When Do You Really Need A Board Of Directors?

"First the rules of engagement for this meeting ..."

“I want to establish my board of directors,” “Allen” said to me.

“What? Why would you want to do that?” I asked.

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“I just think I need a board of directors. After all, we’re doing over $1M per year in revenue,” Allen responded.

“Who’s on the board now?”

“It’s just me,” Allen said.

“Keep it that way,” I suggested. “A larger board is just going to cause you problems you don’t need.”

Allen’s view reminded me of my own naive view of the power of your board of directors. I thought that the board meeting was a place where all the key company decisions were made.

The belief is you’re going to enter this smoke filled room where all these wise people will advise you. You’ll argue and you’ll debate. Then a puff of white smoke will come from the chimney. All the company’s decisions have been made.

That’s not what startup board meetings are like. Think of your board meetings like a necessary evil.


No one wants to be at your board meeting.


Your investors don’t want to be there.

You'll soon learn that you don’t want to be there either.

Right now I’m on the board of one company, and I’m a board observer at another company. To be honest, there really isn’t that much difference.

Sure, I don’t get to vote as an observer, but I do get to fully participate in the board meetings. And when you’re in a board meeting, it’s really who’s speaking, not whether the person has a board seat or not, that matters.

For example, one of our largest investors was a board observer. He came to every other board meeting. But, when he spoke, everyone took notice.

Yes, he didn’t get to vote, but that was irrelevant. He had a tremendous influence because his words mattered.


You’ll find with startups that board meetings many times aren’t what you think they are.


I think there this view that board meetings are where all the strategic decisions for your company are decided. That’s just not the case.

You and your team do the work outside of the board meeting. Then you update your board in the board meeting.


Consequential votes like removing you as CEO are also very rare.


Board votes are usually for things like approving stock options and other procedural matters. It’s extremely rare when your board will not approve option grants.

The decision to remove you will be made outside the board meeting. It will be your performance, or lack thereof, that will determine whether you remain as CEO.


That’s why you’re better off operating as a one person board until you absolutely have to expand your board of directors.


However, why give a group of people power over you until you absolutely have to? Once you establish a board of directors larger than one person (you), you create problems for yourself.

Yes, I get the “it (having a board) gives you discipline.” But, this is your company. You shouldn’t need a board to give you discipline.

The downside is you now work for someone (your board). Instead, create an advisory board if you’re looking for help and guidance. Or hire a CEO coach. Your advisory board and your coach work for you, so it keeps you in control.

You’ll need to expand your board if you raise money from VCs or you IPO your company. Until then, keep your life simple and stick with your one person board of just you.

For more, read: How Should You Tell Your Team The Results Of Your Board Meeting?


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