Some tips from lawyers before you have to call in the lawyers…
(This is the second of my blog posts from the Khemka Forum on Social Enterprise. You can find the full report here.)
Why would a start-up work with their board of directors? A group of old guys with some money and more opinions is not nearly as sexy and cool as software development, business expansion, or social media marketing. The stereotypes of the board of directors fall into two groups – 1. A collection of old-fashioned, out-of-touch retirees that love to meddle in business processes and slow down decisions 2. A pack of investors bent on extracting as much profit from the company while ignoring the enterprise’s future or mission.
Thankfully, Pankaj Jain from Impact Law Ventures and Aarti Madhusudan from Governance Counts were on hand to provide some helpful hints for an audience wary of boards in their organizations. They never ignored the fact that boards are difficult for start-ups as well as established companies, but they provided some very helpful hints.
How do you design an effective board for your organization?
Well, what kind of organization are you? Non-profit or for profit, rural or urban, grassroots or established? Your board members should fit the unique needs of your organization, and insure that there are no “trust deficit issues” as Jain said. Many organizations are legally required to form a board of directors, and follow set guidelines put forth by the Indian government as well as any organizational guidelines. Selecting board members should be based on their ability to follow these laws responsibly as well as support the core mission and goals of your organization.
How do you select board members?
Madhusudan suggested hosting site visits for potential board members. Introduce them to your organization at the grassroots level. Educate them on your organization, but at the same time observe them throughout the experience. Many investors and foundations may already have reputations as board members for other organizations they have supported – do your research! If all else fails, create a probation process for potential members and a rotational process for current members. Just as ideas can become stale, so can board members….
This seems like a lot of work, do I really need to create an active board of directors?
It depends. A few names and proper paperwork from your lawyer will probably suffice, but do you treat your management in the same way? A board of directors can provide benign oversight for non-profits seeking donations, contribute funds for a growing enterprise, and safeguard the mission and values of a grassroots organization. If you can balance the passion of some board members and the competence of others you will have a powerful tool for your organization’s future.