When you’re launching a new corporation, you’ll continually learn as you go—and by building a qualified Board of Directors, you can gain access to support and mentorship, and avoid many of the missteps that you may otherwise make without such guidance.
Many company presidents credit their business’ Boards of Directors for helping them recognize market opportunities, find the right employees, cut unnecessary costs, and build priceless industry connections. But how can you put an effective board together? Here are a few strategies for success:
Before asking your contacts to join your board, it’s important to specify exactly what they will be committing to. For instance, do you hope to have board meetings quarterly, or as often as biweekly? Do you anticipate that each board member will tap into his or her own personal networks to help you drive business? And, importantly, what is the incentive for each Director? In some cases, particularly if you have hopes for an eventual public offering, company stock may be a good reward; in others, it’s more appropriate to offer cash compensation, which could range from anywhere from $100 to $1,000 or more per meeting. Some may be willing to serve without compensation as an act of good will, but it’s important to set expectations from the start.
When requesting a meeting with your Board of Directors, it’s important to prepare in advance and set specific goals for the meeting, so that you’re not wasting your directors’ time. For each meeting, set a specific discussion topic: For instance, “How can we increase sales by 20% over the next quarter?” In order to receive helpful guidance, you’ll need to give your directors access to your company’s financial data and sales history—so you may want them to sign a non-disclosure agreement as a part of their orientation.
It may also be helpful to come up with a set of more specific questions for each director to answer over the course of the meeting. It is also important to record the discussion at each meeting, either through written minutes or an audio recording.
By putting time and care into creating an experienced Board of Directors, and ensuring that each meeting focuses on a topic specific to your business’ growth, you’ll gain the benefits of your directors’ experience and wisdom to help you quickly scale your own company.
THE AUTHOR OF THIS BLOG ARTICLE IS NOT A LAWYER AND HARVARD BUSINESS SERVICES, INC. IS NOT A LAW FIRM. THE ARTICLE ABOVE IS NOT INTENDED AS LEGAL ADVICE AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. THIS SHORT ARTICLE IS STRICTLY TO MENTION SOME ASPECTS OF DELAWARE’S CORPORATION LAWS AND/OR LAWS RELATING TO OTHER FORMS OF ENTITIES WHICH YOU MAY NOT BE FAMILIAR WITH. WE RECOMMEND THAT YOU CONSULT WITH A LAWYER BEFORE FORMULATING A STRATEGY WHICH WILL BE SUITABLE FOR YOUR SPECIFIC CASE.