How to Build a Board

Boards are integral to a company's success. But not all boards are made equal. Many venture-backed companies have boards that are just the founders and investors. Not a ton of value can be derived from a board with this arrangement (though you can get lucky).

I've mapped out some considerations to make when creating (or joining) a board. This is beneficial for both the creator and the member, as it ensures some real thought has been put into inspiring productive interactions while mitigating liability.

Deciding on these ahead of time will help you define what type of board you need and who should be on it. It also establishes a level of consistency that your members will appreciate and respect, ultimately leading to higher quality membership and advice.

Considerations

What type of board will this be? There are many to choose from: activist, consultant, informational, rubber stamp, participating, or mushroom (kept in the dark and fed crap).

Member count. What's the insider-to-outsider ratio?

Company type. Is it public or private? C corp or S corp?

Current members and their backgrounds. What are the strengths and weaknesses of each member?

Current company officers. Are there any family members (red flag)?

Board structure. Who's the Chairman? Who's Secretary?

Communication style. Monthly emails with lots of detail? Quarterly calls?

Frequency of meetings. Monthly? Quarterly? Annually?

Meeting location. In person or telephone, Skype, etc.

Meeting notification. How much advance notice? Is an agenda sent ahead of time?

Security. Is there a volatile member? It can happen. Map out a security plan if someone is uncomfortable.

Legal counsel. What's available? What's necessary? How will minutes be recorded?

D&O insurance. Anyone who has been through a lawsuit in their day will require this.

Compensation of board members. Compensation for being a member, or just travel/lodging expenses? Or nothing at all?

Lawsuits against the company. Historical and pending.

Mission/vision of company.

Corporate performance. Current market share, conversion rates, growth potential, team makeup, etc.

Strategic planning. Review the plan for the next one to three years and any goals or milestones that are part of this plan.

Financials. Audited, preferably.

Debt. Any lines of credit? Current debt-to-asset ratio?

Transparency. Are employees aware of the company direction? Are some members kept in the dark on issues that others are aware of?

Executive compensation. How are C-level executives compensated? Equity? Salary + performance bonus? Just salary?

Standards and values of the company.

NDA. Are all members required to sign one?