หน้า 254
Objectivity is particularly valuable contribution of outside directors. They can look at issues more dispassionately than can insiders who are involved in daily decision making. Outside directors, for example, are freer to evaluate and to question a firm’s ethical standards. Some operating executives, without the scrutiny of outside directors, may rationalize unethical or behavior as being in the best interest of the company.
In a family business, an outside board can help mediate and resolve issue related to leadership succession, in addition to providing more general direction. As outsiders, they bring to the business a measure of detachment from potentially explosive emotional differences.
Working with outside board members is not always easy, but an entrepreneur who is advised by the board to make tough decisions may find that those decisions provide the subtle (or-not-so-gentle) pressure required to move the business forward. For example, they may keep bringing the conversation back to issues that are easy to avoid, such as the need to build long-term relationship with important individuals in the banking community or the value of converting intentions for the company’s future into a formal business plan that can be studied, debated, perfected, and used as a tool attract resources to the enterprise. Entrepreneurs often spend as much as 20 percent of their time on board-related activities, but the times commitment is worth the cost if the directors are doing their jobs well.
The nature and needs of a business will help determine the qualifications required in its directors. For example, a firm that faces a marketing problem may benefit greatly from the counsel of a member with a marketing background. Business prominence in the community is not essential, although it may help to give company credibility and enable it to attract other well-qualified directors. Having a “fat Rolodex” can only be beneficial, as directors with influential business contacts can contribute greatly to the company’s performance.
After deciding on the qualifications to look for, a business owner must seek suitable candidates as board members. Effective directors are honest and accountable, offer valuable insights based on business experience, and enhance the company’s credibility with its stakeholder (especially customers and suppliers). Suggestions for such candidates may be obtained from the firm’s accountant, attorney, banker, and other associates in the business community. Owners or managers of other, noncompeting small companies, as well as second-and third-level executives in large companies, are often willing to accept such positions. Before offering candidates on the board, however, a business owner would be wise to do some discreet background checking.
COMPENSATION OF DIRECTORS
The compensation paid to members varies greatly, and some small firms pay no fees at all. If compensation is provided, it is usually offered in the form of an annual retainer, board meeting fees, and pay for committee work. (Directors may serve on committees that evaluate executive compensation, nominate new board members, and oversee the work of the company’s auditors.) Annual retainers for board work at small businesses typically range from $5,000 to $ 10,000, and board meeting can run from $500 to $2,000 per meeting. These costs to the firm are usually in addition to reimbursements for travel expenses related to board meetings and the financial burden of providing Directors and Officers Liability Insurance, which protects board members if they should be sued in the course of carrying out their duties as directors. Sometimes board members are also given a small percentage of the company’s profit for their participation, and some cash-strapped businesses may grant them stock (often 1 percent, but this could go as high as 2 percent or more to lure top talent) in lieu of compensation. But keep in mind that some directors may serve for free because of their interest in seeing a new or small business prosper. This is not uncommon.
The relatively modest compensation offered for the services of well-qualified directors suggests that financial reward is not their primary motivation for serving on a board. Reasonable compensation is appropriate, however, if directors are making important contributions to the firm’s operations. In any case, it is good to keep in mind that you usually get what you pay for.
หน้า 254
Objectivity is particularly valuable contribution of outside directors. They can look at issues more dispassionately than can insiders who are involved in daily decision making. Outside directors, for example, are freer to evaluate and to question a firm’s ethical standards. Some operating executives, without the scrutiny of outside directors, may rationalize unethical or behavior as being in the best interest of the company.
In a family business, an outside board can help mediate and resolve issue related to leadership succession, in addition to providing more general direction. As outsiders, they bring to the business a measure of detachment from potentially explosive emotional differences.
Working with outside board members is not always easy, but an entrepreneur who is advised by the board to make tough decisions may find that those decisions provide the subtle (or-not-so-gentle) pressure required to move the business forward. For example, they may keep bringing the conversation back to issues that are easy to avoid, such as the need to build long-term relationship with important individuals in the banking community or the value of converting intentions for the company’s future into a formal business plan that can be studied, debated, perfected, and used as a tool attract resources to the enterprise. Entrepreneurs often spend as much as 20 percent of their time on board-related activities, but the times commitment is worth the cost if the directors are doing their jobs well.
The nature and needs of a business will help determine the qualifications required in its directors. For example, a firm that faces a marketing problem may benefit greatly from the counsel of a member with a marketing background. Business prominence in the community is not essential, although it may help to give company credibility and enable it to attract other well-qualified directors. Having a “fat Rolodex” can only be beneficial, as directors with influential business contacts can contribute greatly to the company’s performance.
After deciding on the qualifications to look for, a business owner must seek suitable candidates as board members. Effective directors are honest and accountable, offer valuable insights based on business experience, and enhance the company’s credibility with its stakeholder (especially customers and suppliers). Suggestions for such candidates may be obtained from the firm’s accountant, attorney, banker, and other associates in the business community. Owners or managers of other, noncompeting small companies, as well as second-and third-level executives in large companies, are often willing to accept such positions. Before offering candidates on the board, however, a business owner would be wise to do some discreet background checking.
COMPENSATION OF DIRECTORS
The compensation paid to members varies greatly, and some small firms pay no fees at all. If compensation is provided, it is usually offered in the form of an annual retainer, board meeting fees, and pay for committee work. (Directors may serve on committees that evaluate executive compensation, nominate new board members, and oversee the work of the company’s auditors.) Annual retainers for board work at small businesses typically range from $5,000 to $ 10,000, and board meeting can run from $500 to $2,000 per meeting. These costs to the firm are usually in addition to reimbursements for travel expenses related to board meetings and the financial burden of providing Directors and Officers Liability Insurance, which protects board members if they should be sued in the course of carrying out their duties as directors. Sometimes board members are also given a small percentage of the company’s profit for their participation, and some cash-strapped businesses may grant them stock (often 1 percent, but this could go as high as 2 percent or more to lure top talent) in lieu of compensation. But keep in mind that some directors may serve for free because of their interest in seeing a new or small business prosper. This is not uncommon.
The relatively modest compensation offered for the services of well-qualified directors suggests that financial reward is not their primary motivation for serving on a board. Reasonable compensation is appropriate, however, if directors are making important contributions to the firm’s operations. In any case, it is good to keep in mind that you usually get what you pay for.
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