First Time Board Member

February 19, 2023

by a searcher in New York, NY, USA

Last month I acquired a $35M manufacturing company, recruited a CEO to run the business, and joined the company's board (1 of 5 members). This is my first time being on the board of a business.

For those who've been on boards before, can you share any recommendations, playbooks, or readings that helped you be a successful contributor?

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Reply by an investor
from New York University in New York, NY, USA

Hi ^redacted‌ - thanks for the tag. And congrats^redacted‌ - it sounds like you are at a very exciting point in your journey. There are a lot of insightlful comments above, so I won’t reiterate those, but I wanted to highlight a few points: 1 - My view is that the ultimate job of the board is to support management in achieving the company’s goals. I know that there are oversight and reporting responsibilities, but I don’t think “measurement” is the key to being an effective board. Management reports to the board, so if management fails, then that is ultimately a failure of the board. I have seen my share of “gotcha” board members that are just looking to point out management’s mistakes. While there is a level of accountability, the key to a successful board is finding the best way to support management. I agree that “challenging” management is part of it, but only in a supportive / constructive framework. 2 - Running the company can be all-consuming for management, and management likely will get stuck in the weeds sometimes. The board needs to contribute at a much higher strategic level, and pull management up to that level. There are likely unpursued opportunities and unconsidered threats given management may be fully consumed with the day-to-day at times. The board needs to take the long-term, strategic view so that management is able to rise above the day-to-day. 3 - Having a board with a diversity of expertise and experience is very beneficial to management. While it is certainly helpful to have some specific industry expertise on the board, it is also helpful to have expertise from other disciplines in which management might not be as strong, such as accounting, finance, HR and IT. At larger organizations, you would likely have board subcommittees for Audit, HR, etc., but at an SME it is the board that should complement management in these areas. I'm happy to chat further about my experiences if that would be helpful.

Reply by a professional
from Villanova University in West Chester, PA, USA

Love everyone’s input so far. From a legal aspect, you’ll want to make sure that you’re upholding all of your duties and the terms of the operations of the business. So, you’ll need to thoroughly review the bylaws and articles of incorporation (if it’s a corporation, or the relevant documents if it’s another type of legal entity), make sure each corporate formality is followed, and uphold your legal fiduciary duties as a board member. These generally include the following (but may include others, or differ depending on the corporate governance documents): (i) the duty of care - which is a duty to act in a reasonable, honest, fair and informed manner (be well informed, prepare for meetings in advance, ask questions, be attentive, have a deliberative decision making process, etc.); (ii) the duty of loyalty - which is a duty to be disinterested, act on an independent basis, in good faith with an honest belief that you are acting in the best interest of the company and its stockholders (uphold confidentiality, act in the best interest of the company, act in good faith, avoid conflicts of interest, disclose and receive approval for any conflict of interest or personal interest), (iii) the duty of obedience - which is a duty to obey the company’s mission and goals and act in accordance with them (act in accordance with corporate governance documents, laws, company policies, board policies, etc. Happy to discuss this in further detail as there are a lot of nuances, particularly in important decisions.

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