Produced by Julie Garland-McLellan, Consultant at AltoPartners Australia and non-executive director and board consultant based in Sydney, Australia.

Contribution by Karla Dorsch, is the Founder and Managing Director of Evrima / AltoPartners UAE. She has over 25 years of experience in executive search, across a broad range of clients throughout EMEA including sovereign wealth funds, governmental agencies, banks, private equity firms, corporates, family conglomerates and start-ups. Karla has an MBA from NYU Stern School of business, a Master’s degree from the London School of Economics and a Bachelor’s degree from Columbia University, as well as a Masters degree in Psychology and Neuroscience and is a member of the International Woman’s Forum and has sat on various non-profit boards in the UK. She is Based in London.

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The Director’s Dilemma - October 2025

This month our real-life board dilemma concerns a governance professional experiencing pressure from her employer to join a board that has many risks.

Cecilia is General Counsel of a company with multiple investments in other companies. As part of her role, she observes investee board meetings to ensure good governance.

One investee is very thinly capitalised and will need to raise additional capital. The founder still views the company as ‘his’ business, even though there are two other institutional investors alongside Cecilia’s company and multiple small shareholders. Cecilia has reported, to her boss, concerns that governance is poor.

The board is comprised of nominees from the institutional investors, an independent chair, an independent director who chairs the audit committee, and the founder. The founder owns 35% of the shares and the other two institutions own 12% each, Cecilia’s company has 9% and the founder’s brother has 10%. Cecilia’s company has responded to her concerns by agreeing with the founder that she should join the board, bringing the number of directors to six, and that the chair should be given a casting as well as deliberative vote.

The business has operations in Australia (where it started) and an offshore jurisdiction. It has almost 3,000 assets which are either rented or under ‘rent to own’ agreements. It has a lot of debt at around 12 times equity, and total assets are around $180 million. Its cash balances are low, and it is forecast to make a small loss this year. The relationship with the founder has not always been easy. Cecilia is not sure that she wants to take on the liabilities of directorship when, even with the support of the other institutional investors, she can be outvoted.

What can she do to manage the risks?

Karla’s Answer

Cecilia has found herself in a classic governance thriller: a fast-growing company with a headstrong founder, lots of debt, thin capital, and an uneasy boardroom mix. Now she’s being asked to step onto the stage as a full director. The prize? More influence. The risk? Personal liability in a business that looks like it’s running on fumes.

If she takes the seat, Cecilia inherits the duties of any director; acting with care, diligence, and loyalty; in both Australia and the offshore jurisdiction. With debt at 12 times equity, razor-thin cash, and a founder who thinks the company is “his,” the potential for things to go south is very real. D&O insurance and indemnities would help, but they don’t erase the personal stress of being outvoted.

So what’s the alternative? Cecilia could stay in the wings but strengthen her observer role: more access to board packs, audit papers, and committee meetings. She could push the institutional investors to act together, demanding stronger governance as a bloc. Conditions could be attached to any fresh capital: add another independent director, beef up the audit and risk committee, and commission regular governance reviews. A reworked shareholder agreement could also put guardrails around the founder’s decision-making.

If Cecilia does climb into the director’s chair, she should only do so with armour: watertight insurance, written indemnities, and documented governance reforms.

Either way, her task is the same: protect her company’s investment without becoming the casualty of someone else’s risky dream.

Julie’s Answer

Oh dear. Poor Cecilia!

There is little worse than having to choose between risking your day job and risking joining a board where you may not have the influence you deserve.

First, I would recommend that Cecilia meet with the Chair and ascertain if, as well as independence and good judgement, he or she has the toughness of character to withstand pressure from the founder.

She could then meet with the other investor-nominated board members. Again, she needs to assess the soundness of their characters and the steeliness of their resolve.

Cecilia already knows the CEO/founder so her next port of call is the remaining director, the audit chair. She should use this meeting to understand, not to judge. She needs to know what this director expects and contributes, and how they plan to improve governance.

Cecilia then needs to agree (in principle) a path forward that the large investors will support. Fortified with this outline of a way forward, she should finally meet with the founder and see how he feels about this plan.

• If he is unwilling to back the plan, it is unlikely that the other investors will ‘top up’ their investment. The company has poor prospects if the existing investors have lost faith and the founder is approaching new investors. A ‘down round’ (where the share price is lower than that paid by past investors) is likely under this scenario. Cecilia’s company is likely to be very unhappy with the board and hence with Cecilia. It would be difficult to justify joining the board.

• If he is willing to back the plan, there is a good chance that the current large investors will ‘top up’ and that share price will be maintained or dilution avoided. Cecilia’s company is likely to remain concerned but supportive and joining the board - especially if the plan results in a turnaround - could be a good career move.

Ultimately it comes down to Cecilia’s confidence in the founder’s ability to build a successf