An organizational founder is a person who has undertaken some or all of the formational work needed to create a new organization, whether it is a

business Business is the practice of making one's living or making money by producing or Trade, buying and selling Product (business), products (such as goods and Service (economics), services). It is also "any activity or enterprise entered into for pr ...

, a charitable organization, a governing body, a school, a group of entertainers, or any other type of organization. If there are multiple founders, each can be referred to as a co-founder. If the organization is a business, the founder is usually an entrepreneur. If an organization is created to carry out charitable work, the founder is generally considered a

philanthropist Philanthropy is a form of altruism that consists of "private initiatives, for the Public good (economics), public good, focusing on quality of life". Philanthropy contrasts with business initiatives, which are private initiatives for private goo ...

Issues arising from the role

A number of specific issues have been identified in connection with the role of the founder. The founder of an organization might be so closely identified with that organization, or so heavily involved in its operations, that the organization can struggle to exist without the founder's presence. "One practical way to cope with overreliance on a founder is to distribute management duties so that others are clearly responsible for important operations. If the founder is on the nonprofit's board, part of the solution is to make sure that the board is diverse, balanced, and regularly infused with new blood".

Legal status

The language of securities regulation in the United States considers co-founders to be "promoters" under Regulation D. The U.S. Securities and Exchange Commission's definition of "Promoter" includes: (i) Any person who, acting alone or in conjunction with one or more other persons, directly or indirectly takes initiative in founding and organizing the business or enterprise of an issuer; however, not every promoter is a co-founder. In fact, there is no formal, legal definition of what makes someone a co-founder. The right to call oneself a co-founder can be established through an agreement with one's fellow co-founders or with permission of the board of directors, investors, or shareholders of a startup company. When there is no definitive agreement, like a shareholders' agreement, disputes about who the co-founders are, can arise.

Founder emeritus

Some organizations maintain a connection with their founder by establishing a position of founder

emeritus ''Emeritus'' (; female: ''emerita'') is an adjective used to designate a retired chair, professor, pastor, bishop, pope, director, president, prime minister, rabbi, emperor, or other person who has been "permitted to retain as an honorary title ...

, either as an entirely symbolic post, or as a position with some power, such as a permanent position on the board of directors. A drawback to such an arrangement is the possibility that the founder will clash with the person who has replaced them as leader of the organization, and that such a conflict will affect the performance of the founder emeritus as a board member.

Founder's dilemma

In some instances, the desire of the founder to maintain control over the organization becomes a problem because, when an entrepreneurial organization is successful, " outgrows the ability of the founder, or even of a small team around the founder, to control". The '' Harvard Business Review'' identified this problem as the founder's dilemma, noting that in most successful companies, the founder is pushed out of control by investors within the first few years after the formation of the company. In some cases, a company may have multiple founders, and a prominent source of conflict can be disagreements between these founders as the company evolves. There are factors beyond the personality and professional accolades of a startup founder that impact the ability of a company to succeed, like trouble in fundings, sudden market shutdown, not having the right team or poor scaling plan. Efforts must be made to balance the responsibilities of each so that no one founding member feels involuntarily diminished in their role relative to the others.

Forgotten founder

Another problem that can arise is that of the forgotten founder, a person who participates early on in the formation of an enterprise, but leaves or is ousted before it achieves success, and then returns to claim a legal right to

equity Equity may refer to: Finance, accounting and ownership * Equity (finance), ownership of assets that have liabilities attached to them ** Stock, equity based on original contributions of cash or other value to a business ** Home equity, the dif ...

, intellectual property, or some other fruits of that success.Constance E. Bagley, ''Managers and the Legal Environment: Strategies for the 21st Century'' (2012), p. 650. To avoid this problem, it is advised that the entity " incorporate early and issue

shares In financial markets, a share is a unit of equity ownership in the capital stock of a corporation, and can refer to units of mutual funds, limited partnerships, and real estate investment trusts. Share capital refers to all of the shares of an ...

that are subject to vesting over time".

References

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