When Should I Bring Outsiders
Onto the Board of Directors?
by John B. Elstrott, Ph.D.
Emerging new ventures and even long-established, closely held family businesses sometimes struggle with the decision of when and why they should bring outsiders onto their boards of directors.Public companies are required to have very active and accountable boards of directors, but privately owned companies have a choice regarding how active and involved they want their boards to be.A company is least likely to need a proactive board when it is 100% owned by one shareholder and is unlikely to experience rapid growth.
If a private company has multiple shareholders or is going through a period of rapid industry growth or change, then an outside board can often be a valuable asset to the CEO and the shareholders.It is best not to ask your company’s banker, lawyer, or accountant to be on your board.You are already benefiting from their advice and they may have a conflict of interest.In most cases you also don’t want non-shareholder managers on the board.You may invite key managers to participate in appropriate parts of the directors’ meeting, but there will often be times when it is best not to have them present. More…