How to choose a board of directors for your business
There are many factors that come into play when choosing a board of directors.Each of the factors should be considered individually when putting together a board.A poorly constructed and supported board of directors can be huge negative for a company while a successful board of directors can contribute hugely to the overall success of the company.Here are 10 factors to consider when choosing a board of directors for your business:
1. The composition of the board: In a typical venture-capital backed company, the board consists of members of the management team, including the CEO, representatives of venture capital investors and independent outside directors. This can vary dramatically as the needs, size and makeup of the company is considered.Also the member's experiences are a key factor in how successful a board will be.While putting together the board each member's willingness must come into play.This willingness should be considered in terms of time and effort devoted and the willingness to be team players.These can be some of the most critical issues in your selection.
2. Avoid focusing on the details, all the time!While some detail-oriented people are needed to balance a board.The majority of the board should be able to focus on the majority of the issues.Flexibility in personality is key here.
3.Know your business plan. Most board members want management to formulate a reasonable business plan, take the board's comments on the plan into account and execute the plan or give the board sufficient notice of -- and commercially justifiable reasons for -- deviations from the plan. Failure to do these things creates tension. Therefore it is essential that the board of directors be made of people that can be worked with not just worked for.
4. Establish ground rules. Not every decision by management needs board approval. The board should be made of members who understand the rules and are willing to live by them.
5. Find members who are willing to share and receive information. Managers who give directors updates between board meetings generally find that the bonds of trust are strengthened. When information is withheld, mistrust often grows and board members do not have the tools they needs to perform their job. Board members also need sufficient time to review and evaluate information. Also board members must be willing to reciprocate with information.
6.Find members who are willing to address difficult issues. The board of directors will be nothing more than figureheads unless members are willing to take on difficult corporate issues and work hard to resolve them.
7. The board of directors needs to be organized into strengths.Again this plays into the need for all board members to be willing to be team players and work together.
8. Motivate board members. Typically, board members are directors several companies and may also run their own businesses. You are competing with others for their valuable time. Incentives may be financial, such as awarding stock options know what motivation the members on your board will need. In many cases, however, motivation is as simple as getting a board member excited about an interesting project.
9. Promote a bond. In many companies board members are fairly isolated from the company's team. Except for the CEO and the CFO, board members often spend little time with other team members. Integrating the board and the team is likely to result in a board that is more sympathetic with the goals and ideas of other team members. Take the time to introduce and acquaint your key players within the company to your board members.This will payoff in the long run.
10.Consider your liability issues. Directors have a fiduciary duty to the shareholders of the corporation. Directors who violate that duty can be personally liable to the shareholders. Therefore, management should make accounting, investment banking, legal and other experts available for questioning by board members. Also, consulting with board members about liability insurance and indemnification agreements shows management is concerned about the personal well being of board members, which concern is likely to be reciprocated. Most importantly with this issue it goes with out saying to choose board members who will not add any liability to your companies concern.