Should You Serve on a Board of Directors?
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Should You Serve on a Board of Directors?  

Saturday, December 6, 2014

I am often asked about serving on Boards of Directors for publicly traded corporations, privately held corporations and non profits. A board of directors is a body of elected or appointed members who jointly oversee the activities of an organization. Typical duties of a board of directors includes:

  1. governing the organization by establishing broad policies and objectives;
  2. selecting, appointing, supporting and reviewing the performance of the chief executive;
  3. ensuring the availability of adequate financial resources;
  4. approving annual budgets;
  5. accounting to the stakeholders for the organization's performance

Participation in a board can be an incredibly rewarding experience, but should never be taken lightly. Understanding the expectations of serving on a board is critical for a mutually beneficial relationship. Below is a list of questions which may help in making that decision.

For Nonprofits (NFP):

  1. Do I have a passion for this nonprofit's cause?
  2. Do I understand what is expected of me, especially the fund raising expectations? What is the length of the term? Can I resign midterm?
  3. What is an accurate picture of the overall financial and operational health of the NFP?
  4. Is there any litigation pending or expected?
  5. Is the NFP in good standing with both State and Federal authorities?
  6. Does the NFP have satisfactory amounts of D&O insurance, does it advance costs and expenses of litigation and does it fully indemnify its board members?

For either privately held or publicly traded corporations:

  1. What are the expectations of the each Board member, and what is the term?
  2. For publicly traded corporations on what committees will I serve?
  3. Have you examined past tax returns?
  4. For publicly traded corporations have you examined past public filings including proxy statements?
  5. Have you asked about the relationship between the Board and management?
  6. Is there litigation pending or expected?
  7. What is the compensation and expense reimbursement policy?
  8. Does the Corporation have satisfactory D&O insurance, does it advance costs and expenses of litigation, and does it fully indemnify its board members?

While this list of questions is not all inclusive and each situation demands its own analysis, this is a great starting point to determine if serving on a board is right for you. Do you have any other questions to recommend?