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The duties of a Board of Advisors do “not” include
oversight of the management of the corporation,
which reside with the Board of Directors. A Board of
Advisors will discuss and advise on issues such as
compensation, employee relations, management issues,
customer verticals, acquisitions and divestitures.
Advisory boards may deal specifically with certain
areas of the business such as marketing, strategic
planning, manufacturing, government affairs,
contracts/negotiations or management.
The Board of Advisors should have mutual interests
with your company, and may include industry
knowledge, same/similar customers without product
overlap, manufacturing experiences, volume discounts
with vendors, and vendor selection.
For example, if you sell into the government sector,
specifically The Office of Homeland Security, you
may look for CEOs and retired executives from
companies that sell into the same sector to leverage
their contracts, customers and overall experience
base. You may also look for credible politicians and
agency officials to bridge introductions to their
established relationships. It is important to
reverse the value proposition, and look for Advisors
who may benefit from taking an Advisory Board seat
with your company.
The compensation depends on a few variables: the
level of the executive you want to attract;
frequency of meetings; time commitment; specific
initiatives (i.e. customer introductions vs.
partnered vendor leverage); and the potential upside
that an Advisor would realize. If the Advisory seat
benefits both sides, then there are usually no cash
fees, and a small stock grant is issued on the first
anniversary of the appointment, and every year
thereafter coinciding with their service. Should the
relationship specifically benefit your company and
not the Advisor, then a cash fee between
$5,000-25,000 per year should be granted.
Additionally, a more significant stock grant should
be granted on the date of their appointment, and
every year thereafter coinciding with their service.
It is important to inform any person joining your
Board of Advisors on the level of commitment you
expect. Develop a confirming agreement which
includes the following terms: the number of hours
expected for each advisor to commit; compensation
(if any), and reimbursement of any expenses such as
travel; the length of the advisor’s term; a
description of why the advisory board is being
established and the advisors’ expected contribution;
and the date of the first meeting they will be
expected to attend.
A Board of Advisors can offer your company the
energy charge to win new customers or gain
credibility in a prospective vertical market. More
than any specific benefit, it is an invaluable tool
that the CEO can develop over time and utilize when
needed.
Todd is a Principal Consultant in the McDermott &
Bull Los Angeles office and can be reached at
310-575-4843, or
Gitlin@mbsearch.net. |
