Board Basics

10 min readMay 25, 2019

Written for a dear friend who recently joined her first Board.
by David Weekly
May 24, 2019

First off — THANK YOU for offering your time as a Board member. I’m excited that this will be your first Board and hope we can offer as much to you in knowledge and value as you will doubtless offer to us. Our company is smarter because you’ll be here on our Board.

Let’s go over the different components of being a Board member:

Fiduciary Duty

The most important single concept in joining a Board is that you have a formal responsibility to help ensure the company makes the best possible decisions to get to the best possible outcome. This is a “duty of trust” that you owe to the Board. It’s not a specific commitment in terms of number of hours or anything like that but it’s rather a professional obligation that you’re going to do what you reasonably can to further the company’s interests. Typically this means that informal guidelines emerge, like not sitting on more than eight boards, because it’s too difficult at that point to ensure for each of those companies you are able to give them enough time and “shower thoughts” to be able to help the company make the best possible decisions

This duty of trust to the well-being of the company trumps duty of care to a particular shareholder class, the CEO, or friends who are employees. In any decision you’re helping the company make, you put the company first, even if it may not be ideal for these other entities.

Any time there’s the potential for a conflict of interest or the appearance of a conflict of interest, you should disclose it, and probably recuse yourself from the decision. For instance, if you work at Slack and the company is discussing whether or not to continue using Slack or move to another communication platform, you’d have to recuse yourself from the conversation because you’d be conflicted (unable to have the appearance of putting the company first).

Similarly speaking, whenever entering a new formal obligation to another party, like joining another Board or a different company, you should right away let both them and us know about the new obligation so both entities can come to agreement about any potential conflict of interest or perception thereof. In the worst case, for instance if you wanted to go work for a direct competitor of ours, we would have to break off the formal engagement to avoid a conflict.

Common Representative

In this particular case, you’ll be elected to the Board by a majority of Common shares. Since I’m a majority owner of the Common shares at this moment in time, that may seem like a goofy formality, but as the company grows, the number of Common option holders and shareholders will grow. Your job (secondary to the job of furthering the company’s success, as highlighted above) is to ensure the best possible outcome for the value of these Common shareholders. You serve the company at the pleasure of the Common shareholders.

At future points in time, generally in conjunction with a new financing round, you may find that new seats get added to the Board that will be appointed by a certain Preferred class. They will similarly owe the same a fiduciary duty to the company but secondarily — just like you — will be looking to further the interests of their Preferred class.

Most of the time, interests are aligned across shareholder classes, but it’s important to think things through carefully and get extra decision making support when the two might be at odds.

As the Board grows, some seats might be designated as Independent. In these cases, Common and Preferred Directors collectively agree on such seats; they are putatively neither in thrall to optimizing for Common or Preferred but solely have a fiduciary duty to the company.

Decision-making

Big decisions (like whether to raise a round, sell the company, acquire another company, etc) will take a lot of time and deliberation. I’ll be expecting you to spend time outside of Board meetings thinking about what’s good for the company and to come with me actively with your observations. A combination of advance review of a Board material packet and regular discussions outside a Board meeting with other directors and the CEO can ensure a smooth and efficient formal meeting. As a result of this, you may find the formal decision making section of the meetings to be surprisingly short — it’s not uncommon for this portion to last only ten minutes of a three hour meeting. The rest is often spent going over strategy, performance, and market changes.

If the Board is running well, the vast majority of decisions should be unanimous but not rubber-stamped; directors should be familiar with the material they are approving. It’s never okay to later come back to a decision you approved and say “I didn’t realize what I was approving!” Ensure you ask the right questions (ideally mostly before the meeting) and only consent when you fully understand and approve of what is proposed. Be heard; that’s why you’re on the Board.

The Meeting

Quorum: a majority of Board members need to be present at a meeting for the meeting to be legal and for the Board be able to make decisions.

The agenda of things to discuss at the meeting — especially any formal decisions that will need to get made — should be circulated in advance of the meeting. Please take a moment a week before a meeting to ensure that the Chair (myself for now) knows of any of the decisions or conversation topics that you want to ensure are covered so they are added to the agenda.

During the meeting, we’ll first ensure that the agenda is appropriate and then go through the agenda bullet by bullet. For things that formally need agreement, after discussion we’ll need one Board member to “move” that an item be submitted for a vote and then “seconded” by another member. Then we’ll take a vote from all members; a majority will be needed to pass.

Consent Calendar

There’s often a slate of routine approvals that can get voted on together as a group unless a director wants to separate out one of those items for independent discussion. This is called a “consent calendar”. This will often include things like routine employee stock option grants or other ordinary items. So one vote to approve the consent calendar can in a blanket sweep approve all the things on the list.

Committees

Occasionally, subsets of the Board will need to convene separately from the whole Board. This is much less common in very small Boards like ours, but one very typical example is a Compensation Committee whose job it is to set pay for the CEO. (The CEO obviously cannot participate in this committee.)

