At last week’s Entrepreneurship 101 lecture, Tony Redpath, senior fellow and cleantech advisor at MaRS, and Karan Walia, founder and CEO of Cluep, discussed the differences between boards of advisors and boards of directors, and how they are useful to a company. In their talk they also stressed the importance of ensuring that those you select for your boards are truly committed and fit with your company culture.
When you’re first starting out, you still need to set a strategic direction and decide when you should start getting serious about creating formal boards. You want to ensure that you’re building for success.
Board of directors
A company’s shareholders elect its board of directors. The board of directors is a legal entity that has responsibilities and duties to the shareholders, as well as obligations to the Canada Revenue Agency. A board of directors has the power to hire and fire the CEO. Only shareholders can remove a board member.
Board of advisors
Members of advisory boards, on the other hand, are chosen by the company’s management. A board of advisors has no formal duties or responsibilities other than those set out for them by management. A board of advisors’ purpose is to advise managers about aspects of their business, but the company is under no obligation to follow the advice provided.
Choosing your boards
When choosing board members it’s important to remember that there are only so many board seats and that the time you get to spend with the members is limited, so you need to maximize their utility. You want people who are passionate and knowledgeable, and who will be able to make things happen for your business. Chemistry and commitment are the two main points you want to focus on when selecting your board members.
You should have a clear vision of your company before you bring on board members and you should make sure that everyone is on the same page. There shouldn’t be any shifts in philosophy if potential board members buy in to your company. You can’t afford factions when you’re a small company and it’s imperative that you have people who work well together.
Commitment is key when you’re choosing your boards. You need people who are willing to dig in to help your company become successful. Talk to as many venture capitalists and advisors as you can to determine if they’re just talk or if they’re actually capable of delivering. Ask yourself the snow in the driveway question: If it snows tonight and there’s a board meeting tomorrow, will your board members shovel the driveway and make it to the meeting or will they just stay home?
To learn more about boards—and about Karan’s experience selecting board members for Cluep—check out the full lecture below.