In their excellent paper posted on the Newport Board Group website, Gary Kunkle and Mark Rosenman discuss the need for independent directors at private, growth-oriented companies.
Entrepreneurs, they say, “need to look beyond day-to-day operational firefighting. They need the timeliest, savviest, most reliable counsel about markets, trends and companies.” The authors provide a helpful guide to the natural stages of enlisting advisory help. Sure, the entrepreneur can go it alone, but he or she is likely to fall victim to “myopic decision-making to which nearly all closely held companies are prone.” A private company may seek independent board members when it needs liquidity but the right independent advisors can bring so much more to emerging companies. Not only do independent directors help the entrepreneur to develop stronger, more professional management, but they often oversee the creation of financial and operational controls. The presence of talented business men and women serving as independent directors also sends a message to world that the CEO entrepreneur is confident enough to challenge his thinking in growing a stronger company.