Management Expert Susan F. Shultz What does a board of directors have to do with your small, privately held company? Everything.

The term "board of directors" conjures up high rise,roundtable meetings of humorless suits discussing fourth-quartershareholder reports for the largest corporations in the world.Boards are for big business, not small business. Right?

Susan F. Shultz, founder of SSAExecutive Search International (www.ssaexec.com) wrote The Board Book to dispute such notions.Boards are for every business, asserts Shultz, and in her book, sheexplains why both statutory and advisory boards can have a positiveimpact on all business and what the most common mistakes of boardmanagement are. We've asked Shultz to give us a quick primer onthe world of boards.

Entrepreneur.com: What'sthe basic definition of a board of directors?

Susan F. Shultz:Essentially, the purpose of a board is to address the big issuesand avoid the big mistakes. Legally, the statutory board isresponsible for the fiduciary operations of an organization, makingsure a succession plan is in place, and-the most importantresponsibility-the hiring and firing of the CEO. Recently, theresponsibilities of a board have expanded very dramatically toinvolve strategic input. Boards also serve as tremendousmultipliers by providing [small-businesses with] access to all thekey resources: partners, the financial community, and IPO,distribution, marketing and personnel experience, resources andvaluable expertise they wouldn't otherwise be able to afford orreach if [those experienced people] weren't sitting on theirboard.

		"Aboard is a pivotal success factor, and I don't understand whyevery company of every size, public and private, doesn't have aboard of directors to help them-especially small companies thatdon't have the resources of largecorporations."

A board is a pivotal success factor, and I don't understandwhy every company of every size, public and private, doesn'thave a board of directors to help them-especially small companiesthat don't have the resources of large corporations. If youdon't have a strategic board as a small company, you'realready in trouble and you don't even know it.

Entrepreneur.com: What'sthe difference between a statutory and advisory board?

Shultz: All incorporatedcompanies are required by state law to have a statutory board. And[since] it's a state law, [the specifics] depend on which stateyou're incorporated in. Statutory boards do indeed havefiduciary responsibility and because of that, they have the abilityto hire and fire the CEO. And they have full liability.

Advisory boards, [which are not legally mandated,] are awonderful way for smaller companies to test drive a board becauseso often, company founders, presidents and CEOs are [hesitant] tohave a board. With an advisory board, the CEO fires and hires thedirectors instead of other way around. An advisory board alsoallows a company to focus on strategy, without being diverted bythe minutiae of financial matters and regulatory matters. Plus,advisory boards have diminished liability.

Entrepreneur.com: Why do youfind entrepreneurs are apprehensive about creating a strategicboard?

Shultz: Boards aretremendously underused and underappreciated by small companies, andI think the reason is that founders and CEOs are afraid to havesomebody second-guessing their decisions. Too often, boards becomelittle more than cheering sections for whatever management wants todo. CEOs tend to see a board as a necessary evil; they want theirfriends on the board and they see the board as a nuisance. Soboards tend to be loaded with way too many insiders, paidconsultants, family members and cronies with interlockingdirectorships. The net result is the allegiance of these directorsis compromised and they just don't ask the hard questions.

The other big mistake is a lack of diversity. If you have eightor 10 people just like you sitting around the board table, you mayas well be talking to yourself. You really can't be responsiveto your constituencies and more important, you won't have thestrategic discussion that fast-forwards your business tosuccess.

Entrepreneur.com: How oftenshould boards meet?

Shultz: Most boards meet ona very regular basis. More and more is being demanded of directors,and it's estimated that a board director spends 100 to 150hours a year [with board tasks.] The director is responsible notonly at the time of the meetings but 365 days a year. Smallercompanies' boards will typically meet quarterly. However, thefounder and CEO should be in touch regularly in the interim to keepthe director kept informed between board meetings.