By Louis Pashman, Esq.
An advisory board is a group of professional and business people who meet as a board to review the activities of a business and offer their perspective and constructive ideas.
Who should lead the board? The leader can be the business owner or another individual. The board should have about five to nine members and should represent a cross-section of people with different skills and expertise, demographics, and geographic location. In many instances, the boards also include individuals from similar businesses who operate in a different part of the country. Usually, employees should not be on the board, although at times one or more might attend a meeting to discuss a specific issue.
Once a business owner chooses the members of the board and has personally invited those individuals to join, each member should be given a letter appointing him. The letter should address issues such as compensation, term of service and expectations. Each member should agree to confidentiality and non-interference in the business’ relationships with its employees, customers and vendors. Since the business owner will want the members to view this position seriously, members should be compensated for their board job, even if the compensation is intended only to cover expenses. No member should ever have to be out of pocket in order to serve. Each member should serve a term of one to three years and the terms should be staggered.
Now that the board is assembled and members have accepted the invitation, meetings need to be carefully planned and scheduled. Meeting in-house is a good idea if the facility is appropriate. If it is not, business owners must think through travel arrangements, food service, availability of audio-visual equipment, etc. before settling on a location.
Remember, no board member will have accepted the board position for the money, so the members should benefit from the experience as well. It is a networking opportunity for them. Businesses should show their appreciation by seriously considering their suggestions and advice and be sure to follow up with them. There are many other details before a board is formed and implemented. Business owners should discuss this with their professional advisors (attorney and accountant).