How Should You Pay Your Company’s Board Members?

Many entrepreneurs that are just now starting up their business will want to know what they should offer to their prospective board members.  Sure, they will want to know what the board members can offer them, but this is not the only thing that should be considered.  It is important to be mature in your thinking so that you can have a dedicated board of directors.  Here are the four factors that most people consider if they are asked to be a member of the board of directors for a new company with a promising outlook:

Integrity.  People who have experience in the business world will have a good understanding of the fact that there may be some problems that come along in the beginning. They know that generating revenue can be a challenge in the beginning. Entrepreneurs in their early stages will need to be straightforward with prospective board members.

Financial Management. First time entrepreneurs will usually not appreciate the fact that the board members are usually the ones that hold a lot of the financial liability when it comes to mess ups in financial management. IF companies don’t pay their wage taxes, then board members may actually be held personally liable for this- along with any interest or monetary penalties added to it. Sometimes, people will turn down a board seat until they see that there is a good financial management plan in effect.

Collaboration. Entrepreneurs will sometimes look to the board of directors to get a fast approval on something instead of having discussions about the subject. Board members will usually be there to help the entrepreneurs to make wise decisions that will not cost them a lot of money down the road. Entrepreneurs must be willing to take heed to their advice and guidance.

Compensation. Companies that don’t have a positive cash flow will usually offer the board members stock options and common stock as compensation. They may also be offered a sign on bonus of a certain percentage of the outstanding shares of the company. This is usually somewhere between 1 and 4 percent. When companies start to have a positive cash flow, then they may be paid in cash for attending the board meetings.

If prospective board members don’t feel like they will make a good contribution to the company, they will usually turn down the offer. The best board members will always have the best interest of the company in mind. Membership of the board in the early stages is not always about the compensation or the ego that comes along with it. It is more about helping to build the company responsibly and productively.