Being a board member: privilege or risk?

Triniti

There are two possible reasons why you are reading this article: first, you are generally interested in management of companies or second, you have been asked to join a company board.

Many of you are most probably at the peak of your careers. You might have even been asked to join not one but multiple boards and are wondering if it is worth it. You might have heard from different sources about the wide range of advantages that being a board member provides. However, as great as the pros are, the cons should also be taken into consideration.

Let us get to the advantages first:

Boosts Your Public Profile

Being on a board of directors is prestigious, it definitely looks good on your resume and gets your name out in the public. Consequently, more opportunities arise for you to be invited to different events for making presentations, write articles, serve on panels at conferences and be quoted in the press. You will definitely be included in the company’s website, letterhead and in its publications. That’s nice.

Experience opportunities

If you are invited to join the board of a successful company or of a company that is on the rise, this definitely presents new learning opportunities and experience you might not be able to gain at your current work place. If it is an early stage startup, being a board member may even include running the company. Otherwise, when the company is already a bigger player in the market, you may get a chance to learn more about corporate finances, planning of meetings, marketing, communications, lobbying etc. That’s useful.

Expanding your network and establishing new contacts

While each board member is likely to have an established network of high-quality professional connections, interacting with people from different industries with varying levels of knowledge can definitely broaden this network. You are highly likely to get in contact with new potential business partners, clients, managers and vendors unless the board is comprised of only three persons, which is the minimum requirement under the Law on Companies of the Republic of Lithuania. Although in such case the possibilities of widening your network might be narrowed down, it does not mean that there is no advantage in terms of network expansion, as not the number of people but the persons themselves as well as their network of contacts is what matters. That’s fun.

Chance to make impact and help the company

In addition to the self-directed reasons as described above, you might have an opportunity to make a real impact in your community or professional field. If, for example, you are a big fan of non-profit missions, being in a board may allow you to make a positive impact for such missions as board members have a say regarding the company’s policies and business practices. That’s self realization.

Opportunity for additional income

In some cases, board member are being paid for their service. This is more likely for large corporate boards than for startups though. Nevertheless, while startup company board members might not be awarded in terms of cash, they might be offered stock options of the company, which is rather popular among startups when looking for highly experienced and qualified professionals. That’s profitable.

Despite all the advantages, joining a board might have some disadvantages as well:

Time commitment

An aspect you should consider before accepting the offer to join a company board is whether you have enough spare time to serve in the board properly. The time commitment usually depends on whether you are joining a board of a long-standing corporation or of a company at its development stage. The latter would probably mean more dedicated time as well as ever-increasing challenges. In the meantime, large corporations usually have strict meeting schedules and agenda. That’s demanding.

Personal liability of board members

As a member of the board of a company, you are required to act in compliance with the highest business ethics and in the best interests of the company. The key provisions binding the members of a board are described under Article 2.87 of the Civil Code of the Republic of Lithuania are:

  • To act honestly and reasonably;
  • Be loyal;
  • Maintain confidentiality;
  • Avoid conflicts of interest;
  • Adhere to the asset separation principle.

If you fail to comply with these conditions, you could actually be held personally liable, meaning that the aggrieved parties could sue you individually for your actions which contradict the legal requirements. That’s responsibility.

Limited ability to interact with the company

Being a board member limits your abilities to enter into business transactions with the company. You as well as the people related to you, such as your company, siblings, parents, children, would not be allowed to do business with the company unless certain exceptions apply. Otherwise, it is regarded as a conflict of interests. That’s limiting.

In summary, as attractive as it may be to join a board of a company without giving it a second thought, because the advantages might seem great and unquestionable, the disadvantages are also worth your consideration. Such aspects as the time necessary to serve on the board properly, personal liability issues as well as limitations to the ability to do business and otherwise interact with the company whose board you are on, must be assessed.

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