Great Cannabis Companies Start with Strong Board Governance Corporate travails and misbehavior in cannabis is regularly blamed on the CEO and to a lesser extent the CFO. Yes, they do own the results and the ramifications. However, these leaders are also accountable to a Board of Directors who serve to represent shareholders and stakeholders. One key part of a Director’s job is the obligation to make leadership changes should financial results be unsatisfactory or malfeasance be demonstrated. For some reason, almost every cannabis Board has escaped blame for their company’s ills. Many Boards were asleep at the wheel and did not perform their fiduciary duties. This is appalling. There are many reasons for Board malfunction including poor Board design & reporting, a lack of objective voices, and confusion over roles. Sadly, these failings continue to this day. In essence, this is a failure of governance. Governance dictates who make strategic decisions, how they are made and whose interests drive them. Governance is a function of many variables including Board make-up, their expertise & independence as well as their level of engagement. Enhanced Board performance is critical if cannabis firms (especially pubcos) are to become more professional, financially prudent and attractive to institutional capital & talent. Simply put, you can’t build a well-run company if you don’t have a topnotch Board. One LP who gets this and serves as a role model is Rubicon Organics. Much of this pubco’s success (e.g., 3 strong flagship brands, a national reputation for product quality and operational excellence) can be attributed to its active and professional Board of Directors. To CEO Margaret Brodie “Strong governance is the foundation of Rubicon Organics. We put the ‘G’ for Governance, first.” Rubicon’s secret sauce is to get the right mix of Directors focusing on the right Board activities. Specifically, the Company- 1. Recruits truly independent and expert members that fill experience gaps and provide objective input. “Each Board member plays a pivotal role in both challenging and elevating our leadership, driving us to continually strive for excellence and holding the leadership accountable.” says Brodie. 2. Puts operational and financial ‘quality’ first. Accordingly, every Director brings valuable lessons and standards from having worked at some of Canada’s best-run companies. 3. Bakes good governance practices into important strategic and financial deliberations. For example, the Board meets regularly and engages teams from all levels of the firm. Moreover, the Rubicon Board doesn’t bite off more than they can chew. They focus on areas where the firm can win rather than chasing the shiny new thing. One example. Though ESG is an emerging reporting requirement the firm understands that social and environmental performance starts with effective governance.

Posted by Mitchell Osak at 2024-02-14 15:25:32 UTC