Mistakes to avoid with a startup board of directors by Martin Zwilling

Source link: https://www.forbes.com/sites/martinzwilling/2015/06/30/mistakes-to-avoid-with-a-startup-board-of-directors/#5e42ef1656fd
TL;DR: This article does a good job at outlining why having a board is important and warning of some common mistakes
How helpful?: 5/5
Topic Tags: Board of directors, governance
Relevant questions addressed:
Why should my company have a BoD?
What are some things to look out for when establishing a BoD?
Summary bullet points
Most entrepreneurs avoid setting up a BoD until a VC initiates that process
- BoD can be a great way for an early startup to enlist outside expertise
Common mistakes with Boards
- Too many or too few members
  - Three to five members to start
    - Too many are difficult to schedule and manage. Less than three is not a board
- Avoiding outside independent directors
  - Outside members provide really important context outside of people who are totally steeped in the day-to-day activity of the company
- Expecting the board to always support management
  - Primary purpose behind the board is to represent the interests of stakeholders and be the “boss” of the CEO
- Having the wrong management representation
  - Want to have, at maximum, two managers on the board
  - Board dominated by insiders/family members with little biz experience is not effective
- Maintaining little diversity
  - Business environment is quickly diversifying, so homogenous board will be insulating
- Failing to establish adequate structure
  - Board needs playbook to establish roles and responsibilities
  - Board should meet at minimum of four times a year
    - More often for critical issues
- Lacking commitment/trust in board decisions
  - Culture of trust and respect must be set from the beginning
  - Constantly arguing board will kill the company
If the company isn’t ready for a formal BoD, start with an advisory board
- Group of mentors w/ industry knowledge