[dedward]

Can you elaborate on why not? The board exists to run the company on behalf of the owners. If you are the clear majority owner (51% - heck, let's say 75%) - in what way can the board possibly be stacked against you unless you willfully let it?

[danshapiro]

A not-uncommon scenario for a post series-A board is a CEO, a cofounder, 2 VCs, and an independent. Any 3 board members can sack the CEO and hire a replacement. To add insult to injury, the CEO seat is often attached to the job, so the replacement gets the CEO seat, and now the sacked CEO and cofounder are left to bicker over one seat.

The board composition is decided by the financing docs, and is one of many things you negotiate in the financing. You're right that you have to "let it" happen (ditto the protective provisions), but unless your round is highly competitive you will probably do that, as the alternative is not getting funded.

Finally, note that the board exists to maximize shareholder value. The CEO's share holdings, majority or otherwise, do not mean s/he is the best person to create value for the company's shares. A board member is supposed to act for the best interests of the company as a whole, not for any one person or share class.

As a side note, this sometimes leads to odd cases where someone - like a VC - will vote in favor of something as a board member, which is clearly in the best interest of the company as a whole, but then vote against it with their shares, which is their right and obligation to do, to maximize the value of their own investment. That could happen, for example, if an acquisition offer was in play that would not meet the VC's goals for the investment.

[SemanticFog]

These definitely happen all the time.

Another thing to watch out for is for unfilled seats that can change the board dynamic. If multiple parties have to agree on the board seat, then an intransigent investor can maintain an advantage by never approving any candidates. Don't put off filling these seats! Ideally, you should agree on a specific person before you sign the docs.

[jack7890]

Because board seats are often given to new investors as part of term sheet "package". Shareholders can decide to grant a board seat to an incoming VC because they think the combo of the VC's money and guidance will increase the value of the company. That can lead to situations where a majority of the ownership is not represented on the board.

[cma]

The US has strong minority shareholder protections.