Last night, I found myself on a sinking ship.

It was only a tender, the size of a large rowing boat, and we were coming down the Hamble in Hampshire having moored our yacht further up in the river. But we were still hundreds of metres away from our home harbour and it was dark. The leak started small and first we continued at full throttle, pumping the water out manually. But then the pump stopped working. The boat was filling up fast and we knew we wouldn’t make it to the jetty. The options were to aim for one of the moored yachts we were passing, clamber onto it, call for help, sit and wait and watch the tender sink. Or turn to the shore which was further away and try to reach the muddy riverbank before hitting the bottom. The Hamble is a tidal river and it was low tide. The sun had set and there were no other people in sight.

We decided to try for the bank. I gathered the possessions I most wanted to save in my arms, ready to swim if need be, trying to think of a way to keep my phone dry. I was wearing too many layers of clothing to be comfortable with the prospect of getting in the dark water. We couldn’t move in the boat as the smallest movement threatened to tip one of the sides under the water. I didn’t fear for my life but was stressed about losing what we had with us, including the outboard engine and the tender itself. And I worried about causing trouble and possible danger to other river users in the morning.

Maybe your business feels like a sinking ship right now. The cold water may have been seeping in for a while but suddenly you find yourself in a situation where it’s rising fast. Your life is not in danger but if the business were to go down, there would certainly be serious collateral damage.

What do you do? You may have the option of turning to a larger vessel and piggyback on them for a while; you can borrow or you may be able to get an investor to inject cash into the business. There’s also the option of abandoning the ship and leaving it to sink. But if you decide to keep fighting for the best possible outcome, you have to get the boat to the shore where it can potentially be fixed or at least disposed of properly. And you want to achieve it whilst minimising damage to the crew and assets you carry onboard with you.

Which, weirdly, brings me to the topic of corporate governance. You might be a company director who accepted that position without knowing exactly what you signed up for. Or you may have set up a company recently and are wondering how to organise its governance. If you don’t have a commercial background, you might not even realise that corporate governance is not the same as company management.

The role of the board of directors in a company is to provide vision and direction, to decide the strategy and structure, to delegate authority to the CEO who heads the operational management of the business, and to be accountable to shareholders and other relevant stakeholders.

In the UK, a private limited company must have at least one director. When initially registering the company, the incorporation documents must name the first director(s). The way in which subsequent appointments are made is governed by the company’s articles of association.

In family companies, what usually happens is that one or two of the shareholders also become the directors of the company. In the SME private sector, they may even be employed by the company. One person can thus simultaneously be a shareholder, director and manager – three roles that have separate responsibilities and interests regarding the company. When a company allows for such combined roles, it is very tempting to take pragmatic shortcuts in board procedures and decision making. This really obfuscates things for the onlookers – everyone recognises the company has a power cluster, but no one quite understands how the roles in that cluster relate to each other. Hence even the staff end up referring to the governing group imprecisely as ‘bosses’, ‘owners’ or ‘leadership’.

Many start-ups have an all-executive board where every director also has a managerial or employee position in the company. A potential problem of this structure is that the executive directors can be perceived to be monitoring and supervising their own performance. They may also find it difficult to separate operational perspectives from strategic ones.

If your organisation is small and it doesn’t seem prudent to appoint several directors, an advisory board is an excellent option. Its structure is more flexible and its advice non-binding. Consequently, its members don’t have legal fiduciary responsibilities either. The company, CEO and shareholders benefit from the wise counsel of these non-executive experts and can compensate for their contribution by mutual agreement. When setting up an advisory board, I recommend you approach people who have been successful in areas where you feel less confident. Aim high. You will be surprised by how many of them say yes.

Back in the boat, we made it to the shore, but with no time to spare. I gashed my leg scrambling out and we spent ages trying to bail out the water and haul the vessel higher on the mud so that we could tie it to something until the morning. I openly admit that the hardest physical endeavour that night was not mine. I was lucky to share the boat with someone stronger and more experienced than myself.

Running into difficulties in business is not always your fault. Our boat had been fine when we last used it, and there was no sign of water when we started the journey home from the yacht. A business can be hit hard by external factors that are out of your control – we’ve all learnt that in the past six months. It’s important to know that as soon as a company becomes insolvent, the director’s responsibilities are extended to others beyond the company; in addition to the regulators and the shareholders, the director becomes accountable to the creditors as well.

One thing holds true for both business and sailing: the smaller the boat, the more it matters who’s with you in it. If you are in the position to choose, choose wisely who you have on (your) board. When you get into a tight spot, they can make the difference between life and death.

Director’s Cut, Leadership, Management