dick dadamo-lunch & learn august 7, 2015
TRANSCRIPT
Advisory Boards
•Presentation – The • Why• Who• Where • How
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Company Boards
• Fiduciary Board of Directors
• Advisory Boards
• Inverter Driven Boards
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Board Emphasis
• Fiduciary – Governance (CYA)
• Advisory – Help
• Investor Driven – ROI
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Broad Priorities
• Fiduciary – Shareholder Protection
• Advisory – Help
• Investor Driven – Investor Interest
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Fiduciary BoardsDefined by SOX (Sarbanes-Oxley Law)
Before SOX Loosely Controlled LawsFriends of CEOAlmost non-existent accountabilityEmphasis on Strategy/Planning
After SOX – new world for directorsGovernance - Heavy Legal Issues and DefinitionsShareholders LitigationsPressure to CYA and less on strategy Planning
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Investor Driven Boards
• Inherent help
• Prevent Self Style Business to Develop• Prevent by
• Redemption Clauses
• Shared Governance
• Pressure for Successful Exit
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Why Extra Help Needed in Today’s Economy and Business
Companies Face• Changing direction
• Fast moving technologies
• Changing Business Culture (Internet, Social Networks)
• Global Competition
• Customization
• Time to market shorter
• Compliance requirements
• Stagnation
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Beware Advice vs. Counseling
• Fiduciary Boards tend to give advice –more often he obvious – likely motherhood
• Counseling is advice that can be managed within the system using resources available• It will come from Advisors more familiar
with the company’s daily operations
• The once a quarter attendance of Fiduciary Boards inadequate for counseling
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Advisory Boards To The Rescue
Advisory Boards Bring:
• Experience and Knowledge⁻ Market⁻ Human relations⁻ Accounting⁻ Financing⁻ Legal⁻ Operations
• Resources
• Innovation
• Marketplace contacts
• Objective and fresh problem solutions
• Passion
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Trends – Advisory Boards for Growing Company Needs
• Start-Ups – Advisors a must for investors
• Public – Fiduciary Directors getting spread thin (burdened with governance)
• Private – Experts are needed to deal with the changing business (environment and compliance needs)
• All – to counter changing business environment
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Private Fiduciary vs Advisory Boards
Private Boards Burden:• Many have loss of objectivity as "Family and Friends"• Many have loss of objectivity as "Major Investors"• Many are conflicted as Officers of the Company
Advisory Boards Advantage:• Expand knowledge• Service contacts• Market contacts• Sounding board• Added disciplines• Compliments “Family and Friends” Boards• Time commitments can be controlled• Affordable consultants• Matchmakers
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Advisory Boards “Flexibility”
No Fiduciary Responsibility• Can tell it like it is
• Flexible • length of terms
• changing disciplines
• compensation
• responsibility division
• availability
• negates “Advice” when “Counseling” is needed
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Advisory Boards – Downside
Conflicting with Fiduciary Board • Sensitivity – threat to Fiduciary Board members• Ego “Why not me?” – belittling to Fiduciary Board• Confusion – Who does what?
No Company Commitment – to them• Advisory Boards treated like consultants• Advisory Boards counseling can be ignored• Advisory Boards not held accountable
Overcoming Downside• Reporting• Face to Face with Board occasionally
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Who Would Do This?
• White Hairs & No Hairs (WHNH's) – older men
• Wiser and Older Woman (WOW's)
• People from industry/market
• Retired executive personnel
• Friends Of the management
• Investors in the company
• Potential investors
• University system
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Why Would WHNH’s Do This?
• Desire and chance to contribute
• Networking opportunities
• Peer enjoyment
• Bored of retirement
• Satisfaction
• A step up to the Board of Directors
• Save marriage – being out of the house
• Potential dollar reward
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Advisors Can Vary Their Activity
• Monthly meetings – Creates “Sparks”
(Far more effective than individual meetings)
• “One on one’s”
• Available to staff
• Available by phone/email
• Part of planning/strategy/team
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Compensation
• Flexibility
• Stock options
• Modest retainer
• Consulting tasks
• Success fee
• Deferred income
• Contribution exceeds compensation
• Satisfaction – No Fee• to avoid retirement boredom• to receive recognition
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Advisory Boards
What Type of Person to Look for
• Personnel with common • Experience
• Market
• Interest
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Advisory Boards
• Networking
• Law firm
• Audit firm
• Bank
• Trade shows
• Trade magazines
• Customers
• Vendors
• Ex-competitors
• Trade organizations
• Mentors/coaches
• University system
• Incubators
Where to Find
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Company S – Pool Safety Systems
• One man band – need to expand beyond Southern California
• Advisory Board makeup• Ex-CEO of a competing technology company• Leasing company executive• Marketing/business planner• Ex-COO pool equipment company• Senior executive (been there, done that)
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Summary
• Markets, technologies & business culture rapid change too rapid for in house capabilities of small companies
• Markets, technologies & business culture rapid change too rapid for in house capabilities of small companies
• Fiduciary Boards tendency is operations avoidance• Advice rather than counsel• Subject to risk and liability• Subject to expanding governance regulations
• Advisory Boards are more flexible and available• Compensation• Attendance• Expertise
• Advisory Board candidates available• Retired and semi-retired people• From industry and from a variety of expertise & knowledge
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Dadamo Small Business Magazine
• Step 1 – www.richarddadamo.com
• Step 2 – Go to “Magazine” Tab• Go to “Membership Login”
• Step 3 – Go to “Register”
• Step 4 – Register• Username: First and Last Name (Ex: Joe Smith)• Type in Email Address• Password: DadamoBeta1 (type in both boxes)• Then Register
• Step 5 – Registration is Complete
• Step 6 – Enter Magazine – click the magazine signup –put username (first and last name) and password (DadamoBeta1)
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