Fast-growing founder-run companies are more likely than other companies to need strong boards — and less likely to have them. That's the message of a study by Annette L. Ranft and Hugh M. O'Neill.The researchers looked at 91 U.S. companies whose CEOs also had been founders of the company and contrasted the 91 with enterprises matched for industry and size but run by nonfounders. Using a variety of statistical techniques, they identified significant differences between the two samples. Founder-run companies tended to have fewer independent outside directors and a greater concentration of ownership within the top management team. Not surprisingly, founder-CEOs had a larger ownership stake than non-founders and were more likely to serve as board chairmen. As a result, CEOs at founder-run concerns had significantly more power over their boards.That may seem reasonable, considering the role that visionary leaders such as Steve Case and Bill Gates play in their companies' success. But giving a founder-CEO too much power can be a recipe for disaster, the researchers warn.
