These control mechanisms offer the ability to proactively provide checks and balances, maintain credibility in the event of a possibly embarrassing future ordeal and ensure that directors or advisors have adequate time to contribute and be productive.
- Term Limits. Members should be elected for a fixed number of years with a maximum number of times they can be re-elected. It may be beneficial to include some flexibility based on member and role. “Charter members” may be treated differently. Also, include an exception clause based on board approval in case of specific organizational circumstances, etc.
- Staggered Board Terms. Do not have all your members’ terms expire at the same time as this could be very disruptive – especially true if numerous high performing members are all targeted to leave simultaneously.
- Performance-Based Ongoing Membership & Re-Election. At a minimum, ongoing membership/re-elections should be withheld from members that fail to meet a reasonable attendance requirement. Even the SEC requires that companies publish the list of directors that fail to meet 75% of all relevant board meetings.
- Pro Forma Resignation for Specified Life Events. Member should be obligated to submit pro forma resignation, which the board can vote on, in cases of major geographic moves, changes in employment (voluntary or involuntary), transitions to new roles which may cause conflicts of interest, changes in state of health, changes in legal standing based on indictment, drug charges, etc.
- Limit the Number of Other Directorships and “Outside” Obligations. Limit the number of directorships, and “other” existing and planned future commitments. Ensure that other obligations do not interfere with the member’s ability to be an effective and active member.
You’ll have less flexibility to implement these across your charter or founding board of directors, but can easily adopt these strategies with advisors and advisory boards. Remember, the board of directors will likely consist of investors, founders and a single independent (who would likely fall into the “charter member” category).