Board Compensation

21 December 2007 by Grizz.

Board Compensation
There exists never a more apt example of the old saying "you get what you pay for" than when it comes to compensating your Board of Directors.

Companies, especially startups, need to look outside their own organizations for fresh perspectives on just about every aspect of running the firm. Startup CEOs need to be able to turn to a small group of motivated, objective, and (hopefully) smart set of folks for advice.

You can call them an advisory board if the members are unwilling to take on the liability a corporate board position brings; nevertheless you need this group of folks to be motivated.

Since small firms don’t have the resources to compensate their board with cash (retainer, meeting fees, travel, expenses) the very least you can do is match the board’s fortunes with that of the firm by offering stock and/or options in the company. Treat the board stock (option) allocation just like the employee bucket (first right of refusal on repurchase, vesting schedule, etc).

Don’t make the mistake of thinking you’ll engage quality people without motivating them. It’s axiomatic that if someone says they don’t need to get paid or compensated in any way, that you’ll get what you pay for.

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