Founder's IPO Governance Trap

“Lessons from the IPO Going public was another critical juncture that affected the future of lululemon. Again, for those of you who might be in this position in your own lives, I would like to share my learnings: 1. Have each prospective director explain their theory as to what type of CEO is needed at each growth stage of the company. 2. I didn’t control the Board, so I should have nurtured and selected my own people to fill Board positions and not let PE do it. 3. A founder with more than 10 percent of the company will be a “dependent” director. The other directors are deemed as “independent” to ensure the founder-director does not control the company decision making, and these independent directors will elect a lead director. The lead director is essentially the chairman as he or she represents more board votes. Giving the chairman title to the founder is often nothing but smoke and mirrors. 4. A strategic CEO can divide and conquer a board by marginalizing the “dependent” founder from the independent board members if the CEO and founder do not see eye-to-eye on vision or operations. 5. A staggered board where only three directors are up for election each year does not allow directors to change with the speed at which the world changes. Directors get stale fast and nepotism and mediocrity set in quickly. 6. With new money in their pocket, the founder now has another job trying to figure out what to do with that money. A founder usually knows one way to turn a profit, and that’s in the business they just sold. I recommend the founder invest the money equally with three wealth managers and determine which firm does the best over a three-year period. If instead, the founder tries to build a new business or joins other boards, their eye gets taken off the ball. This creates a vacuum that gets filled quickly by operational directors and management looking for more power.”

“Collective Vision Lululemon’s vision statement used to be “elevating the world from mediocrity to greatness.” I don’t know what it is today; I looked online and couldn’t find it. For argument’s sake, let’s assume it’s remained the same. For a vision statement to be successful, the individuals who live into it must align on what it means for them collectively. If it is to be effective, a vision statement cannot just be words on an office wall that are left open to personal interpretation. We need to be clear on the meaning of these words, and more specifically, how we define “greatness.” If I am a metrics-driven Board member, then perhaps I see “greatness” in making lululemon the most valuable and sought-after stock in the US athletic basket. If I am an Employee, then maybe I see lululemon’s “greatness” in its active community engagement and the reach of its transformational development program. My point is, neither party is wrong in their interpretation. They are just misaligned in the collective interpretation and as a result, the collective intention becomes unclear. Prior to the creation of the Board, we didn’t have this misalignment because we were all in authentic communication all the time. There was no “us” and “them.” We aligned on what we wanted as a group and then lived into that vision every day. I believe that the Board, the Management, and the Employees can align again, and I believe that lululemon will fulfill on its vision. I remain lululemon’s number one cheerleader.”