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

organization An organization or organisation (Commonwealth English; see spelling differences), is an entity—such as a company, an institution, or an association—comprising one or more people and having a particular purpose. The word is derived f ...

, whether it is a

business Business is the practice of making one's living or making money by producing or buying and selling products (such as goods and services). It is also "any activity or enterprise entered into for profit." Having a business name does not separ ...

, a

charitable organization A charitable organization or charity is an organization whose primary objectives are philanthropy and social well-being (e.g. educational, religious or other activities serving the public interest or common good). The legal definition of a ...

, a governing body, a

school A school is an educational institution designed to provide learning spaces and learning environments for the teaching of students under the direction of teachers. Most countries have systems of formal education, which is sometimes co ...

, a group of

entertainer An entertainer is someone who provides entertainment in various different forms. Types of entertainers * Acrobat * Actor * Archimime * Athlete * Barker * Beatboxer * Benshi * Bouffon * Circus performer * Clown * Club Hostess/Host * Co ...

s, 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 Entrepreneurship is the creation or extraction of economic value. With this definition, entrepreneurship is viewed as change, generally entailing risk beyond what is normally encountered in starting a business, which may include other values t ...

. 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, focusing on quality of life". Philanthropy contrasts with business initiatives, which are private initiatives for private good, focusing on material ...

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 Securities regulation in the United States is the field of U.S. law that covers transactions and other dealings with securities. The term is usually understood to include both federal and state-level regulation by governmental regulatory agencies, ...

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 A startup or start-up is a company or project undertaken by an entrepreneur to seek, develop, and validate a scalable business model. While entrepreneurship refers to all new businesses, including self-employment and businesses that never intend ...

. When there is no definitive agreement, like a

shareholders' agreement A shareholders' agreement (sometimes referred to in the U.S. as a stockholders' agreement) (SHA) is an agreement amongst the shareholders or members of a company. In practical effect, it is analogous to a partnership agreement. It can be said t ...

, 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 ''Harvard Business Review'' (''HBR'') is a general management magazine published by Harvard Business Publishing, a wholly owned subsidiary of Harvard University. ''HBR'' is published six times a year and is headquartered in Brighton, M ...

'' 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 diff ...

intellectual property Intellectual property (IP) is a category of property that includes intangible creations of the human intellect. There are many types of intellectual property, and some countries recognize more than others. The best-known types are patents, co ...

, 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 ...

that are subject to vesting over time".

References

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