Shop Talk — Boards, A Pragmatic Checklist

Big Red Car here, y’all. Oh, it’s cool and sunny here in the ATX. [Shut up, Big Red Car. We’re getting tired of it.]

So, today we start a new thrust that is going to be called “Shop Talk” for all of you in the trenches.

Today’s chat is about Boards of Directors. It is a checklist in the spirit of The Checklist Manifesto by Atul Gawande. Remember him?

So, read it already.

So, here goes, practical advice on how to create, configure, and run boards.

___1. Write up a Board Charter clearly outlining the powers and duties of the board including such administrative trivia as the frequency of meetings.

[Coordinate with your Articles of Incorporation and your ByLaws to ensure that it is correct. Let some gray haired eminence review it.]

___2. Have an odd number of Directors.

Maintain control of your Board by ensuring you have allies on the Board who will back you in a tense moment. Do this and don’t go all pollyanna on a Big Red Car.

Some VC has 20% ownership, he gets 20% of the Board seats, not 40%.

___3. Appoint Board members to committees — audit, compensation, nominating are essential. Two members, preferably three, per committee. Rotate committee assignments annually.

When you get big, you can consider board development, evaluation, executive, finance, fundraising, marketing, personnel, product/product development, promotions/sales, and public relations. When you start out, this work is done within your more spare organization. As an example, the “comp committee” handles both CEO compensation and evaluation. Don’t fret this stuff.

___4. Write up a Committee Charter for each committee.

As to charters in general, don’t worry as these can all be keyboard whipped as you begin to use them. Review and revise charters annually.

___5. Set a calendar for meetings.

Four quarterly meetings, an annual Board retreat, a shareholders annual meeting at which Directors are elected and committee assignments are made is enough. In the early years, you may want to start out with monthly meetings — a lot of damn work.

___6. Create a “soft landing” for meetings.

The Boss used to walk around Town Lake with a couple of his high strung Board members the evening before the meeting to let them unwind and get all of their questions answered and to unburden themselves of their more “bat shit crazy” utterances thereby saving them from embarrassing themselves at the actual meeting.

___7. Develop a comprehensive agenda — likely 25-30 topics of which, typically, you will only discuss about five. These five should be in red print.

Identify the presenter of each topic (some you will want the CFO or the acquisitions guy to present) and set a time budget including time for a couple of breaks and lunch.

Bring lunch in and make it pleasant but not extravagant.

It is important to have a very comprehensive presentation for the board but it is only necessary to discuss a handful of “action items.” As an example, The Boss would have a personnel tab which would contain a couple of graphs showing the FTE staffing status, the cost of personnel by department, the % of gross revenue personnel expense represented (critical KPI), and any critical losses or pending hires.

This was never discussed at an actual Board meeting but the Board members liked to review it and put their minds at ease.

___8. Deliver all materials to the Board a week before the Board meeting and place them in a digital repository like DropBox. Send out an email with the Board book attached digitally. The days of hard copies are over.

[Pro tip: Make damn sure you copy this to a Board member’s administrative assistant for scheduling and printing, if the Board member is going to print out a copy. This person is the gatekeeper. Become friends with the gatekeeper and send her a very nice Christmas present. Trust me on this one.]

___9. Five days before the Board meeting send an email to verify the Board member has received the materials (copy you know who, right?) and then follow up with a call to ask — anything you’d like to add or delete, any questions, any contentious issues, any input?

Listen carefully and do not be afraid to scrub an item is there is a fight brewing. Similarly, do not be afraid to change a “decision” item to a “discussion” item based on this contact.

___10. Two days before the meeting verify that the Board members are, in fact, going to show up.

If they cannot, make immediate provisions for remote access (Skype, Hangouts, Adobe).

Don’t let a Board member miss more than one meeting a year. If so, kick them off the Board automatically. No exceptions. Put it in the Board Charter.

___11. Get started on time and move the meeting along crisply. Let everyone have their say going around the Board table clockwise the first time and counterclockwise the second.

___12. Make all BIG decisions via a Decision Memorandum which states the case for the proposition — an acquisition, as an example — and have it signed off by the acquisitions guy, the operations person, and the CFO.

Early in his career, The Boss failed to do this and when the acquisition went into the ditch, it turned out nobody had liked it but The Boss. Lesson learned.

The Board approves the Decision Memorandum in writing.

___13. Document all decisions via a Resolution which authorizes or approves a specific action. This is important for a couple of reasons — documentation, forcing Board members to take a stand, streamlined minute keeping.

“Resolved, the Board of Directors of ABC Corp, at a duly called meeting, does hereby direct the Chief Executive Officer of the corporation to purchase sixteen drones to facilitate the delivery of our products. The purchase will conform to the attached Purchase Order.”

It is a pain in the ass at first but once you get it down to a SOP, it is easy and it is streamlined.

___14. Do not be afraid to create a “parking lot” where issues go to wait until the next Board meeting.

___15. Appoint a time keeper to discipline lengthy debates and allow three rounds of comments.

___16. Short, sweet minutes that would provide no grist for the mill in the event of litigation. I will give you an example in a subsequent Shop Talk.

