Every president or owner of a private company knows that it can be very lonely at the top.
Setting up a formal board of directors or an advisory board can not only reduce the loneliness but also significantly improve your company performance and valuation through good governance. Companies of any size can benefit greatly from good governance.
This past week, I spent three days in Winnipeg with a great group of people attending the Institute of Corporate Directors training for the Director’s Education Program. Despite being surrounded by mostly Winnipeg Blue Bomber fans, the course was an excellent learning experience for establishing governance best practices.
What Value Does A Board of Directors Add To A Privately Held Company?
A Board of Directors has a fiduciary duty to place the interests of the company ahead of their own interests. The Board has four main responsibilities to an organization, including:
- Appointing an effective Chief Executive Officer who can lead and manage the company and build a management team.
- Approving the strategy (or requesting other factors be considered) of the company that is developed and proposed by the CEO and the management team.
- Monitoring the strategy implementation and business performance.
- Assessing risk management strategies and plans developed by management.
The Board is an objective group of people with significant expertise and experience. They are there to help the President, CEO or owner to run a better company. Ideally, they would have experience in your industry and in working with companies larger than you.
The Board is not there to tell the CEO what he or she can or can’t do. That would extinguish the entrepreneurial spirit that drives every great entrepreneur.
What Does An Advisory Board Do?
An Advisory Board is not a formal legal Board and do not have a fiduciary duty to the corporation. That being said, an Advisory Board would be comprised of people who have significant expertise and experience and would advise the President and the executive team on any issues and opportunities facing the business.
They’ve been where you want to go so they have wisdom to offer on many of the challenges and opportunities facing your business today.
Who Is Not On The Board?
Your lawyer and accountant would normally not be on the formal Board or an Advisory Board because you already have access to them. They can and should present their analysis and recommendations of major issues to your Board.
In conclusion, good governance can come from a formal Board or an Advisory Board because they can help you put in place:
- Effective leadership and succession planning.
- Growth strategies.
- Monitoring of performance and results.
- Risk management plans.
If you’re experiencing that lonely feeling from being at the top, it may be time for adding good governance to your company.
To discuss how I can help you set up or improve your board of directors or advisory board so that you can increase your revenues, profits, and valuation, please give me a call at 1-306-992-6177.
Thanks for reading!