If you’ve read my Approach, then you know that my goal is to become a part of your team just as surely as if my office were down the hall from yours. It is definitely better for businesses to have ongoing relationships with their governance teams — this structure allows you to get in front of problems, to plan rather than react. Remember, chance favors the prepared mind.
These specific service options describe how I prefer to work with companies. These options provide deeper relationships, lower cost, and increased overall effectiveness for you as a company with ongoing needs for timely, strategic- and execution-focused advice every month on all issues facing the business. You are the client I want to work with.
Most private companies are not quite ready for monthly board meetings; quarterly meetings is where many strike the balance between fine-tuning strategy and having a meaningful amount of time to operate. It’s no coincidence that Objectives and Key Results (OKRs) generally fit a quarterly cadence: it’s enough time to accomplish something meaningful while not so long that you lose a sense of urgency.
Quarterly board meetings involve the following steps, working backwards:
- The board meeting (4 hours)
- Pre-meeting calls with the CEO (30-60 minutes)
- Review of the board package (1-2 hours)
- Monthly call with CEO (30-60 minutes)
- Monthly informal board call (30-60 minutes)
That’s 8-10 hours of work, not counting the additional work that might be involved:
- Mentoring executives
- Assisting on strategic transactions
- Introducing possible hires, strategic partners, vendors, suppliers, and acquisition candidates
This plan means that I’m fully on your board – I’m not just an advisor who can give random advice that I think sounds good or that benefits me or my worldview; no, as a director, I take on fiduciary duties of due care and loyalty to the Company and its equity owners. The goal for this relationship is that you know when a business issue arises, you call me and I help you solve it. Period. For quarterly meeting governance, the fee is $5000/quarter.
Monthly board meetings are more common for venture-backed companies and for companies still in the start-up stage (defined as searching for a repeatable and scalable business model). These companies want the benefit of more regular and more detailed review of results against plan because planning to find a business model is not the same as planning to build a bridge. Results are sometimes hard to come by, evidence is ambiguous, and false starts caused by mixed signals abound. Monthly meetings keep the board’s hand on the CEO’s shoulder as the CEO turns the wheel.
Monthly board meetings involve the following steps, working backwards:
- The board meeting (2 hours)
- Pre-meeting calls with the CEO (30 minutes)
- Review of the board package (1 hour)
- Semi-monthly call with CEO (30 minutes)
Of course, the board members should do the same amount of non-meeting work for the benefit of the company. Monthly meetings involve more work, but the company gets the benefit of an accumulation of director attention so that contributions are more valuable and more attuned to the company’s needs. Our relationship grows over time and you gain the benefit of my deeper perspective on your business. For monthly governance, the fee is $2500/month.
For those situations where a party has observer rights and needs help that falls short of the obligations of a full board member, I do provider observer services. The difference is that my participation on the board is unbiased and based on the same standard as if I were a director, but my feedback to the party engaging me is confidential and takes that party’s desires, not the company as a whole, into consideration. The fees here are the same as for regular board services except that D&O insurance is not required.
In situations where a true board doesn’t exist, such as when the co-founders retain all control, companies nevertheless avail themselves of outside advice in the structure of a board. I find that these companies make greater progress on governance and level up their managerial expertise in planning and reporting much more quickly because of the external pull of the advisory board. These situations are also important to me because I find these companies to be at the greatest risk of under-management. Why? Because they too easily fall prey to the risks from the old adage: the unaimed arrow never misses. The fees here are the same as for regular board services except that D&O insurance is not required.
Because the purpose of these plans is to help smooth your governance costs at a predictable level, the work included is tied to the regular problems you face in the ordinary course of business. Typical included work is:
- Board meetings, board prep, and ongoing prep and related calls.
- Review of board materials and mentoring of executives to improve and streamline reporting.
- Review of completeness of company strategy and strategic plans
- Review of company plans, budgets, and actual performance
- Annual shareholder meeting attendance
- Execution of written consents
- Review of minutes of meetings
What’s not included?
There are a variety of specific tasks not included, and there are two reasons: either the work is specialized and outside the ordinary course of business (such as a company-side venture financing or special committee work) OR the amount of work is effectively in someone else’s control (such as an M&A transaction, whether buy-side or sell-side). In both of these cases, neither of us can accurately estimate in advance the amount of actual work required. With corporate transactions, I will work with you to develop a fee schedule for each phase of a transaction with a preference for fixed fees. The rest we’ll just have to work out when it becomes necessary.
Depending on the specific circumstances of past board equity grants, I will expect either the corresponding grants as other board members or a double-FAST grant at fair market value to satisfy the long-term compensation requirement and ensure that interests are aligned over the long term.
Finally, the fees above do not include D&O insurance, which the company must provide along with typical indemnification and advancement rights, subject to applicable law; nor do they include extraordinary expenses, which are typically just non-local travel at the request of the company.
The most common special circumstance that companies find themselves in is when the company is considering a sale and too many of the board members have conflicts of interest that make them ineligible for a special committee. In such situations, I have been willing to join the board for the limited purpose of serving on the special committee and helping move a transaction forward under the applicable governance approvals that accrue when the board is not conflicted. The situation is typically an add-on to an existing special committee, which simplifies the case-by-case compensation discussions.
In other situations, a substantial – but limited – project comes up that fits my specific skills, experience, and expertise. Examples are leading a strategic review, conducting a scenario planning exercise, reorienting the company to its operational components of value, or supervising a strategic financial transaction. In these cases, we will work together in good faith to determine a fair way of accounting for work that is above and beyond the expectations of the typical director, recognizing that I would have an obligation of loyalty to the company and any agreement must satisfy the applicable legal standard as well as my own ethical standards.
Of course, I also provide some basic services that appeal to clients who need some standardized help before they turn to me with their most complex problems.
Are you starting a business?
Are you forming a nonprofit or a foundation?
Finally, for those matters that don’t fit into one of these standard independent director models, I provide legal services at a rate of $500/hour with a 10-hour minimum retainer. Why do I do this? Because if your problem isn’t big enough to require that much work, you should be thinking hard about whether it needs to be solved at all, or in this way (and that’s a question I’ll gladly help you answer in a no-obligation 15-minute call (until I can set up 30-minute donation-based calls, where you donate to a designated 501(c)(3) charity instead of paying me for the call)). If we’re working together, my advice is only valuable to you if you pay attention to it and integrate it into your decision-making process. When you commit to getting my advice, you’ll be more engaged in asking the right question and getting the correct answer. It’s better for both of us this way. You’ll constantly judge me on the value of the advice I give you: that’s a challenge I’m ready to accept every day. (I don’t even want opportunities where I could make you pay me for less-valuable advice: that’s why I write.)
Here’s another way to think of it: if you’ve decided your problem isn’t worth $2500 of opportunity cost, then what is it really costing you to solve it by yourself? Probably even more. This structure is a model: I want to do everything I can to encourage that kind of decision-making and priority focus in your business, whether it’s your time or my time.