of employees for about a year. I'm not sure about the timing of your situation, but also I'm sure we're not the first company to do so.
This is probably worth an application of a much more general principle: if you have experienced something directly it's quite likely to be fairly common, however if you haven't experienced something it's not good evidence that it isn't fairly common.
Path dependence means personal experience is rarely very generalizable.
Of course if you've made a systematic study of corporate governance and have data on thousands of companies, things are different.
Your reasoning in this discussion is unbecoming of a board member. In your activity on that board you’re involved in a lot of open-ended conversations with a lot of ambiguity and high cost of failure. I hope you express yourself in that setting with a bit more humility and introspection.
I find your tone dismissive, condescending and snarky. I made a (hedged) statement that turned out to be incorrect, updated the blog post, and moved on. I didn't think it was a statement of great consequence, certainly nothing to fixate on.
Please review the HN Guidelines and ask yourself if posting your comment added to or detracted from the value of this discussion:
Do you share that link with everyone who disagrees with you? It comes across as an overreaction. Another way to deal with critical feedback would be to understand it at a deeper level instead of being reactive.
I’ll help you out. A bunch of us here deal with board members on a daily basis. Some board members are great, others not so much. To hear that there is a board out there that gave voting rights to an employee makes us experience two simultaneous sensations: 1. Hell yeah!, and 2. I wonder if they picked the right employee.
Oh shut up you sanctimonious prick. You're confirming all of the negative stereotypes about this website.
Do you think I, in 20 years of working in the industry, haven't dealt with bad board members? How about a little curiosity instead of whatever the hell you're dishing in this thread.
Let me help you out: you're a stupid little troll and your contributions to this discussion are like little turd droppings that just stink up the room. Please kindly contribute constructively or fuck the hell off.
Bump Everything that I have seen and heard from Charity Majors (cool name, right?) is a good listen / read. She is amazing. Honeycomb.io is lucky to have someone like her on the board of directory.
We also have a biannual meeting we call our General Assembly in which anyone can make proposals, and then we debate and vote on them as a company. For anyone trying to inject more democracy into their company, I think having a structure like that which more explicitly empowers workers to shape company policy is essential.
[^0]: https://o1labs.org/
[^1]: https://www.opavote.com/methods/scottish-stv-rules