Board of directors · Board member

Who makes the best candidate for an independent (3rd party) board seat?

D Worthington Founder at Loop Global

August 31st, 2015

Is it a relative, market expert, or someone else?

Thanks to all in advance!

Jacob Kojfman Experienced technology and corporate lawyer, focusing on SAAS

August 31st, 2015

definitely not a relative.  They would have some sort of bias. Someone with either market expertise, start-up expertise or a financial interest without a connection to anyone other board members.

John Sweet Business Strategy, Technology and Innovation

August 31st, 2015

This is a great question for good corporate governance.  An independent board member (or "outside director") is like all other members of the board, making decisions to serve the best interest of the shareholders as a whole -- except that outside directors are intentionally free of all affiliations, financial interests, and other ties which might bias the director and prevent him or her from exercising completely impartial judgment with regard to any matter before the company.   

For this reason, outside directors do not hold operating roles with the company.  Ideally they will not have strong ties (and certainly no fiduciary duty to) any one group of investors or other shareholders in the company (including founders).   Outside directors often own minimal stock or equity in your company, sometimes taking sitting fees as their only compensation.  They should have few financial or operating relationships with your company’s immediate trading partners.  They may even be drawn from completely different industries, freeing them to render perspectives and exercise discretion that other members of the board may not be capable of delivering.

The "best" candidate for an outside director position will be highly specific to your firm - taking into account its industry, its stage of maturity, its exposure to risks and opportunities, and its ability to attract prospective board members.

Corporate governance is an interdisciplinary endeavor.  In addition to any business requirements that you might apply to your organizational strategy and to the election of an outside director, you will also want your corporate counsel's advice when defining the ideal profile of an independent board member for your company.

I hope that helps!

John

Mark Silva Finance & Operations at KITE

September 1st, 2015

Depends on your objectives with this role and with your board. Beyond governance, I've established boards early as a way be more accountable, strategic and be a better, more effective CEO. 

To unpack each of these: 
  1. even though I've held governing ownership of a company, I have created boards to enforce the cadence of short-term focus and execution 1/4ly reporting requires balanced with... 
  2. running board meetings to anticipate and manage future needs and the most strategic opportunities and...
  3. stay open for the objectivity an outside board member offers. 

Based on these objectives it's important to find an outside board member that matches qualities you need including: superior domain and/or business expertise; equal or greater intensity; strong moral compass; passion for the mission and opportunity; shared commitment to building a breakout company.

Also based on these objectives, I've kept my boards small for as long as I can. More voices and potentially different agendas don't improve the performance of a board. A strong, small board can increase potential that early investors take an observer role vs requiring a board position. Long way to say that the 3rd/outside board role should be selected carefully and address a wide range of objectives.

For my most recent company I found a domain expert, experienced operator, mesa-level brainiac, VC and invested passionately in our space. In a word, a Unicorn. He challenges in a great way and am confident I will execute better as a CEO. I wish the same fortunes on you. As I recently said quoting the Foo Fighters, "you gotta promise not to stop when I say 'when'."

June Choi CEO/Founder, Serval Ventures

September 1st, 2015

Depends on who you have so far, their roles and motivations/drivers as a board member. The board should be balanced to safeguard the company, so the makeup of the board will change as your company evolves. At this point, I'm guessing your company is small, so I suggest you actually look for a range of qualities rather than skills. Someone who fits your culture, who is passionate about the company however you assess that, someone willing to 'work', someone who will use their network for you, someone who can think and perform in several roles.

Happy to do a short advisory session if that helps. Good luck.

Richard Lindenmuth Verto Partners Founder - Interim CEO at Styrotek

August 31st, 2015

Advisory Board requires supporters a Board requires independence, operating, financial and coaching skills to develop a strong successful organization

D Worthington Founder at Loop Global

September 15th, 2015

Sorry for the delayed response. 

Thank you all for the insight! 

With the help of your comments, I now have my eye on a few candidates.