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is the governing body of a corporation. It is elected by the shareholders and, in turn, elects the company's officers. The board of directors sets the direction of the company and oversees the activities of its of officers. Investors often require a seat on a company's board of directors as a condition to funding. The configuration of boards of directors varies greatly from company to company. Boards can consist of as few as one individual or as many persons as the company's bylaws permit the shareholders to elect. Many entrepreneurial companies have small boards consisting of the company's president or the president and one or two key shareholders. Others contain many members and include general business advisers, industry experts, and others with skills to lend to the company. The size and configuration of a company's board of directors usually depend in large part upon the founder's method of operation and the concessions he has had to make to raise money. Company boards also differ in the degree to which they become involved in the management of a company. Some consult regularly with the company's officers and set specific directions for its operations. Others may meet regularly but function more as sounding boards for management, becoming involved only at the request of management and then usually only to approve a specific action. As with the size and configuration of a board, the method of its operation usually reflects the personalities of the individuals involved. If the company has a strong chief executive officer and profitable operations, the board may be relatively quiet. However, if the board members have a significant stake in the company's success, they may stay very active with the company even when it is doing well. What's the best configuration for a growing company's board of directors? The answer depends in part upon the talents of the company's officers and its success in attracting outside board members who can add significantly to the company's prospects. As a general rule, however, smaller boards are easier to work with than larger ones and also tend to be more actively involved in the companies they represent. Too many members on a board can create inertia, making it difficult to call a board meeting and difficult for the board to arrive at a consensus when it does meet. As a result, entrepreneurs should try to keep their boards small, inviting only those people to serve as directors who have the interest and the time needed to devote to the company's affairs. Members should only be added to the board if they are required to complete a substantial funding or important contract, or if their contributions can add significantly to the strength of the company. See: Board Committees, Bylaws, Charter, Control, Cumulative Voting, Stock Committee. |
