This article was originally published here on July 30, 2018.
A few weeks ago, our most recent portfolio company Mekonos held their first board meeting. With detailed agenda sent weeks in advance, the meeting went well and was productive for all. While being very impressed by how well first time CEO Steven Banerjee ran the board meeting, we at Good AI Capital also realized that it would be valuable to share insights and best practices we have learned from the meeting. We want to make this information available not only to our portfolio teams, but also to all new CEOs.
Elaine Heron, Purdue alumna, gives back through success, art
Incidentally, she, together with some of her esteemed colleagues — Michael Finney and Anne DeGheest — had already been developing guidelines for new CEOs. Based on their many years of board experiences, both as a board member and as CEOs, Elaine and others have provided great insights ranging from how to prepare for the board meetings to strategies in managing the board dynamics. Keen on making board meetings much more productive and less painful for all, Elaine has granted us approval to share their battle-tested experiences.
The following guideline, which is in its original version, is the first of our blog post series for board management. Working with our partners — investors, advisors, portfolio startups — we aim to use this forum to advance startup culture as well as leadership. To us, these are the core values that contribute towards the success of all companies. If you share the same passion for these values, we would love to hear from you
1. Avoid surprises
The CEO should introduce any important question at the board meeting before it must be approved. This is sometimes known as the “two bounce rule.” If there is not enough time during the board meeting, introduce the question by phone or by email significantly in advance. For phone calls, do not expect board members to answer those questions decisively during the call. Allow them to confer with other board members or do background research. It is best for the CEO to approach individual board members offline and explore the pros and cons in order to vet the problem, ultimately leading to an acceptable plan.
2. Repeat those numbers and details
Board members don’t live the company day‐to‐day as you do. To help them to be more engaged during the board meeting, you should not shun from repeating any board information — potential competitors, partners, essential facts about the companies, etc.
- Don’t overuse abbreviations or acronyms.
- Remind the members who the particular people are as they are being mentioned.
- Remind the members, as appropriate, of the number of outstanding shares and the post‐money of the last round. While this information is quite salient to you, some board members have been through tens or hundreds of funding rounds, and will not remember the details with the clarity you do.
3. Leverage your board for advice
The board is not just a governing body. It is also a great resource for knowledge, relevant experiences and connections that could help with strategic or personnel decisions. Leverage these resources to accelerate your company. Through the advisory sessions, it is also a great opportunity for the CEO to establish a lasting relationship with the board members.
4. Send your board package in advance
Your board members have many commitments you don’t know about; and they may even have back to back board meetings during board meeting “seasons” (Jan, April, July, Oct). Therefore, you will help them to be more prepared by sending out the board package at a minimum of three and preferably five days or more ahead. The board package does not need to be 100% complete; however, it should at least include the minutes of the last meeting and any other materials that need to be approved.
5. Schedule your board meetings ahead
Schedule board meetings well ahead (recommended 1 year) so that board members can work their schedules around the meetings. With such advanced planning, there will not be a lot of scurrying around to find dates at the last minute. For your board members, they will respect the schedule and should strive not to change a meeting date less than 3‐4 weeks beforehand. The final dates may still need to be revised from time to time, but it is important to have a starting point. Every board package should have a list of all the scheduled future meetings.
6. Attorney’s presence in the board meeting
Your attorney should be present at the board meeting to take minutes. Most will do this for free for startups. They can also answer questions that arise about stock and other legal matters. Often times, the attorneys can also share about ideas and best practices from the industries. For example, they will have good reference for information regarding stock packages for directors or hiring and licensing.
7. Encourage interactions between board members and non-board executive teams
Everyone benefits if board members know as much as possible about the business. To help the board, you should encourage and facilitate board/staff meetings outside of the regular board meetings. You can also consider having your team present for portions of the board meetings.
8. Develop compensation guidelines for employees
Work with your board and develop a compensation guideline for employees at all levels. Include both stock option packages and salaries as part of this guideline. And get the board to buy off on it. With such agreement in place, offers can be extended quickly without a lengthy board approval process.
9. Don’t fret about the “executive” session
Don’t worry if the outside (not company employees) board members want to have an “executive” session where your absence is requested. This is good governance and they may need to discuss your compensation or other matters which are more appropriately discussed among the outside directors only.
10. Focus on three key issues
You should focus on 3 key issues that will move the needle. Provide information and collect issues with the proposal beforehand. Don’t waste board meeting reporting data and looking at uneventful financials. Focus on strategy discussion.
11. Build the board human dynamics
A dysfunctional board is the last thing you want for any company. And having great human dynamics among the board members is the key to a successful board. One way to build the dynamics is to have meals (lunch or dinner) around the board meetings where board members can get to know each other. If you have the opportunity to select outside board members, look for people who have previously served on boards and are able to help you build a consensus.
Next time, we’ll dive into compensation committees, board observers and elements of a great board package.
The views, opinions, beliefs, conclusions, and other information expressed in this material is not given, verified, or endorsed by Square 1 Bank, a division of Pacific Western Bank. Instead, this material is solely the work of the author, and represents his views, opinions, beliefs, conclusions, and other information he wishes to present, in all cases without any manner of endorsement from or verification by Square 1 Bank, a division of Pacific Western Bank.
This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that the author believes to be reliable, but which has not been independently verified by the author or Square 1 Bank, a division of Pacific Western Bank, and, as such, we do not represent that the information is accurate or complete. The information should not be viewed as tax, investment, legal, or other advice, nor is it to be relied on in making an investment or other decision. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to this material should be construed as a solicitation, offer, or recommendation to acquire or dispose of any investment, or to engage in any other transaction.
All material presented, unless specifically indicated otherwise, is under copyright to the author or Square 1 Bank, a division of Pacific Western Bank, and is for informational purposes only. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied, or distributed to any other party, without the prior express written permission of Square 1 Bank, a division of Pacific Western Bank or the author. All trademarks, service marks, and logos used in this material are trademarks, service marks, or registered trademarks of Square 1 Bank, a division of Pacific Western Bank.
Square 1 Bank is a division of Pacific Western Bank, member FDIC.