The most successful entrepreneurs surround themselves with the strongest teams, and that includes a Board of Directors. Whether you are an innovative startup company looking to create a brand new board, or a seasoned businessperson who has been asked to join a board, the process can be complex and daunting. We invited a group of experts to demystify the process and offer insight on creating and maintaining a productive board.
Why do I need a board?
Some entrepreneurs may view a board as a necessary evil, but that is approaching the topic from the wrong direction. A board is really a “strategic weapon” that provides an outside view of the company. The board adds layers of accountability – both for management and shareholders. A board can be an especially useful tool for a family business because it separates the kitchen table from the conference room table and invites other independent perspectives from non-family members.
Who do you want on the board?
Often there is a rush to grab industry celebrities, money finders, and mentors, but crafting your board is more of a strategic question. You have to tailor your board to meet your company’s needs at that point in time. For example, in an emerging growth period, you may want a team that is more focused and experienced in growth strategies. A board needs to be able to provide diverse opinions and experience, which will help to anticipate challenges and foster success.
What does the board do?
The board is a group that addresses corporate governance, communicates with management, and provides accountability. A board will periodically meet, and the duration and number of these meetings will depend on the stage of the company. Several good practices include providing materials to directors in advance of the meeting and setting aside at least one meeting annually to discuss strategy and envision a path forward. Some companies have also found it helpful to appoint a lead director, as a separate position from the CEO or Chair, who will organize information and deal with the meeting logistics. This can relieve some of the pressure from the CEO, who may be too busy running the company to run the board. The board plays a unique role and there is fine line between oversight and management. The board often wants to be remain visible to the company, and an established process and policies can help decide what decisions go to the board and what decisions the CEO can make. Dinners and other social events with board members and management can also help to remove the barriers and anxiety surrounding board meetings.
How much should a board member be paid?
There is a wide variety of ways for companies to compensate directors, and each company will need to tailor compensation to the current stage of the company. Often, early stage companies and startups will only offer equity as compensation. Cash compensation is more common in larger, publicly traded companies. When crafting director compensation, it is important to consider the time commitment required of the directors. Further, a director should not view the compensation primarily as a source of income. Directors need to have the freedom to push back on important decisions without the fear that their opinion could jeopardize their position and income.
Gennari Aronson would like to thank our panelists:
– Patricia Negron, Executive Advisor, former Director Nu Skin Enterprises
– Joe Caruso, The Bantam Group
– Caleb White, Board member, CEO Advisor, Newport Board Group
– John Nies, Managing Partner, JMH Capital, LLC
– Travis Drouin, CPA, Lead Partner-Audit, Moody, Famiglietti & Andronico
and our co-sponsors, Newport Board Group and Moody, Famiglietti & Andronico, for such a successful event. If you are interested in learning more or attending one our future events, please join our mailing list by contacting firstname.lastname@example.org.