There are a couple of reasons you’d find it necessary to set up a board of directors.
If yours is a publicly held company, regulators would require you to have a board of directors. Also, if you’re seeking funding from a venture capitalist or some other financial institution, they might ask to have an independent board of directors to provide regulatory supervision. Or perhaps you recognise the benefits of having a top-notch board to give expert guidance and help you steer your company in the right direction.
Whatever the reason behind your decision to have a board, know that there are critical considerations to cover before proceeding further.
1. Consider experts to fill knowledge gaps
Whether your plans include mergers and acquisitions or international expansion, make sure you find executives with extensive experience and success in these types of ventures. Also, consider getting experts in businesses aligned with yours but not direct competition.
2. Prioritise those with board experience
When deciding on the board of directors’ composition, keep relevant experience top of mind. Aside from not needing any training to become members of the board of directors, executives with board experience already know what it takes to become efficient members.
3. Keep your board of directors manageable
Although it’s possible to start with just one director, five is a good manageable number. Always keep the number odd to prevent deadlocks during critical decision-making.
4. Get people who can commit to their role
Choose people who can invest a lot of time in your business and are ready to meet personally for important meetings or making decisions concerning any issues that may arise.
5. Form committees
Set up key committees designed to help with critical areas, such as regulatory compliance, finance and audit. Make sure each committee is headed by a chairperson with the relevant experience and skill set required to do the job well. This way, it’ll also be easier to see who’s taking their board of directors’ duties to heart.
6. Prioritise independence and mutual respect
As much as possible, you should have independent-minded members of the board who can separate blood relations or friendships from their role of protecting the interests of the company. This means that even if you’re the CEO or founder of the company, none of them should be beholden to you.
Having an effective board of directors can help you realise or even exceed your vision for your business.
However, before putting one together, make sure you go over the above points first and importantly, always seek professional advice.
If this article has inspired you to think about your own unique situation and, more importantly, what you and your family are going through right now, please contact your advice professional.