___17. As to voting, try to be the last one to vote. If you have a seven person board, the counting goes like this — one, two, three, four, seven.

Never, ever be on the wrong side of a losing vote. Do not create residual angst or tenderness. If you lose, lose graciously.

Give any Board members who are going to be hanging in the wind a heads up as soon as you can count to four.

___18. Know your votes on any item for which you are the creator — such as an acquisition.

Participate in the discussion but recuse yourself from the voting. This is both a smart thing to do but also, arguably, required.

___19. The day after a Board meeting and when you know that any travelers are home, place a call to debrief the Board members. This is as important as the communication before the meeting.

This is where you put the salve on any burns. Be patient and learn to make a solid “clucking” noise.

___20. Send a hand written note to anyone who rose to the occasion at the Board meeting. Keep it short, personal, and grateful. You are building goodwill for a future rendezvous with destiny.

___21. Make sure that you discriminate among management, investor, and independent Directors.

Have an Independent Directors meeting before the Board meeting. The Independent Directors should be the CEO’s most loyal supporters. Make it so.

This is, perhaps,the most overlooked element of the care and feeding of Boards.

___22. Never, ever confide your personal challenges to a Board member. Do not confide in people who can fire you.

Get a CEO coach and be unafraid to cry on the phone. Get someone who has been a CEO so they are not taken aback by the crying. You will do it, trust me. Being a CEO is hard work.

___23. When dealing with a Board remember that they will hire you as the CEO and they will fire you. It is their primary duty.

Remember, at all times, you are dealing with people who WILL fire you.

Eighty percent of VC funded companies replace their CEO in the first four years. Know this and act accordingly.

___24. Conduct an annual Confidential Board Survey to get honest and candid feedback from the Board anonymously. This is a very good thing and you will learn stuff you never expected.

That is all for today, y’all. It is enough for you to think about.

Shop talk. Shop talk. Shop talk in the accent of an experienced voice that has been doing this shit for a third of a century. Of course, you can consult with your pal who went to school with you and was really good at Texas Hold ‘Em.

But, hey, what the Hell do I really know anyway? I’m just a Big Red Car. Stay safe and work that Board. Own that Board. Make that Board sit up and beg for more. 




4 thoughts on “Shop Talk — Boards, A Pragmatic Checklist

  1. For

    > one, two, three, four, seven.

    maybe you mean, that on a seven person board, four votes is a majority so that when the first four votes agree the voting is over and vote seven is from the CEO who “stands with the majority”? Is that the detailed translation?

    For these board minutes, written board agreements, on paper, etc., how are those stored? On in manilla file folders, by the secretary of the board or the CEO’s secretary or the CEO, in a file drawer? Is there some special legal requirement for those papers, e.g., must be in a fire proof safe, photocopied with the copies stored securely off site?

    Since there is greatly reduced use of paper and a lot of use of e-mail, are there some legal requirements for handling the e-mail copies?

    Since e-mail messages can become evidence in legal proceedings, mostly want to be careful about what categories of e-mail are kept. Then, maybe, e-mail for the board meetings should be kept in its own e-mail account so that legal action for the board e-mail traffic can get only that traffic and not lots of other e-mail?

    For a startup, monthly board meetings? Gee, a big chunk of time away from the real work.

    I was hoping that the board meeting would consist of the CEO reporting the bare bones financials and then progress on the major business metrics, e.g., number of Web site users per day. Then, DONE. For the mud wrestling we’re having getting high performance, parallel SQL Server to work — give the board the mushroom treatment, in the dark and fed BS.

    How about a really uncomfortable board room, say, too hot in summer and too cold in winter, maybe with some loud fans blowing or car or train traffic just outside, to make the members as distracted and uncomfortable as possible as a way to have the meeting do less and end early. Good idea?

    Giving lots of information to board members on paper or via e-mail sounds like one heck of a risk of a security leak. So, maybe try to minimize such?

    • .
      The CEO (and the other smart Board members) should vote with the majority when they know the question has sufficient support to pass.

      Board notices, agendae, minutes have to be filed in a Corp Minute Book which is usually paper copy and digital copy. The CEO’s secretary should do this for the corporation and any wholly owned corp subsidiaries.

      This Corp Minute Book should be inspected by the CEO quarterly.

      For a public company, there is an affirmative duty to hold everything for 7 years. It is a good policy to destroy nothing before that date.

      The best thing with the Board is full, controlled disclosure of everything hence the 25-30 agenda items while controlling the discussion.

      I would play no games with the board as there are allies who will come in handy in the future. A good CEO should control his board. Period.

      I would have exquisite controls of all paper, excellent controls of ACCESS to all digital info, and written agreements with Directors as to their inability to keep other files. They can use the digital files.

      Very few companies really have much in the way of confidential, proprietary, trade secret info — less that should come into contact w/ the Board,.


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