You have enough experience now to know when you need Board involvement and how to record meeting minutes. Does anything change as your company grows up? Yes. Say you’ve just closed your Series A round. The formality and structure for your Board meetings are going to be elevated up a notch or two. Your new Board members should be eager to contribute to the strategic planning for the company’s growth while keeping an eye on their investment. Here are some Board meeting shifts that may happen once you’ve reached a more mature growth stage:
- Meeting Frequency. You may have gotten away with very sporadic Board meetings in the past. This is going to change. At a minimum, the Board should meet quarterly. The Board may decide to meet more frequently, such as monthly, if it is in a high growth period, embarking on a strategic transaction, or if the frequency is mandated by the company’s most recent round of financing. Your new Board members will expect meetings to be scheduled well in advance. At at the new Board’s first meeting they should approve the meeting schedule for the rest of the calendar year. From then on, scheduling out all of your Board meetings at least a year in advance will become routine.
- Scheduled Discussion Topics. Setting the agenda for a Board meeting is a key requirement to run an efficient meeting. It is a good idea to have an annual schedule of what needs to be covered at every Board meeting, which can then be used to set the agenda. Every meeting should include a review of the company’s operations from a high and strategic level, and its financial performance and status. For any startup, it is especially valuable to discuss the strategy for short-term growth (e.g., the client pipeline) as well as longer term growth (e.g., strategic alliances that may be worth pursuing). Circulate a draft of the meeting agenda to the Board members and to your management team in advance to capture additions or revisions.
- More People Want to Join the Party. The Board and management team will determine who should attend each meeting, but as part of the financing, the company may have granted “observer rights” to one of its investors. An observer is invited to all Board meetings and gets the same information packet given to directors. Your outside lawyer may now be interested in attending your Board meetings (typically without cost) as it allows them to build a better and deeper relationship with your company and investors. Other typical attendees that may attend include the company’s mentors/advisors, outside accountants (if they provide the company with audited financials), investment bankers (if pursuing a strategic transaction), or members of your management team (e.g., head of sales). Each non-director attendee should only stay for the part of the meeting when he/she is needed.
- Board Committees. As your company, and the number of issues it faces, grows, the Board will want to create Board committees to handle its workload more efficiently. The specific responsibilities of each committee are usually set out in a committee charter, which the committee should review annually. Each committee decides when and how often to meet, but they usually meet just before the scheduled Board meeting and then report on their activities/decisions to the entire Board. The two most commonly added committees are:
- Audit Committee - This committee supervises the company’s financial disclosures and reporting—think monthly/quarterly/annual financial statements—so the Board members chosen to sit on this committee need enough financial expertise to know their way around a balance sheet and cash flow statement. The committee also hires, oversees, and interacts with the company’s external auditor/accounting firm if and when your company deems that it should have one, e.g., the company’s investors, creditors, or regulators require audited annual financial statements to be prepared.
- Compensation Committee - This committee is involved in reviewing equity grants, the performance and compensation of the executive team, and the design and strategy for company bonus or incentive programs.
- Prepare with More Stakeholders in Mind. Preparing for a Board meeting becomes a more arduous task as your company grows and more information needs to be disseminated to its directors. This job usually falls to the Secretary or his/her delegates. The Board package of relevant materials should be sent to your directors/observers about a week in advance of the Board meeting. Another aspect of preparation involves individual communications with the Board members. A key person at the company, usually the President, CEO, or CFO, should be in continuous contact with the Board members to keep them updated about the business, to seek their thoughts or opinions, and to give them a head’s up on Board meeting agenda topics, especially any resolutions they need to act on, and get their causal feedback on these topics.
Board meetings are nothing new to the startup company, but as your company grows, the expectations on how the meeting should be conducted evolve. You’re growing up! Prepare for it, ask for help when you need it, and enjoy the ride.