In my post, How Companies Are Governed, I pointed to the fact that many decisions in a VC backed company are made by the board.  As a result, the composition of the board can greatly impact the level of control of a given party.  For example if it takes a majority of the board's vote to make decisions, if a single party were to control a majority of the seats they would be able to unilaterally make decisions.

As you can see identifying an appropriate board structure is very important for ensuring that decisions made at the board level are done so with the intention of maximizing shareholder value, not serving the interest of a single party (whether that's a particular investor, executive or founder).  Investors, entrepreneurs and employees are all in a venture together and decisions need to be made that attempt to maximize value for all of these parties.

So how do you do that?

Generally this is achieved through the creation of a balanced board.  A balanced board is a structure that is theoretically designed to prevent either the founders/management or the investors from having a controlling position on the board.  This generally means giving investors and management and equal share of seats on the board.  If the investors have two seats then the management might also have two.

At the highest level, the concept of a balanced board is designed to distribute power equally across the interests of the company's key constituencies.