2017-03-15 00:00:00 Partners and Related Parties English Determine who you need to find for your board of directors and get tips for what to look for and how to avoid bad board members. https://d1bkf7psx818ah.cloudfront.net/wp-content/uploads/2017/06/08214036/board-members-pose-at-studio.jpg What To Know When Choosing A Board Of Directors

What To Know When Choosing A Board Of Directors

2 min read

A corporation’s board of directors acts as the governing body of your business. Your board helps you make decisions as CEO so you can protect shareholders and grow your company. A board can also help prevent mistakes or missteps in areas where you lack experience. An advisory board, which doesn’t have fiduciary responsibility, can be a beneficial first step for startups. As you start to put your board together, remember that your corporation must have at least one director elected by shareholders. Here’s a few suggestions for how to recruit the right board for your small business:

What Does Your Board Need?

The number of board members you require is specified in your articles of incorporation. Limit the board to a manageable number, keeping the total number odd for voting purposes. Small company boards typically have up to seven members, while larger companies have up to nine. To help you decide what roles you need fulfilled, ask yourself these questions:

  • What are you good at? Where do you fall short?
  • Where does your business excel? In what areas does your business need support?

For instance, if you run a small accounting firm, you might be great at finances already. However, perhaps you could use advice about marketing or legal or business strategy. Once you determine particular areas of need, you can start looking for specific people to meet those needs.

Whom Does Your Board Need?

Next, think about the backgrounds and expertise your board members might demonstrate to meet your needs. You’ll want board members who have experience in your industry, as well as people with a variety of relevant expertise and backgrounds. If you’re running a nonprofit organization, you may want members who are passionate about what you do, such as heavily involved volunteers. Cast a wide net, looking beyond people in your immediate networks. Make sure your board reflects diversity of gender, demographics and cultures.

How to Avoid Bringing on the Wrong Board Members

Treat recruiting board members as you would hiring your employees. If you can, use a recruiter, and create an interview process or plan prior to starting your search. Ask your potential board members to submit references, and take the time you need to follow up and make sure you’re finding the right people for the role. Don’t settle for a board member who doesn’t meet your company’s needs. Consider conducting background checks as you would for an employee, particularly if the board member in question is required to handle funds. Don’t be tempted to add friends and family to your board. Instead, only recruit people who add value to your board and to your business. Once you have a board in place, make sure each board member has a clear understanding of the responsibilities involved. If you give your new board members plenty of opportunities to add value to your company, you’re taking the right steps toward growing your business.

References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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