Session leader: James Geshwiler
James asked the question: Why are you here? What’s on your mind?
Answers included:
- I’m here because I’m looking for directors
- I’m setting up my 1st board, looking for advice
- We have 2 insiders and 2 investors and are adding a strategic investor who wants to be on the board
- Want to know how to look out for the founder’s interests
- To learn how to find and cultivate high quality boards
- To learn how I get the most out of the board; I spend 50% of my time managing the board so this is important
- I see lots of boards that are not that active; how do you get them involved, get them engaged?
- Board members who do this for a living; how do you make this beneficial for the Company
- How do you navigate the issue of a board member who’s dealing with the issue of preferred stock vs common stock?
- I’ve seen a good board that taken us up, followed by a bad board that’s taken us down
James: Boards are incredibly relevant; I want to explore that.
There’s no training for board members.
The board is a team.
Companies evolve
1. infancy/exploration,
2. scaling/repeatable process,
3. early maturity/command and control,
4. going public
The company evolves; the board should too. Do we have permission and a process for that to happen?
To do this, you need to do an annual review of the board. Bring in an outsider to facilitate. Ask bankers, and others involved.
Company should have a page-long position description for the board seats. The annual review should take this into consideration for renewing each board seat.
Director has a duty to represent all the shareholders; acting as a fiduciary on all their behalf.
Who is holding the board accountable? is it the CEO’s job? This is very uncomfortable for a CEO.
It is the role of the Chair to set the agenda and run the meetings; also to control the Board.
Peer pressure is very powerful.
CEOs want to set the agenda, talk about what they want to talk about.
Specific homework assignments for each board member is a good idea; board members can contribute a lot.
Organized committees is a way to do this. (Comp committee, audit committee, etc.)
There needs to be a board strategy.
Having name recognition is one attribute; but they must contribute.
What’s the right size? Are there rules of thumb? Yes, don’t have the wrong size board.
We choose boards the wrong way, like ‘whoever writes the biggest check’.
Each side (entreprenuer – investor) chooses candidates from their own social network.
There is a norm of around 5…because this is a good size for a TEAM.
Consider setting up term limits.
Composition:
2 management
2 investors (or just 1)
1 outside (or 2)
The odd # is bogus, boards don’t take votes where there’s a split. Consensus building is an important aspect.
Recruit a Chair early; this person will own the job of Board Strategy. Your chair could/should be the best facilitator on the team. Might even be the person who talks the least…
It’s common to invite a new potential member as an advisor, and you can test the chemistry.
The CEO is facing a number of conflicts if he/she is in the Chair seat.
Exec Chair is someone who’s not the CEO but is in the Company with an operating role.
Our investor and we agreed that we needed an outside person to Chair the board; that was helpful.
Lots of companies do it without a chair, and that’s fine; the problem is, fine isn’t good enough.
Board Compensation:
1. Cash
2. B (stock)
3. Ego/social currency (ie the network)
The key issue is to align incentives with what you want from them.
Thanks to Drew Hannah for sharing her notes.
