BOD Compensation @ Startups

I get lots of questions about compensation for BOD members @ startups. I can’t say it much better than Brad Feld in this post. A few additional thoughts:

Your BOD works for the company. First time entrepreneurs are sometimes at risk of thinking of the BOD as their boss – imho the best early stage BODs do not function that way. The best BOD members are responsible for holding the CEO/Founders accountable for performance and for representing the interests of all stakeholders. The BOD members individually or collectively can’t match the detail, pace, intensity and intimacy required to drive effective decisionmaking in early-stage companies. The BOD should be a valuable and objective feedback mechanism for the founders & leadership – and they should absolutely do whatever they can to help – but thinking that they can/should be driving decisionmaking or strategy is a slippery slope. In my experience – the most functional and effective early stage BOD members start every interaction with founders/leadership with the simple question “How can I help?”

Beginning, Middle and End. As Brad points out in his post – it’s always best to make clear that every BOD seat should have clear expectations and milestones to consider change of compensation & role. BOD membership – like all “tours of duty” should have a beginning, middle & end anticipated at inception of the first BOD gig. If you decide to extend a BOD member to a 2nd or 3rd tour of duty on your BOD – that’s great – but having a preset milestone to check in and evaluate how it’s working and to enable 360 feedback for the BOD member helps ensure that you don’t have BOD members who are just filling a seat. I think that 2 years should be the max timescale for the first check-in and annual is much better. It’s a little different for BOD members appointed by investors – but also healthy to have similar check-ins for investor appointed BOD members who sometimes never get objective 360 feedback.

This entry was posted in Entrepreneurship, Financing, Founders, Innovation, Start-Ups, Startup. Bookmark the permalink.

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