![](https://static.wixstatic.com/media/740007_507bc53a5a274eaab7c6d0cd5f77cc64~mv2.jpg/v1/fill/w_980,h_417,al_c,q_85,usm_0.66_1.00_0.01,enc_auto/740007_507bc53a5a274eaab7c6d0cd5f77cc64~mv2.jpg)
In a recent Club E panel discussion at the Minneapolis Club, Rick Brimacomb hosted three experienced professionals to explore the value of boards and the best practices for structuring and managing them. The event, held in collaboration with the Private Directors Association, brought together diverse perspectives on board dynamics, fiduciary responsibilities, and the benefits of advisory boards. Here are the key insights shared by panelists Sal Mondelli, Cora Liebig, and Libby Utter.
Why Establish a Board?
The decision to form a board often hinges on the company’s goals and growth stage. Smaller or lifestyle businesses may not require formal boards, but as a company scales, the guidance and accountability provided by a board can become invaluable. Sal Mondelli emphasized that boards help validate strategy, challenge decisions, and guide the business through inevitable "speed bumps and potholes." Libby Utter noted that boards can help executives "get out of their own loop," adding fresh perspectives that push the business forward.
For companies looking to attract investment, a fiduciary board is often essential. Cora Liebig shared her journey of establishing a formal board at Chromatic 3D Materials as the company reached Series A funding, explaining that a fiduciary board reassures investors by providing oversight on how their funds are being used.
Fiduciary vs. Advisory Boards: Key Differences
A fiduciary board has legal responsibilities to act in the best interest of the shareholders. These boards have obligations like the duty of loyalty, obedience, and care, which legally bind members to prioritize the company’s interests. Advisory boards, on the other hand, are more flexible, offering guidance without the same legal responsibilities. Cora pointed out that advisory boards are an excellent way for early-stage companies to receive external advice and prepare for the transition to a fiduciary board when investment requires it.
Libby added that fiduciary boards are ultimately accountable to the shareholders, not the CEO, highlighting the importance of independence. Both fiduciary and advisory boards play essential roles, but each must be carefully managed to align with the company's objectives.
When to Form a Board and Who Should Serve?
According to the panel, the timing and composition of a board depend on a company’s lifecycle and strategic goals. Cora suggested that early-stage companies can start with an advisory board, scaling to a fiduciary board as the company grows and brings in outside capital. Sal emphasized the importance of understanding where the company is in its growth trajectory—revenue alone shouldn’t determine the need for a board. First-time CEOs may benefit from a board sooner rather than later to gain insights from seasoned professionals.
Choosing the right board members is critical. The panel recommended a balanced mix of industry knowledge, financial acumen, and operational expertise. A high-functioning board should consist of members with complementary skills who can contribute different perspectives. For example, Cora’s board includes individuals with technology expertise, commercial insight, and financial savvy, ensuring that the company benefits from a wide range of viewpoints. Libby emphasized the importance of “diversity of thought,” recommending a structured onboarding process to assess fit and alignment with the board’s needs.
Characteristics of High-Performing Boards
Effective boards are those that challenge the status quo while remaining unified in purpose. Libby noted that high-performing boards can handle disagreements and still come together on key decisions. Sal added that a board’s role is to help the CEO "look around the corner" and think strategically beyond day-to-day operations. This requires curiosity, willingness to invest time, and the ability to collaborate well with others.
In addition, board members need a strong sense of self-awareness. Cora highlighted the importance of knowing when to step back and let others contribute, as well as understanding when a board member's skills and experience can best serve the company’s challenges.
Common Board Pitfalls and How to Avoid Them
Board meetings should be productive and focused, yet underperforming boards often fail in preparation or allow meetings to get sidetracked. Libby warned that complacency and lack of engagement are common issues that can hamper a board’s effectiveness. Cora shared how she restructured her board to focus on investors who were genuinely invested in the company's success, creating a more cohesive environment.
Another common pitfall is the tendency for board members to reminisce on past experiences that may no longer be relevant. Sal cautioned against “war stories,” where board members repeatedly bring up outdated advice from previous roles that may not align with current challenges.
Board Term Limits and Succession Planning
The panel also discussed the importance of setting board term limits. According to Libby, term limits prevent stagnation and create natural points for board members to transition off, making it easier to address underperformance or skill gaps. Succession planning, particularly for the CEO, is another critical responsibility for boards. Proactively planning for leadership changes ensures that the company remains resilient and prepared for the future.
How to Get on a Board: Practical Advice
For those interested in joining a board, the panel recommended networking, clearly defining your unique value, and starting early. According to Libby, many boards now prefer members who are still active in their careers to keep up with the fast pace of business change. Sal shared that attending industry events and maintaining connections can open doors; he landed his first board role through a chance encounter at a networking event.
Final Takeaways
Board membership is a serious commitment, and it’s essential for members to actively prepare, understand their legal responsibilities, and contribute to a collaborative environment. A well-structured board can be a powerful asset, steering companies through both prosperous and challenging times.
For companies considering setting up a board, evaluating the board’s purpose, selecting diverse, complementary members, and maintaining regular reviews of the board’s function are all critical steps to ensure long-term success.
Comments