Thoughts On Choosing Board Members

I am a professional board member. I’ve been sitting on boards for almost 20 years and I’ve seen a lot. I’ve seen some of the best board members in action and have tried to copy them. I’ve seen some of the worst board members in action and have tried hard to forget them.

Here are some thoughts on choosing board members. This advice is for everyone, but it’s of particular use when you are a bigger company, maybe public, and need to fill your board with good people.

  • Avoid "big names"  For the most part, they are useless.
  • Select people who will attend each and every meeting, who will pay close attention to the business
  • Select people who have an affinity for your business, who understand your challenges and your opportunities
  • Avoid putting someone you can control on your board. In tough situations they will have a fiduciary duty to do what’s right and you won’t be able to control them when it matters most to you.
  • Don’t let conflicts get in the way of selecting the ideal board member. Conflicts will be disclosed and can be managed. Many times the people who will understand your business best are conflicted in some way. There are ways to deal with this problem.
  • Make sure to have an experienced accountant/auditor on your board and have them run the audit committee. That is no place for amateurs.
  • Make sure to have at least two or three CEOs of comparable companies on your board. Make sure they are on the comp committee. Compensation issues are best handled by people who understand the talent market.
  • Select people who have the time to do the job right. Being a board member is a job. It’s not a retirement perk. If someone cannot commit to attend each and every meeting and to spend at least several hours a week on your company, they are not the right choice.
  • Select people who will get along with each other. The very best boards I am on are friendly social active groups. Serious business doesn’t have to be stilted and formal. It can and should be fun.
  • Above all else, look for great judgment and ethics.

Hope that helps.

#VC & Technology

Comments (Archived):

  1. Jonathan Marks

    Agree with most of those thoughts when applied to boards here in Europe. The only aspect I would be wary of is conflicts – especially when there are serious conflicts of interest or relationships (like family relations) which might lead to misunderstandings by the press/government. I don’t believe a board member and a managing director can have any form of relationship, even if it is clear up front, in a public company. Family run businesses are obviously different.

    1. fredwilson

      Good point Jonathan. I didn’t mean family or personal relationshipconflicts. I was speaking more to business conflicts.

  2. Ben Saren

    Good suggestions Fred! Having a board with some real mojo can make a huge impact. And it’s certainly a lot more fun too!

  3. Peter Cranstone

    Great post. Right on the money. Now all we have to do is find them.

  4. stone

    Totally agree with these points. I’ve had this problem with “not such big names” also. I do not agree that I want a board that I have to fight with on all the big issues. I have some war stories from my last company. The less engaged often create the worst problems and they tend to pop up around key hires, changes in strategy or strategic posture or M&A. I will be much more careful as I start company #2. I will control this company with more of an iron fist while always being wide open to constructive criticism.

    1. fredwilson

      I hope you didn’t read my fourth point as suggesting that you create a boardyou have to fight with on all the big issues. That would be a terriblething. I agree that ³less engaged² often means problems.fred

  5. Cory Levy

    Fred – Have you been on any boards (previously or currently) to where it has run poorly, people didn’t get along, company wasn’t very successful, and at the end of the day failed? If so, it would be cool to write a post titled, “Lessons Learned From Not Following My Board Rules”..something like that 😉

  6. SM

    Great post as well as some really good comments. At the last company I founded we took on some VC money after having customers, product and revenue (yes,not just a cool idea on a napkin, but rather a business) Unfortunately, the VC’s that were on the board were out of touch. A couple of them were really good at looking at the “numbers” while the other one was an ex-CEO that was just out of touch with today’s technologies and dynamic marketplace. I fought tooth and nail to bring on at least one outside board member from our industry to no avail. While the company today is still considered a leader in it’s space the lack of vision and incompetence truly amazed me and will end up crushing existing common shareholders. Lesson learned on my part ,and yes, I take full responsibility.

    1. Cory Levy

      Nice comment @SM. It’s great reading that you admitted to taking full responsibility rather than saying, “it was ____ fault”.

  7. Harry DeMott

    Couldn’t agree more. I’ve been on boards chaired by a “big name” who took it as a hobby until success came – and then it was his victory – and I’ve been on boards that were highly functional – and I can tell you that highly functional and socially fun is far more preferable.If I could add one comment it would be to make sure not to get people on the board who all come from the same background – either in work or in life. I’ve found that boards that are composed of people with highly diverse backgrounds seem to function better.

  8. Shurtleff

    Fred, in early stage deals most board members have skin, aka their own or their firms money in the deal. What is your take on asking potential board members in mid or later stages to own (i.e. buy with their own cash, not just earn as options) stock in the company?

    1. fredwilson

      It’s great if you can get them to purchase some stock. Granting options andrestricted stock is important but not as good as having real skin in thegame.fred

  9. Guest

    “Select people who will get along with each other.” Are you sure? What about the risk of “groupthink’? A dissenter often brings value. Plus, this whole “team harmony” is a meaningless “feelgood” concept. Look at the current L.A. Lakers. Kobe was ripping teammates apart in the summer, trashing the whole organization, and now they have the best record in the West.What do you think the right number is? Do you have any formula? Say, “one board member per 50 employees” or what?Finally, you missed an important point: Make sure the founder stays. Not everyone has learned their Apple lesson, so it needs to be reminded.

