Reasons for establishing a board of advisers and tips on adviser compensation.
Mark Nielsen, president of Wesbar Corp., a manufacturer of marine and agricultural products in West Bend, Wis., heard dire predictions when, three years ago, he told people that his 100-employee family-owned company was going to bring on five outside directors (out of a total number of seven). "People warned us we'd be giving up control of the board," he recalls.
Instead, Nielsen believes the outside directors, who are in their forties and fifties, have improved the quality of decision making at the company; they anticipate problems because they've seen them before.
There are other reasons to create an independent board. Any company that aspires to go public and have its stock traded on the American Stock Exchange or NASDAQ should install independent directors to meet the exchange's requirements. These days bankers, too, are interested in knowing who's on your board before they agree to renew a line of credit.
Wesbar used local surveys on board-member compensation to figure out what to pay the directors for attending six meetings a year. Directors are typically paid an annual retainer and fees for attending board meetings and special committee meetings. John Nash, president of the National Association of Corporate Directors (NACD), says all of that might come to $6,000 a year for each outside director of a small company. The NACD (202-775-0509) will make industry surveys of board-member compensation available (free) to companies that request them. The NACD will also do a search, at no cost, for companies looking for potential directors with special expertise or management experience.