Managing Joint Ventures Effectively

Managing joint ventures is one of the most complex aspects of corporate governance, and a key lesson I’ve learned is that proactive engagement is non-negotiable.

When a parent company creates a joint venture, there’s often an assumption that it will manage itself. This hands-off approach can lead to significant problems. Without top-level oversight, ventures frequently lose sight of their original goals.

One of the most common pitfalls is the emergence of "absentee boards." These boards often include members with limited experience or insufficient commitment to the venture’s success. This lack of engagement leads to reduced accountability, weaker performance, and an overall drift away from the venture's intended purpose.

The solution lies in strengthening the structure and involvement of the board. Independent directors should be an integral part of any joint venture governance model. These directors must have a fiduciary duty and an active role in ensuring the venture stays on track. Their unique perspective, free from direct ties to the parent companies, allows them to bring objectivity, drive progress, and focus on achieving long-term objectives.

In one of my own experiences serving on a joint venture board, the difference between active and absent leadership became starkly apparent. A lack of attention from the board allowed the venture to veer off course. When independent directors with a clear mandate were introduced, the venture regained direction and began to thrive.

The takeaway is clear: effective governance requires more than forming a board and hoping for the best. Joint ventures thrive when their boards are active, engaged, and staffed with individuals who are not only experienced but also deeply invested in the venture’s success. By fostering this level of commitment and accountability, parent companies can ensure their joint ventures achieve their full potential.