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How Do You Select and Pay Board Members? Six Suggestions

Situation: A company has been advised to augment their Board of Directors. The principal objective is to access mentorship and advice, particularly in the areas of gaining critical mass and marketing. How do you select and pay Board members?

Advice from the CEOs:

  • If the principal needs are mentorship and advice in growth and marketing, pursue an Advisory Board first. Compensation for Advisory Board members is much lower and saves the need to purchase expensive Directors and Officers Insurance for Board Members. If, in the future, you decide to expand your Board, you can elevate your best Advisory Board members to your Board.
  • Offer Advisory Board members one-year service commitments. Particularly if the company is early-stage needs may change rapidly.
  • As to specific members, select Board members who will help you hold the company to its vision and mission, including a member who offers financial advice and experience for the CFO, a resources and benefits expert, and industry leaders. Align these selections with the business model of the company.
  • If your patent portfolio is a critical asset, consider an attorney with experience in infringement issues – as distinct from expertise in IP.
  • Compensation for Advisory Board or BOD members need not be uniform. Key advisors often are compensated more than strategic advisors. Enthusiasts may serve as advisors for free.
  • Stock compensation for Board members may be as low as 1%, pre-funding. They will be diluted as you go through successive rounds of funding. You may offer your chairperson more than regular members.