How to Build a Balanced and Effective Board of Directors Throughout the Corporate Life Cycle

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How to Build a Balanced and Effective Board of
Directors Throughout the Corporate Life Cycle
A presentation by John Thomas Stoel Rives LLP

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Purpose of Board of Directors

• All companies must have a board of directors.
• The companys business and affairs are managed
  under the direction of the board, and all
  corporate powers are exercised by or under the
  authority of the board.

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Types of Boards

• Working boards These boards actively work
  with management to accomplish company objectives.
  They meet frequently and offer substantial
  ongoing support to management.
• Reporting boards The boards are less active
  and meet less frequently (e.g. four to six times
  a year) than working boards. They typically
  meet to discuss status reports and do not have
  much to say if the company is performing to plan.

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Board Members

• Characteristics
• Most members should be
• Independent
• Well-connected
• All members should
• Have experience in the industry
• Understand entrepreneurship
• Know the company
• Be able to read and understand financial
  statements
• Want and have the ability to make a significant
  contribution

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Board Members (cont.)

• Where to find them
• VCs or other investors
• Investment bankers, legal counsel, accountants
• Executives of key customers, vendors
• Industry associations

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Size of Board and Board Committees

• Size of board generally is a function of the
  stage of the company and capitalization structure
• Types and composition of committees
• Audit
• Compensation
• Nominating and Governance
• Executive
• Function of committees

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Board Meetings

• Frequency
• Preparation
• Send out director books one week to 10 days
  before meeting
• Include agenda, draft minutes of last meeting,
  financial statements, organization reports,
  proposed resolutions

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Board Compensation

• Stock options or cash
• Depends on stage of company
• Should pay out-of-pocket expenses for meeting
  attendance
• DO insurance

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