An up and coming fashion clothing company is asking me to be on their board. While I’m flattered, I don’t know what that entails. So a few questions to those with knowledge instead of ignorance:
What might be expected of me?
How much time might it demand?
Is there usually compensation? Cash? Stock?
This is a company that would probably be a client of mine. Can one serve as both a board member and a resource/vendor?
If it matters, this is in California.
Oh, one more thing: do they do background and financial checks, etc.?
I’m not an expert at this but my dad was on a couple of boards, and I read.
What might be expected of me? Go to quarterly board meetings. Help with selection of a CEO and determine executive compensation. Boards often have compensation committees to do that. Possibly participate on an audit committee to oversee internal workings. Develop policy.
How much time might it demand? Varies widely depending on the type and size of company. The people giving you the offer should tell you. Some companies have figurehead boards that don’t do much, others are pretty serious about it. But board membership is definitely a part-time job.
Is there usually compensation? Cash? Stock? You should be compensated, although this also varies, and also the offer should include this.
This is a company that would probably be a client of mine. Can one serve as both a board member and a resource/vendor? I would say that is a conflict of interest.
If you decide to serve you should definitely look into getting insurance to cover you in case the board is sued. In fact, I’d not serve on a board unless that was part of the compensation even if there was no other compensation as say with a charity’s board perhaps. Since it’s a corporation, then yes you should expect compensation above and beyond that.
Yeah, that would make sense. But I guess one could be an employee, right. Do you know how common it might be for an employee other than the President to be on a board?
As far as the insurance other’s mentioned, I do know that there is a policy. I guess I should talk to a lawyer and see if I need an additional one.
It happens all the time in my experience and jurisdiction. There are ways of dealing with these issues that you’d want to look into, to ensure it was OK.
I’ve been on two Boards of companies at which I was an employee, but not President (or CEO, for that matter).
Many companies, even big companies, offer only token compensation for being on the Board of Directors. Do not be surprised if it’s not much.
There are conflict of interest issues with being a Director that you should investigate. One Board member I knew was forced to resign when the lawyers realized that his own company was underwriting a private placement financing we were doing. Remember that Directors have a fiduciary responsibility to make the best decisions for the company, which can be at odds with your own best interests as a supplier. Breach of fiduciary responsibility is taken very seriously by the authorities, so be sure you understand the situation.