    1. fredwilson

      Dissent and getting along are not mutually exclusive conceptsTrust me on thatFred

  10. jmccabegorman

    Excellent, concise post with clear, valuable advice. BOD recruiting is one of the most difficult ‘jobs’ for an exec. I’ll gift-wrap this article and hand it to execs who invite me to consider board service.I became a BOD member at 26, and am still the only female Exec Comm member. I wish someone had handed this list to me in an envelope before my first meeting – many of the items are ones unfortunately learned via good (and not so good) experiences with other members.I wish more boards would put a premium on those who ‘do’ (show up, participate actively, ask the tough questions, seek out answers) rather than those who ‘deign’ (big names who show up to 1 meeting a year and then slow discussions as a result of not understanding progress and setbacks, strengths and threats).Thanks again for the great post.

    1. Vishal Sharma

      I’m not a board member yet, but somethings are commonsense and some are good points to be kept in mind.

  11. Doug Kersten

    Fred,To me you’re a big name! Damn! I wanted you on my board! ;-)Doug K.

    1. fredwilson

      That’s funny

  12. Gerald Buckely

    Mr. Wilson, Going into the rigorous weeding-out process at i2E.org here in Oklahoma (biz planning/seed stage). Your post on boards is fantastically timed as I’ll be forming THE Board for my startup very soon. As always, appreciate the mentoring. (Now, wishing you would post that draft for founders on structuring equity. That one’s clearly mucho importante to all concerned…)

  13. mike lewis

    great post. Good thoughts

  14. Prashant

    Fred excellent post on choosing board members. most important of them is not having BIG names. I would like to add up few more points which I think are important in this context* Board members are not hired to make the team LOOK good but to make the team function in good way. Many small startups fall in trap of hiring brand name guys to just attract VC / investors / employees / whatever. Though this will help you at some places, it is not that worth as it won’t be much beneficial in the long run which you should care about* You don’t need to fill up all board members at the earliest. You can start with only three board members when you are small (just keep board members authorized for 5 but fill 3) and as you grow, you will understand who else you want on your board. This will make sure that you have the place for the best board members at a later stage.

    1. Anil Rathi

      Is it a conflict of interest to have your legal counsel on your board? if your legal counsel is business savvy, understands strategic issues and has shown a consistent commitment to company over many years?

      1. fredwilson

        One of the best board members I’ve ever worked with was a very experienced lawyer. His firm represented the company but he didn’t manage the account. He was compensated by getting an opportunity to invest in the venture round with the rest of us and he acted very independantly of his firm in his role as a board memberSo I would say that having a lawyer on your board can work but not the one who is directly representing your company every dayFred

  15. Howard

    Great post. I’m giving a atalk at TED U Wednesday on Boards and will quote liberally from this (with credit where it’s due).

    1. fredwilson

      cool

  16. chush.net

    Looks like Yahoo could have been better of if they read this post few years ago.

  17. jmccabegorman

    Got another one:* Interview BOD members just as thoroughly as you would potential employees.Why are they interested in serving? What value do they feel they bring to the group, the mission, ops, strategy, etc?Board members are doing the organization a service, not a favor. They should be able to articulate this before they sign on.

  18. Aruni S. Gunasegaram

    Great points. Based on my learning all of the above is so true. Bad boards can kill a company. Stumbled it.

  19. Chris Schilling

    Fred,Thanks for taking the time to articulate this. With the pressure to get a company moving in the right direction it is easy to assume that it is enough to have “stars” supporting the cause. The key seems to be that all members of the board support the success of the venture. This takes time, energy, creativity, and strong effective council. (Which we all need) Very cool stuff! I am a big fan of yours.

    1. panokroko

      The corollary to all of the Boards is Ox-Sarbanis legislation making boards responsible. It’s not a bad thing to have concsious boards. Unless you have board members willing to risk all for gutsy decisions You will founder in a storm. You need lions on the board, not sheep or fearful scardy cats. The more famous, usually, the more fearfull the board members are; of taking the difficult decisions. When You are in a fight for survival as most companies are more times than you think, who do you want fighting next to You? Choose guts over glory everyday of the week. They will stand by You when you are in a corner.RESPONSIBILITY EARNS AUTHORITY; NOT VICE VERSA

  20. Scott Sanders

    A question when dealing with very small, private companies: I have a stake in a (very) small enterprise, with very little work necessary, and there’s only two owners, including me. We don’t have a board. Would it be in our interest to set one up? Or would it be a hassle that would be annoying and unproductive, i.e., my partner’s opinion!

    1. fredwilson

      At this stage you don’t need a board

      1. Scott Sanders

        Thanks for the quick reply, Fred. What threshold would cause us to need a board? (Perhaps that would be a good follow up post!)

        1. fredwilson

          When you take outside investors, when you hire a bunch of employees, whenyou have a bunch of customers, stuff like that

          1. jlipton

            We are a small, music industry LLC – more than a decade old, seeking to build an advisory board to assist in our transition from print to new media and to help take the company to the next level.Concerned about potential conflict of interests when assembling a board – also since it’s an advisory board only – how much of our financials are we required to share?

  21. Kirk Badii

    Do you have any suggestions on how I can become a board member of a company?

  22. Raouf

    Fred, Could you expand a little on how and where to find board members? Is salary or equity more attractive to board member?Thanks

    1. fredwilson

      Equity will be more interesting to the best candidatesI think other founders and ceos (particularly ones who’ve done it a number of times) are the best board membersFred

  23. Chris J Snook

    How do you best make your skills and talents available to companies who are seeking active board members? I am interested in finding some solid opportunities to sit on the board of exciting companies in the education, alternative wellness, or healthcare industries. Thanks