If you’ve decided a board of directors would be good for your business, what’s next?
In previous blogs, I’ve covered why privately-held companies can benefit from having a board of directors. After you’ve chosen to go with a board, your questions turn to how to manage it and how to work with the process.
One of the first keys is the selection of your board members. You want a great team. Typically, the members of an LLC or the stockholders in a corporation choose the directors. Sometimes the board is classified, meaning the different groups of stockholders get to pick the directors, but often a majority stockholder chooses them in a straight-up vote.
And who should be on the board? You have many options. Some companies want people from within the company. Often the president and other senior executives are invited join the board. Additionally, you may want some industry experts or others with vast business experience to be on your board. You want to look at how the board is put together and how everyone will interact.
With the directors in place, they need the ability to truly function and run the company. You want to give them proper authority. That requires good communication so that the board receives the information it needs.
To make the board work well, you also want to keep shareholders from meddling in its affairs.
Theoretically, under the governing documents of most entities, shareholders can at any time remove the directors and vote on a new board. You want to avoid this kind of power play because you want the board functioning independently of the owners. Keep an eye on directors as their roles, business experience and industry alignment change over time. You may want to revisit your board periodically and make sure you have the right composition of people. Board members likely will come and go over time, so always look at the balance of the team to make sure it’s the right team to get the job done for your company.
What are your thoughts on boards of directors? Is this something you’ve started to think about? Are you afraid to implement it for some reason? Join us in the comments below and let us know about your experience is.
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This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. Each case is unique. Past results do not guarantee future outcomes. This article should not be treated as legal advice to any person or entity. Freeimages.com/photographer Abdulhamid Alfadhly.
About the Author
R. Shawn McBride is the Chief Innovation Officer at McBride For Business, LLC. His signature keynote, The 3 Laws of Empowerment, gives audiences an entertaining look at how they can prepare, plan and protect themselves. You can email R. Shawn McBride or (214) 418-0258.