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OK at Work, hosted by Offit Kurman attorneys Russell Berger and Sarah Sawyer, is a weekly podcast that discusses current events and legal issues impacting business owners. From updates on the ever-changing employment law landscape to the risks and benefits of integrating AI into your workplace, subscribe to stay up-to-date on issues and events that may impact you and your business.
Sarah Sawyer: Welcome to this
week's OK at Work with myself, Sarah
Sawyer, my colleague Russell Berger,
both attorneys at Offit Kurman.
And today we are talking
about organizational structure
specifically as it relates to
board governance and operations.
So often you see this a lot,
obviously in nonprofit space,
there's private boards as well.
But where there's a board that is the
main governing body for an organization.
They're tasked with oversight
to a certain degree.
And then you have, executive directors,
CEOs operations folks that are within the
organization who are running it, running
the day-to-day responsible for actually
operations and the business functioning.
And there's a lot of
overlap between those roles.
And it can be a little bit confusing
about who needs to do what and who has
what authority if you're not careful
and you don't have good legal documents
and policies and procedures in place.
So what are some things that need to
be in place for those organizations
to function well, Russell?
Russell Berger: Yeah.
Working back towards the legal documents
from the operational I think you need
to have good, clear guidance as to
who's responsible for what decisions
need to be made at certain levels.
For example, in a corporation, you've
got stockholders, the stockholders
delegate certain authorities to the board.
The board then retains some
authority and delegates further
authority to the executive team.
Having clarity as to what's in
each group's bucket, I think
makes things a little bit easier.
Then you draft the appropriate
documentation, stockholder agreement,
corporate bylaws, that sort of
thing to get it in the right place.
And similarly, like in an LLC where
you might have a membership agreement
instead of a stockholder agreement,
you ought to be doing the same thing.
What types of decisions need
to come to the ownership team?
And again, whatever entity you
are what decisions can be made
at the management team level,
the day-to-day operational level.
Are there certain types of decisions
that need a super majority?
Because this is such a big deal that,
we don't wanna just do a 51 49, we
need a two thirds, one third type vote.
Those are the kinds of questions that
either when you're starting a business
or you're evolving a business as you
go into a new space as a business,
you should be revisiting and, revising
documents, corporate docs accordingly.
Sarah Sawyer: And I think
this is something that you see
large entities do very well.
Obviously if you've ever seen the
show Succession or anything like
that, there's a very complex legal
process involved and people do it
really well in large organizations.
I think that it's something people
skimp on in smaller organizations and
businesses often where they're able to
get away with just making decisions and
just not really consulting the legal
documents and just running the business.
We talk a lot on OK at Work about disputes
and then things start going wrong.
And then they go to their legal
documents and they say, I don't
really know what to do based on this.
We're arguing about who has the authority
to do this or what process to follow.
And we don't really have a fair
guidance in the documents on what to do.
And so that can be really
sticky when that happens.
And so it's really something that's
important to pay attention to, even if
you're small or you're growing or medium
sized because it's classic, obviously
we talked about it a lot when everyone's
happy and everything's going well, not
having a good process in place and stuff
you can be okay and things can function.
But there's gonna be times where that
clarity is gonna be really important
and really helpful to the business.
And having a document that you can
point to, policies to point to, that
everyone's on the same page, make sure
that you're not getting, in your own way
and having to spend a lot of unnecessary
time fighting about those details.
Russell Berger: Yeah, and I also
think it's helpful, to whoever
it is that's running the business
day to day to know, I'm all clear.
I, can be mostly autonomous in these areas
and, the board or whoever can check in and
will ask what I'm doing and want input,
but, these are my decisions to make.
But if it reaches one of these
enumerated categories, then
it's not my decision to make.
And I know that's a hard stop for
me and, not that I can't raise it
to the board or raise it to, the
members but that it's gotta be raised.
Giving that clarity to the people running
the business, I think is really important.
Sarah Sawyer: Yeah.
Well, so people can be agile.
We hear that term used a
lot in business, right?
Wanting to be agile during COVID,
we talked about pivoting a lot.
So we'll bring that word back, but
it's hard as a business to be agile,
make quick decisions when you need to.
If there isn't clarity on that.
And so I think that's where people
notice the lack of clarity the most
is when they feeling paralyzed in
the decisions that they need to make.
And that's never a good thing.
It's good to pause and be
thoughtful in your decision making.
We talk about that a lot also on OK at
Work and being proactive and thoughtful
in your approach, but you gotta be
able to move quickly when needed.
Russell Berger: Yeah.
Right.
And, to bring the point home, as your
organization changes, those allocations
of responsibility could change too.
And like anything, just like reviewing
your handbook periodically to review
these documents periodically and make
sure it's structured the right way.
And it's the right game plan for the
organization that you have today.
Sarah Sawyer: Yeah.
Well, thanks Russell.
We'll see you next time.
Russell Berger: Thanks, Sarah.