Minutes

Our corporate counsel is also the Secretary of the company and takes minutes for the Board meetings. (It may surprise you to learn that this service is pro bono — in part because it helps them ensure the company is being properly legally run! So don’t freak out to see a $900/hr lawyer sitting next to us.)

The formal minutes of a meeting may surprise you as being much shorter than a transcript of all of the items discussed; very different from what you’d expect of a good set of minutes from a typical corporate meeting. Part of this is because the formal minutes constitute a formal record of the organization’s decision making and are highly subject to discovery — best practices are to minimize what’s in the formal record to strictly contain what is legally necessary for the meeting. Nonetheless, it’s important to avoid “re-litigating” decisions — once we make a call we should stick with it.

The prior meeting’s minutes are generally the first thing that requires formal approval at the next meeting. You must review the minutes to ensure they accurately reflect the discussions and agreements!

Scheduling & Ad Hoc Decisions

Formal Board meetings must be scheduled; typically the last thing agreed on at a board meeting is the time, date, and location of the next.

Impromptu or electronic Board meetings may happen to discuss urgent matters but instead of requiring a quorum, 100% attendance is required for any such meeting.

Since we have a small Board, it’s important that we make a best effort to have everyone be able to attend all Board meetings. We will try to at least “pencil in” meetings for a few months in advance so you can plan around them; please let us know immediately if your plans change and you’ll be unable to make a meeting — we can and will change meetings to accommodate you. Don’t feel bad about it.

Adding Value

There’s a lot going on with a startup — there will be many “fires” that will need discussing and be tempting topics. In particular it will be tempting to get involved in making tactical decisions around hiring, firing, and vendors. But a Board must not become operational in nature, where its input is seen as required to operate the company. Instead, Boards should focus their effort on strategy, helping orient the company toward success and avoiding micromanaging.

Similarly, a lot of the value you can add is in observing what’s *not* being discussed. If we seem to have app install campaigns covered well, what did we not consider in terms of partnerships? If we’re struggling to hire a full-time employee for a role, what resources are we not bringing to bear? Why aren’t we thinking about using a consultant?

Part of your value is also to act as eyes and ears — what’s going on in the industry that we should know about? What are shifts you’re seeing in parallel industries that may end up impacting us? What new competitors are on the horizon? Don’t assume the company already knows everything — err on the side of oversharing your thoughts and observations.

Similarly, don’t assume that the company knows all of the ways you can help and add value as a Board member; pipe up with referrals to resources the company seems to need to which you are connected. At a cocktail party or flying on a plane, let out that you’re a Board member of the company — sometimes these serendipitous connections can add a lot of value but you won’t get serendipity without probability: you need to put it out there!

Legal

As a Board member, whenever you are communicating on behalf of the company, you are speaking as its formal representative. Things that seem casual or funny or not a big deal to put in writing in an email or a text message might end up not so funny in a court of law years later. In particular, it is essential that you not comment on legal matters. If you have a question about legality, pick up the phone and call to talk about it or send an email to corporate counsel (msullivan@orrick.com) with the first line of the email as “A/C PRIV” to mark the email as attorney-client privileged. The content of the email must be a legal question — you can’t just cc: a lawyer in a thread to privilege the whole thread. And if possible please call me first; my hourly rate’s a little lower than Orrick’s.

To be clear: unless you are licensed to practice law and familiar with the details of a case you must never write down a legal opinion about what you feel is legal or not. Pick up the phone and talk through your concerns or write an A/C priv email to counsel.

Security

As a Board member, you will have access to very sensitive company information and circumstances. As a result, we’d like to ensure that your computing environment and access to company data are secure. When possible, only access information via your company-controlled GSuite account (@medcorder.com) and enroll a pair of hardware two-factor authentication tokens such as Google’s Titan Key or a Yubikey. The company will reimburse your purchase of these. Please also enroll these security keys for your personal accounts such as GMail and Facebook. We’d strongly prefer if you use only recent (≥ 2013-era) Apple or Google laptops to access company resources; if using a MacBook, please have the latest version of the public non-beta operating system installed at all times and use an anti-virus solution such as Bitdefender Shield. Please ensure you have enabled full disk encryption (FileVault), auto-lock of your screen, and a secure password to unlock your screen and hard drive. When possible, preview documents in Google Chrome vs downloading, and ensure you have the latest version of Chrome installed at all times (click the green “up” arrow in the upper-right when shown). Another best practice we recommend is creating a separate Google Chrome profile for your Medcorder account to create a further firewall between your personal activities and logins and company-related activity. If accessing company data from a public location please install a privacy screen on your laptop and use a WPA2 encrypted WiFi connection, ideally with a VPN where practical. Ensure you use strong, machine-generated passwords with a trusted password manager such as LastPass, 1Password, or mSecure. Please do not attempt to access company resources when physically located within China or Russia.

Questions

Please don’t be embarrassed to ask what seem very basic questions: about the company, strategy, the Board, or anything. You might be shy because you’re worried the answer might be obvious to everyone else, but many times these kinds of “obvious” questions avoid getting discussed because nobody wants to look like the idiot. So be the idiot. Ask the dumb question. And watch how often it’s actually incredibly helpful.