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Board of Directors

Board of Directors. Nir Barkat BRM Group November 2000. Agenda. General BOD roles Types of BOD ’ s Professional BOD at seed stage External BOD ’ s Advisory board Summary. BOD Roles & Responsibilities.

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Board of Directors

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  1. Board of Directors Nir Barkat BRM Group November 2000

  2. Agenda • General BOD roles • Types of BOD’s • Professional BOD at seed stage • External BOD’s • Advisory board • Summary

  3. BOD Roles & Responsibilities • “The BOD will define the company’s policy and monitor the duties of the CEO and his actions…” (article 92 (a) of the Companies Law, 5759 – 1999) • Overall Responsibilities, like parents of a child • Creating & managing shareholder value • In the interest of ALL the shareholders

  4. The old economy Power of $$$ Protect shareholder interests Negotiate with CEO Macro/micro manage 10-30 members Board holds the key The new Economy Power of knowledge Increase shareholder value Guide & Build CEO Hire & support or fire 4-7 members (we use 5) CEO holds the key Governance

  5. Orientation of Board Member

  6. Formation of the Company • Keep to top tier standards, avoid future problems • Push for fast decisions, no arbitration mechanism • Is the company best prepared for growth? • Common stock, preferred, ESOP • When negotiating splitting the pie, think about: • Company needs, current & future management • Entrepreneurs, Current & future Investors

  7. Examples of problems • Management vs. Entrepreneur conflict resolutions • Negotiating terms & keeping a good partnership • Board composition and governance issues • Cleaning company from “bad habits” • Develop team work & company culture • Disagree & commit environment • Allow CEO to make mistakes

  8. Founders leaving the company • 4 cases in BRM group (25%), all companies recovered. • Only the CEO fires VP’s and/or founders, • Founders are valuable, make efforts to keep them Example: • Founders 40%, ESOP 20%, Investors 40%, $4M investment • 4 founders start with 10% each • 3.3% immediate, 2.2% per year (0.183% monthly) • Fire with cause (legal issues): 0% of unvested • Without cause (personal issues): 50% of unvested

  9. BOD’s involvement in Seed Stage • Help in Hiring process • Defining the short term goals & mile stones • Open doors to potential customers & 3rd parties • Budget & allocation of cash to build solid BPlan • Advise CEO on management & business conflict • Guide (& approve) business plan • Help prepare & escort next fund raising process

  10. External Board Members • CEO, XCEO, XChairman of successful companies • Industry knowledge with business experience • Strong belief & contribution to company vision • Good chemistry with CEO & other BOD’s • Active more important than just brand name • Compensation: • Become an investor, or option equivalent • Helps in resolving shareholder conflicts

  11. Advisory Board • VP’s, XVP’s of large companies, CEO’s of smaller companies • Provide professional domain experience • Open doors to relevant customers • More upfront help, less frequent than BOD • Compensation: • Allow to invest in company, option equivalent • Usually 10-25% of BOD compensation

  12. Summary • BOD has clear legal and fiduciary responsibilities • Role of BOD has changed with new economy • External BOD –diverse background, important!!! • Advisory board can boost the company • Allow to make some mistakes • Keep focused on creating shareholder value

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