10 Tips for Forming a Board of Directors
Join us at Entrepreneur magazine's Growth Conference, Dec. 15 in Long Beach, Calif. for a day of fresh ideas, business mentoring and networking. Register here for exclusive pricing, available only for a limited time.
Entrepreneurs who want to take their business to the next level may eventually come to the conclusion that they need a board of directors. But what does it take to form an effective one?
Julie Garland McLellan, a leading governance consultant and the author of the new book Dilemmas, Dilemmas II, is happy to show entrepreneurs how to do just that. The boardroom authority has lots of experience, having spent a lifetime resolving conflict in the boardroom and examining different modes of raising capital.
Here are Garland McLellan's top 10 tips for recruiting and retaining a board:
1. Use a crystal ball: Think long term and recruit directors who can govern the company you aspire to grow into rather than the small business you might be now.
2. Find a go-to guy or gal: Have at least one director who understands boards and governance (preferably one who is trained or chartered by the National Association of Corporate Directors). Don’t rely solely on the lawyers and accountants to have governance skills.
Related: Growing Your Business in Management
3. Create job descriptions: Establish a clear job definition for directors (executive and non-executive) and define the role the board will play in strategy, risk management, etc.
4. No playing favorites: Insist that all directors recognize their duty to the company as a whole (or all of the shareholders) rather than play a limited role of safeguarding the interests of one shareholder — even if it’s your biggest investor.
5. Include a variety of flavors: Build a team that possesses a range of skills and diverse backgrounds in order to get different perspectives on each strategic discussion. [revised]
6. ‘Yes Men’ (or Women) need not apply: Select directors who would quit the board if they disagreed with a course of action you were taking.
7. Lean toward like-mindedness: Seek consensus on all decisions, not majority voting, and be sure that all directors know how to assess issues from the perspective of the stakeholders and what is right for the company.
8. Draw that imaginary line: Be clear about the differing roles of the chairman and CEO — and don’t try to combine them in one person.
9. Remuneration requires research: Pay a fair and responsible equivalent, and seek expert advice if you need it.
10. Boardroom hierarchy: Remember that the CEO reports to the board; be ready for a challenge and embrace the collective wisdom and enhanced discipline.
What advice do yo have for for creating a board of directors? Add to this list in the comments below.