How to Form a Board of Directors

Last Updated: November 30, 2021 Approved

Forming an effective board of directors can be a powerful driver for your company's success. Determining the right size, scope, and experience of the board is critical to a successful outcome. In this article, we'll show you how to create a strong board of directors that can help you manage your business.

Steps

1
Find experts that fill areas your company is currently lacking in.
- If your company is planning a major acquisition in the future, find people who have significant merger and acquisition experience.
- If your company has plans to expand internationally, find people who have international business experience.
- Experts to consider include executives of other companies that are similar to, but not in direct competition with, your company.
2
Recruit experts with board experience.
- People who have served on other boards will know what it takes to effectively work on a board of directors.
- You will not need to provide much training for experienced board members, which will ultimately save you time.
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3
Manage the size of the board of directors.
- Keep the board small and focused.
- A good number of people to start with is 5.
- Always keep an odd number of board members to avoid deadlocks.
- Ensure that at least a portion of the board is clearly independent. In other words, they should not be related to or under the direct influence of any prominent members of the company.
4
Select people who can fully participate.
- Select people who can dedicate a significant amount of time to your company.
- Select people who live close enough to the company to meet face-to-face for important or unexpected issues.
5
Divide the board of directors.
- Form focused committees for critical areas of the company.
- Committees to form immediately include compensation and audit committees.
- In the long run, other committees should be established. These include acquisition and governance committees.
- People with relevant experience should be chosen to head each committee. For example, a person with accounting experience should be the head of the audit committee.

Community Q&A

Question

Who all can be a voting member on a board of directors?

Community Answer

Those who are members of the Board of Directors.
Question

Can I use my friends to be involved?

Community Answer

If they agree to it, yes.
Question

How old does a member have to be?

Community Answer

It depends. You must be 16 or older to work in the U.S., and if you're the CEO of a company, you'll probably want to appoint someone with experience and a good education in the department they're representing. I would say board members would probably need to be between 22-25 years old at a bare minimum.