If you’ve chosen a corporation as the structure for your business you need to have a board of directors. If chosen well these people can be a huge asset to your company and help your business become more successful. Choosing the wrong people can be a big setback, sucking time, energy and resources away from managing a business and towards a malfunctioning board.
A board of directors is elected by stockholders and it oversees the corporation’s management. Daily functioning of the business should be left to executive officers recruited and retained by the board. Major decisions affecting a business should be decided at the board level.
If you have a new business you need to find directors. If you have an existing company after a board member leaves you may need to find a replacement. In either case, here are some things to think about.
- Find someone you trust. A board member will be privy to the company’s innermost secrets. A board member who uses his or her position for personal gain, perhaps by starting a competing company or working for one, would be a huge problem. Though this could be grounds for legal action against this individual, the threat of a lawsuit might not necessarily prevent the person from trying to cash in on his or her access to the company.
- Those to avoid: VentureBeat lists The Do-Nothing, The White Flag (avoids confrontation), The Cabalist (his or her personal agenda is foremost), The Meddler (focuses too much on details) and The Pontificator (just wants to hear himself talk).
- Are there too many board members? Do meetings get bogged down because too many people are involved? Is it difficult to reach a decision because of so many opinions? A larger board will also probably be less engaged with the business.
- What skillsets you should be looking for in board members depends on the maturity of the business. Individuals whose skills are especially helpful for a startup may not be so helpful with a mature, established business. Board members should also have a mix of skills that complement each other and members of management.
- A board member should be a good fit with the culture of the business. Is the culture dominated by those with strong opinions or run by consensus?
- How much compensation should a board member receive? If you want skilled, experienced people their time is very valuable. It will take a commitment by a board member to become engaged, do the homework necessary to make informed decisions and attend and participate in board meetings.
It’s a challenge not only to get the right people but to have the board function well. There are many dynamics that are present when a board of directors operates. Members have different personalities, skills, engagement levels and management skills. Some will be more willing and able to put in time and effort than others. There may be differences of opinions on important issues. How a chair runs the board and its meetings may annoy or irritate some members.
If you have questions about board members, how a board should function or potential legal issues involving current or past board members involved in your business, contact our office so we can talk about the issues, the laws that would apply and what could be done to protect your company’s interests.