Are Your Directors Directing? Part 1
Updated: Mar 22, 2021
You've finally made it to the big time. Your company is ready to get outside investors and really ramp up growth or you're already public and need to inject some new blood into your team. Its time to bring in the Directors. The Board of Directors are supposed to be fiduciaries for the interest of the shareholders and the company's health. More often than not, they provide very little tangible benefit to small companies. Sadly, many small companies fall prey to the Paper Tiger Director. The man/woman who has an impeccable resume but seemingly overqualified for the position you are offering, yet they embrace the opportunity with exuberance of a teenager who just got the latest gaming platform. Before asking one of these individuals to join your board of directors, you should have a very clear understanding of what they are willing to bring to the table and offer your company. Are they willing to share their "rolodex"? Will they provide you with time when you need it? How much are you offering them in equity and quarterly paychecks? Do you know what a company your size should even offer a potential director? Overpaying is commonplace and many small companies feel that in order to attract talent they need to overpay for that talent. If you are going to overpay, you better have a clear understanding of what you are receiving. Here is a short list of important duties that need to be covered by your director: Representing Shareholders' interests Reviewing Quarterly reports Reviewing Monthly Management Reports for adherence to budgets Voting on Executive Compensation that is fair to Executives and Shareholders Voting on Equity plans for Executives and employees Addressing Ethics and Diversity policies Reviewing major agreements that impact the Company's long-term prospects These are the minimum areas that Directors should cover. If you aren't getting the minimum from your directors you need to look for replacements.