Articles

There is No Need for A Board of Directors!

There is No Need for A Board of Directors!

by

Rodrigo J. Himiob, a Silver Fox Advisor

“Why would I need someone in a suit to tell me what to do? I dress casually and do not plan on wearing a suit.” Said John to me when the topic of forming a board of directors came up.

I politely asked him if the concern was being told what to do or whether he had to wear a suit. I was intrigued.

After many conversations, John started showing concerns that he would be judged and questioned by people he had imagined as smarter.

John had many conversations with his family members, and they agreed to form a board. “But with one condition. I will be the board chair.” Said John.

We have a new Chair

“Wonderful!” I said. “Can we start working on what you need to do?”

It became apparent that John did not know what it meant to be a board chair, and we would work with him to ensure his success. After a few months, I received a call:

“Rodrigo, it’s me, John. I want you to think about my buddy Scott (not his real name) for the board and maybe me as board Chair.”

“Sure, John, I can do that. Please have Scott fill out the forms or have him contact me. Given the importance of board members having good chemistry, he may be a great candidate. We must run this by your family members (other shareholders).”

John saw the candidates who had applied. Scott, John, and his family members were on the list, so he quickly dismissed them. They were unsure if Scott brought the depth the other candidates did or the experience to chair the board.

The new board would have an independent director as the board chair.

The new board

After review and deliberation, the family elected to have a five-member board: two family members and three independent directors.

In four years, the fiduciary board has supported the family in the leadership transition, strategic planning, and mentoring.

How can a board help?

Quite the contrary to the title of this article, a properly formed board of directors has been found to be a catalyst that propels a business to the next level. So how do they do this? There are various, among which are the three that are commonly present:

·        Duty of Loyalty – They act in the business's and its shareholders' best interests. At the values being carried through.

·        Duty of Care – They care for the business like any ordinary and caring person. This may mean having tough conversations and holding folks accountable.

·        Duty of Obedience – Ensure that the organization follows all applicable laws and regulations and complies with applicable requirements. This also includes business processes, procedures, and guidelines.

“At first, we thought this [forming a board and compensating the independent directors] was too expensive; today, we think of the value it has brought us.” – Family member.