Board of Directors compensation?

November 01, 2021

by an investor from Carnegie Mellon University - Tepper School of Business in Philadelphia, PA, USA

I'm a self-funded purchasing a business outside of my industry of expertise and would like to put together a board of advisors to advise me as I take over the business. How have people compensated the advisors? I was thinking a mixture of equity and annual compensation since they won't get dividends until a few years out. How should I be thinking about it? I want it to be fair for everyone and give incentive to the advisors to be engaged.

Reply by a professional
from Dartmouth College in Los Angeles, CA, USA

I would not recommend cash compensation, other than expense reimbursement. If you're talking about a public company that's different. If there is an equity plan then it makes sense for board members or advisors to receive options/restricted shares/ phantom shares, but these amounts should be around .5% or less, unless they are devoting significant time to the company, which is unlikely. These individuals won't be on the ground each day for the business so you typically want to reserve larger grants for key employees, but every situation is unique.

Reply by an investor
from Michigan State University in Chicago, IL, USA

Hey folks, I've seen this question come up several times and had it myself. I put together a quick survey. It would be great for folks to take 5 minutes to fill it out, and then I'll share the results here and on twitter.

https://docs.google.com/forms/d/e/1FAIpQLSegPn32vRIyY54F0ZOVV03F5RSZeV-GShbqHQtGgWng7n-3DA/viewform?usp=sf_link

+10 more replies.

Join the discussion