Selecting Corporate Directors

How to Attract Valuable Corporate Board Members

 

Corporate directors may have the ability to:

  • Refer and help develop new business clients;
  • Share their special expertise with the board and management;
  • Add to the confidence of those that provide credit to the firm;
  • Provide access to valuable contacts (including political contacts) in the community;
  • Add to the prestige of the firm because of their reputation, status, and accomplishments;
  • Provide leadership and solid judgment, thus helping the board to make good decisions; and
  • Assist in raising capital for expansion or new projects.

 

Why would a person serve as a corporate director?

 

  • Compensation in the form of money, stock, and / or stock options;
  • The opportunity to serve others by sharing their knowledge, business experience, contacts, and overall expertise;
  • To increase their contacts for the purpose of increasing their own business; and
  • Possibly to add to their own prestige, reputation, and status in the business community.

 

What type of person makes a valuable corporate director?

 

  • Certified Public Accountants;
  • Attorneys with business/corporate experience;
  • Bankers (Sr. V.P. or above);
  • Owners of business publications;
  • Successful CEOs;
  • Experienced directors of other corporations; and
  • Business executives with integrity, excellent judgment, a track record of financial success, no conflicts of interest, leadership skills, and the time required to perform.

 

What do corporate directors want?

 

  • Directors and Officers Liability Insurance;
  • Access to all relevant information so they can make informed decisions; and
  • An Indemnification and Hold-Harmless Agreement for all liabilities.

 

Outside or independent directors

 

Outside directors or independent directors are directors of a corporation who do not have a direct or indirect material or pecuniary relationship with the firm (or anyone closely related to the firm), other than receiving a fee for serving as a director. Outside or independent directors can not be shareholders, employees, or officers of the company or any of its subsidiaries. The New York Stock Exchange and Nasdaq Exchange require that a majority of directors be independent. Non-listed corporations are not required to follow this rule, but it is generally prudent to do so.

Non-executive directors are often referred to as outside directors but there is a difference. While non-executive directors are not part of the management team, they may be shareholders of the corporation which has the effect of making them less than fully independent.

Having outside directors tends to increase the confidence of shareholders and lenders and often results in higher stock values.

If your corporation or non-profit corporation is in need of recruiting a qualified outside director or non-executive director, we may be able to assist you.

 

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