Basic Core Duties of the Leonhardt’s Launchpads Board of Directors
Ensuring company has adequacy of financial resources to implement its business plan
Approving annual budgets and hiring plans submitted by the CEO.
Corporate policy setting and enforcement
Hiring, Evaluation (and replacement if necessary) of the CEO
Ensuring adequate reporting to shareholders.
Expectations and Evaluation Criteria of Leonhardt’s Launchpads Board of Directors by Majority Controlling Ownership
#1 Capital Raising Assistance – First and foremost the board of directors are expected to lead the capital raising efforts of the company with strategic introductions. The main measure of Board of Directors performance is their contribution to helping the company raise capital essential to implement its mission. This constitutes 50% of the weight of Board Director performance evaluation.
#2 Driving Successful Exit for IP and other Assets – This is the second highest expectation for our board of directors. This constitutes 25% of the weight of Board Director performance evaluation.
#3 Financial Oversight and Risk Management – This is a very high priority duty expectation of the Board of Directors which calls in particular for careful review of financial statements circulated on a monthly basis. This constitutes 15% of the weight of Board of Directors performance evaluation.
#4 Ensuring Adequate and Frequent Reporting to Stakeholders at all Levels – Building a bandwagon of support and keeping that support is essential for the success of the business and increases the opportunities for exits greatly. We want to make all our stakeholders evangelists for the company and its assets. Frequent updates are essential to build and keep this support. Careful board review of press announcements, annual reports, newsletters, blog posts, social media posts, web sites, video, executive summaries, slide decks is very important. The Annual Report is the most important communication of the year to Stakeholders and warrants the most review effort followed second by the update slide deck to presented at the Annual Shareholder meeting. This constitutes 10% of the weight of Board Directors performance evaluation.
Board Governance – The board in its entirety is selected by the majority voting control shareholders, the owners, of the company and primarily answers to them as well as all the shareholders. The only time they do not answer only or primarily to the majority controlling shareholders that control the ownership rights of the company is in cases where a move may favor the majority shareholders over the minority in an un-fair fashion. The majority shareholders constituting the controlling owners of the company ultimately decide what the company will produce or do and how they will do it. They define the mission and purpose of the organization and how it operates.
Board Governance Checks and Balances
(1) The majority owning shareholders holding > 50.1% elect all the Board Directors of the company.
(2) The board may never elect a new board member on their own without a shareholder meeting election.
(3) The board may never increase authorized shares. This is can only be done by the majority owning shareholders.
(4) The board may not make the final decision to acquire a new business. Only a vote of the majority owning shareholders can do this.
(5) The board may not sell the company or its most valuable assets. Only a vote of the majority owning shareholders can do this.
(6) The board may not take on major debt on its own. Only a vote of the majority owning shareholders can do this.
(7) The board hires the CEO and the CEO hires all other employees of the organization and has sole discretion in the hiring and firing decisions.
(8) The CEO submits an annual budget and the Board approves or suggests modifications to that budget which are then dually approved or not approved by both the CEO and the Board. If the CEO and the Board cannot agree on a budget the Board’s budget prevails. Once the budget is established the board has no part in any financial decisions related to the budget unless the CEO veers out of the bounds of the budget.
(9) The board does not set board or executive compensation levels. This is approved only in the annual shareholders meeting by the majority controlling ownership.
(10) The board compensation committee and shareholders jointly approve pay levels and share option levels for all positions in the company and a budget and pool of share options available for the CEO to use in hiring and incentivizing employees and advisors. Once the compensation levels including stock option levels have been established and approved the board has no role in implementation on a hire by hire basis unless the CEO goes out of the bounds of the approved compensation levels at each position, the total approved compensation budget or has exhausted the available pool of stock options available.
Director Value-Add Descriptions from Publication Source
If the above legal duties were all a director did, I suppose there would be some virtue, but not much value. Fortunately, good directors bring far more to the table than just legal baby-sitting. The best directors can help the company across eight different areas:
1. Strategic Advice. Good directors bring a broader perspective that can be very helpful for the CEO who can “lose the forest for the trees” of daily operational activity. Many directors have tremendous business experience and can serve as a sounding board and source of strategic direction.
2. Customer and Partner Introductions. Strong directors bring a rich network of connections that should be useful in connecting to potential customers, partners, analysts, journalists, service providers, and more.
3. Time-Saving Operational Advice. Because many directors have “been there and done that,” they can provide tremendous value in finding short cuts and preventing constant reinvention of the wheel with routine operational matters like setting up payroll, finding office space, dealing with investors, and the daily ins-and-outs of running a business.
4. Recruiting. Experienced directors not only have a large network of connections to help find talent, they should also have deep experience in evaluation and hiring which should allow startups to hire better people faster than by trial and error.
5. Risk Management. Seasoned directors will insist that stage-appropriate financial controls are in place and that communications between the board and the financial/accounting providers does not lapse. They will also insist on regular circulation of the right financials to directors and investors. This not a lot of fun for many CEOs, but is a vitally important discipline the board should provide.
6. Fundraising. Many directors, especially investor-directors, are experienced and connected in the fundraising world and can provide extremely valuable guidance on the who, what, when and how aspects of raising additional rounds of capital.
7. CEO Evaluation. Good directors will be the first to point out when a CEO is struggling with his or her job, and can be extraordinarily helpful with coaching and advice, including the selection and hiring of an official CEO coach if the situation calls for it. It should also be said that directors are the ones who will kick off the process of transitioning the CEO into a different role if the situation requires it.
8. Driving a Successful Exit. Even if directors are not all large investors themselves, they represent the investors and are responsible for maximizing value for shareholders. Thus directors have the motivation, and typically the experience and connections, to help the company on its path toward eventual liquidity for shareholders.
Source: Startup Board Dynamics – Expectations for Director Conduct and Value