See Also:
Ten In-House Secrets for Reducing Your Company's Legal Costs
What should General Counsel's relationship be with a Board
Red Herring
Advisory Board Best Practices
Benefits of Advisory BoardsThe first steps in forming advisory boards are to identifying the members of the advisory board, recruiting the target number of participants and finally determining the advisory board compensation.
Advisory Board Membership
When creating an advisory board, it is important to develop a bio of what you are looking for in an advisory board. Are you looking for diversity by industry? Do you want age diversity? Gender diversity? Do you want people you know very well? People you don’t know? Or a combination?
Advisory board guidelines are important. Make up the ideal advisory board bio in your mind. Then start looking through your lists of contacts and acquaintances for people who fit this ideal. It is important that the advisory board be comprised of people that you know and trust. You may consider including your attourney or
CPA on your advisory board, but keep in mind that they may have a certain bias since they are a service provider to your company. To the extent that they can remain objective, they can be considered as a prospective member of your advisory board.
As your company’s leader, you want to be able to be open and honest with your advisory board. There is no advisory board liability as it has no legal say in the operations of the company.
Advisory Board Responsibilities
After you have the ideal advisory board bio and a prospective pool of candidates, the next thing you need to determine is how many members will be on your advisory board. A typical advisory board will have between four to six or seven members. That will be a good range to work with. It is important to be clear with prospective advisory board members, what the roles and responsibilities of the advisory board are, what your expectations are from them with regards to their contribution, how frequent the meetings will be, and what they will be expected to do between meetings. You want to give them some idea of what their participation will look like and what kind of commitment you are seeking. You will need to set the meeting dates for the advisory board up front and well in advance as your advisory board members are typically very busy themselves. It is a good idea to set the meeting dates for your advisory board on a routine basis (once a quarter at the same time in the quarter, for example). This scheduling tends to work the best.
Finally, once the individual has verbally agreed to join it is a good idea to send an advisory board invitation letter to each new member.
Advisory Board Compensation
Advisory board members can be compensated in different ways. The advisory board compensation can take the form of a nice meal once a quarter. Advisory board pay can be in the form of a stipend paid for each meeting, perhaps a couple hundred dollars or up to $1,000 per meeting, depending on the resources of your organization. Another possibility is the provision of some restricted stock in your company to your advisory board members. Remember that the primary reason for the advisory board members to be present is that they want to make a commitment to the future and growth of your organization. Advisory board earnings are often immaterial to their other compensation.
Advisory board members often remark about how they get more than they give; value received not in the form of compensation, but rather from hearing perspectives from their peers that they do not normally hear. They get inspiration, ideas, and information about the marketplace that is worth the cost of attending by itself.