[enra]

I don’t know what the situation is here but a startup can setup the board or governance in different ways. Founder could control everything directly or indirectly and the board might have one or no external directors.

And while technically you should inform the board of executive comp changes, it’s not like the investors generally care that much in the early stages or there is some box they have to officially check. You could just go to your payroll system and increase your comp. They don’t come to check your payroll or accounting unless they suspect something so it’s not that hard fly under the radar for some time.

[mikemac]

Do you really think Greylock, A16Z or Azure Capital has no interest in BOD seats and no experience forming a Compensation Committee?

As CEO, the Board is your boss. If you instruct payroll to bump your salary up without proper approval you will probably be looking for another job.

These investors have a basic fiduciary duty to their LPs to make sure there is no blatant fraud, and you don't get to billions under management and not understanding this.

[enra]

There are hot rounds you have those names involved and they all don't get a board seat. Usually only the lead gets a board seat (not always) and growth investors (Tiger) also don't typically ask for board seats. Depends on the amount of leverage the founder has. If A16Z is wanting to win a deal and Tiger is offering more money and no board seat, and the founder wants that then A16Z either has to pass or offer the same.

You're overestimating the formalness of the early stage startup corporation practices or board (seed-series b) and the reporting requirements. Most of the time it's like any other meeting, you chat about what's going well, what's not and how to improve. It's not like public company board at all, there most definitely are no committees (maybe on paper). If you need approvals, like for employee option grants, you just send them an fyi and a docusign (this case the approval is also after the fact. You already gave someone an offer and the accepted it. It would be hard to go back to change it so approval is just a rubber stamp.)

It's up to you as board define what kind of board meetings you have and what's on the agenda. At the end of the year, most VCs ask you submit some basic financials, cap table etc but for example the CEO's salary is not one of those numbers. The BOD might be also completely fine with $500k/year salary.

As the startup grows and matures, the practices mature too but likely that won't happen before ~100 employees or after Series B.

I can assure you that as CEO, I could go to our payroll service increase my salary. We don't even have a payroll or HR department. No-one would really know until maybe next year when accounting gets done. Obviously, I wouldn't do that but if you don't care about your reputation and there to scam then it's very easy to do. If the investors find out, they might not be able to get rid of the CEO that easily, since like I said before, the founder(s) could control the board by votes or by seats. It's also unlikely these investors would cause any publicity around this because it's embarrassing to them and pushing a founder out could hurt their reputation (like when Benchmark kicked Travis out of Uber), they would just more likely walk away.

[spamizbad]

My understanding is that "hot" founders receive a tremendous amount of latitude from their BOD - so they wouldn't think twice about "generous" (by startup standards) executive comps.

[airstrike]

> Founder could control everything directly or indirectly and the board might have one or no external directors.

Uhh, investors are definitely going to demand seats on the board after funding

[margalabargala]

Some do, some don't. Depends on the investor and the company.

I work for a startup that has raised a bit over $30M, with no board seats given up.