Building an Advisory Board: When and Why You Need It
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The document discusses when privately-held companies should consider establishing an advisory board and the value they can provide. It notes that advisory boards, unlike fiduciary boards, do not have legal duties and their votes are non-binding. The benefits of advisory boards include helping with business development, filling executive skill gaps, providing objective insights, and driving strategy. It recommends treating an advisory board similarly to a public company board by setting meeting schedules far in advance, having clear agendas, respecting members' time, and keeping minutes if there are multiple shareholders.
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Building an Advisory Board: When and Why You Need It
- 1. Building an Advisory Board When Do You Need It and What Value Does It Add?
- 2. MARK S. DAILEY Partner, Newport, LLC mark.dailey@newportllc.com 203.424.0433 Welcome & Introduction
- 3. Fiduciary Boards vs Advisory Boards Fiduciary Boards • Duty of care to protect all shareholders • Duty of loyalty • Votes count! • Committees: Audit, Nominating and Governance, Compensation, Risk Advisory Boards • Non-binding, votes don’t count! • Can’t fire you, can’t force management action • Possibly no committees
- 4. Privately-Held Businesses Private Equity Owners • Board is comprised of the major investors Founder-led • Board can range from informal to formal 2nd Generation-Owned • Board could be family and founder offspring 3rd and Subsequent Generation-Owned • Family members may be employees or non-employees • Avoid family tree champions
- 5. Advisory Boards for Privately-Held Companies A Spectrum of Possibilities • Board of friends • Current family advisors (legal, financial) • Family council • 2nd generation vs subsequent generations • Family majority • Non-family majority • Board of Business Development contacts
- 6. Benefits of Advisory Boards • Business Development • Adjacent market experience • Fill skill gaps in the executive team • Geographic expansion • Drive strategy and performance • Strategic vs tactical frame of mind • Objective insights
- 7. Best Practices of Advisory Boards Treat your advisory board the same way a public company treats its fiduciary board • Set the meeting schedule 12-18 months in advance • Set the agenda and stick to it • Respect your boards’ opinions and time • If you have multiple shareholders, keep minutes • Respect your hat
- 8. Questions? MARK S. DAILEY Partner, Newport, LLC mark.dailey@newportllc.com 203.424.0433
- 9. Thank You F o r Wa t c h i n g & L i s t e n i n g UPCOMING WEBINAR: MODERN DECISION SUPPORT – WHAT GREAT FINANCIAL PLANNING AND REPORTING LOOK LIKE February 10, 2022 | 12:00 PM ET/9:00 AM PT Featuring: Dominic DiBernardo, Partner