Monday 10 May 2010

Role of Board of Directors

2009-2010 Texas Tech Foundation Board of Directors
I'll write a few posts on Board of Directors (BoD), because there are some common misunderstandings about its role and function.

Board of Directors corporate governance tool of choice for most funded startups. It's a common way to formally include investors in running the company. They are other models available, but almost never used in the startup world. 

If you want to find out more about formal definitions and duties of BoD, check the Wikipedia, however for practical purposes the advantages of the board is:
- it gives you the chance to brainstorm with your investors and other wise man about your performance and plans once a month
- it brings all investors at the same table and forces them to switch off their cell phones
- gives legal protection to the management for certain decisions (you need the approval of the board, hence investors)

All other roles are important (appointing of the ceo, approving the budget ...), but rarely on a monthly basis.

If you're an entrepreneur don't view the board just as a once-a-month-reporting session. And if you're an investor, don't push entrepreneurs with unimportant details. Take the time to discuss the business and its course. Reporting can be done on paper (and it should be done upfront), discussion almost never.
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