How Do You Recruit Outside Board Members? Seven Suggestions

Situation: A company wants to recruit outside members to its Board of Directors. Currently, all Board members are founders except for a single early investor. How do you recruit outside Board members?

Advice from the CEOs:

  • Board Member selection is a strategic matter. You want to have people on your Board who have done what you want to do strategically with the company.
  • A Board does not run the company. Board Members provide input and perspective to help the CEO make better choices while running the company.
  • Board Members have fiduciary responsibility – to the Shareholders, the government (to assure that the company is being run legally), to customers, to employees, and to vendors. Their role is to assure that the company does what it says it plans to do.
  • How affordable are Board Members?
    • Stock options are very feasible if you have little cash to pay salaries. Much will have to do with the prospective member’s buying into your vision.
    • You will need to secure Directors and Officers Insurance for Board Members – $3K+ per year per member.
    • The rationale behind payment in stock is for Board Members to have the same incentives for company success as shareholders.
  • Target remuneration of Board Members is, for a pre-IPO company $100K per year if the company is successful, but if not then $100K over 5 years. Members of the Audit Committee are generally paid about double what other Board Members receive.
  • Is there a downside of having numerous minor shareholders?
    • Not really, except perhaps nuisance. You run the company. As long as you retain majority share ownership, Board members can only advise.
  • Sitting on another Board is one of the best ways to improve your own abilities as CEO. Advising another CEO on how to run their company is a learning experience.

Special thanks for input on this topic to Bill Rusher, founder of Rusher, Loscavio and LoPresto.

3 thoughts on “How Do You Recruit Outside Board Members? Seven Suggestions

  1. Tom E. Muncy, CBI

    I have served on a lot of volunteer boards in the past and the most enjoyable has been and continues to be a local credit union with 9 members on the board. We have a “3 every year” rotation so we can continue to bring in fresh board members and new ideas. We look for skills in each member that match up with the issues that face on a continuing basis—accounting, law, human relations, business operations, etc., so that we have expertise within our group to make plans and key decisions. In addition, we have an annual retreat for a day to review the past year and set goals for the incoming year and invite our key employees for the morning review of the past year, and then have a board meeting informally to set goals for the next fiscal year and deal with any pressing issues that may come up on the horizon.

  2. Martin

    We used a couple of consulting companies to help us. I cant remember the name of one of them as it was some time ago but the other we are still working with Mckendry Consulting -Outsourced Sales and Sales consulting” They initially helped us with the board members and the CEO provided interim Board support until we found what we where looking for. Now they have helped us with outsourced sales resources on a contract to hire model. We have already transferred to VP of Sales and Director of sales to FT.

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