Board Structure

We recently surveyed our Clients and Members about how their board is structured, triggered by a request from one of our clients putting together their first-ever board, for us to provide a Role Specification for a Chairman.

We had also read the report from Spectrum search firm concluding that businesses were not often getting as much value as they could from their Chairman. This they put down to CEO’s prioritising a chemistry fit above any previous experience/industry knowledge, despite the fact that Investors expected a chairman to mentor /coach the CEO and his executive board colleagues. Perversely the CEO’s priority to have a ‘friend’ as Chairman meant the person they picked often did not have the track record/experience needed to fulfil this role anyway!

So what did our Survey reveal?

Survey results:

  • 14 businesses surveyed; 11 have a board
  • Chairman.
    • Most common attributes are scaling up track record and board management experience; 50% have industry knowledge but only 2 have VC/Investor management experience
    • Fee amounts vary, £32.5k on average p.a. ( £44k exc. 3 low outliers) Note: Time allocated not specified.
    • 2/3 of chairman  invest
  • NEDs  – 2 on average, 1 being  the investment director (if there is an external investor).
  • Execs – Total on average is 3 (mostly CEO,CFO and CTO)
  • Board members T- So a total of  5 on avg.

 ‘What value does/should the Board give?’

Here are some quotes….

  • ‘The Chairman typically runs the board on the day (but not always),’
  • ‘Yet as CEO I have had to create the added value, by assigning tasks to the NEDs’
  • ‘The Chairman acts as my adviser/sounding board, because  he understands issues from my perspective as the CEO, because he has been there himself.’
  • ‘A Board should  help avoid “CEO blindness”’
  • ‘Boards should be kept away from operational discussions to focus on the bigger picture.’
  • ‘Value adding boards help the CEO and colleagues assess the options going forward, rather than spending undue amounts of time looking backwards at ‘historical’ data.’
  • ‘Not all Investors on board bring value to the extent postured –in fact some can be  value destroying.’
  •  ‘Likewise Angel investors who can be past their ‘sell by date, as the business grows and becomes more structured.’

Some advice we gave….

  1. Ensure major shareholders and the board are aligned on the objectives for the business in terms of ambition; growth; risk appetite; organic v. acquisitions; international or not; investment levels in product etc. and timeframes for an exit – if there is an Investor involved.
    These would normally have been set out in the Business Plan being financed, but they can be forgotten/blurred during the due diligence processes, so at the very least, reaffirming them when the new board meets for the first them is to be recommended.
  2. Then all appointments – Chairman especially should be made with these objectives paramount. This in turn means all appointments should be of people with the requisite knowledge and connections.
  3.  This should also apply to the Investor Director, who you do not want to be using this appointment as their training vehicle. Furthermore, stick out for someone as senior as possible who will not have to revert to their boss/investment committee for approval of any deviations from the original Business Plan.
  4. Have a  fixed period stated in their service agreements for both neds and angel directors, mutually renewable
  5. Chairmen should have some skin in the game – recommended min. a year’s fee.

If coming in pre-fund, then share price should be low (extra risk and role should help with fund raise). if coming in at Fund raise then no real need to have a  ‘discount’ compared to external investors (although may be a small one to acknowledge no downside protections for their shares, unlike investor shares).

  • Create an advisory board to ‘test’ out individuals and invite them on the proper board only if they have added value.
  • Getting the board the  right level of information helps avoid opinions over facts


Regrettably we have rarely seen the above  recommendations fully adhered to.
But whilst following the above advice does not guarantee getting full value from your Chairman and your board it should get you a lot closer than the average!

A Board – Who Needs One Anyways?

Watch our on-demand webinar where we further explore why scaleups should have a Board, how they can benefit from having one and most importantly, how to build one that best suits your business.

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