Governance Debt Calculator

Price the governance you don't have

Executive summary
How a buyer, lender or investment committee would read this assessment.

Governance debt of 78/100 is a material diligence finding: a buyer or lender would price in $22.5M (23.4% of enterprise value).

Key findings

  • Undocumented authority is the weakest area: 29 of 35 possible points of debt.
  • Each point of governance debt costs $288.0K at the current enterprise value of $96.0M.
  • The 3 largest gaps carry 45% of the discount ($10.1M): remediation is concentrated, not diffuse.

Recommended actions

  1. 1Document a delegation-of-authority matrix: recovers $3.5M.
  2. 2Appoint independent directors: recovers $3.5M.
  3. 3Put an incapacitation plan in place (powers of attorney, key-person cover): recovers $3.2M.
Undocumented authority
Delegation of authorityWho can sign, spend and hire, written down
CEO succession planA named successor and a written transition plan
Incapacitation planPowers of attorney, key-person cover, an emergency successor
Missing board seats
Board seats filledDirectors currently serving
Recommended board sizeSeats the company should have
Independent directorsNon-family, non-employee directors (target 2)
Board meeting cadenceHow often the board formally meets
Informal voting rules
Shareholder / buy-sell agreementRules for transfers, exits, death and divorce
Written voting rulesWho votes on what, and by what majority
Dispute resolutionA family council or agreed escalation path
Governance Debt Score
0 is best practice; 100 is no formal governance.
78/100
$22.5MValue at risk: up to a 30% discount on the simulator's $96.0M enterprise value.
  • Undocumented authority29/35
  • Missing board seats25/35
  • Informal voting rules24/30
Biggest gaps
Value recovered by closing each gap
  • Delegation of authority documented+$3.5M
  • Independent directors+$3.5M
  • Incapacitation plan+$3.2M
  • Voting rules formally written+$2.9M
  • Board seats filled+$2.6M