FAQ About Value-adding Board Work

If you have other questions about professional board work, you are more than welcome to send your question to vinderstrategi@vinderstrategi.dk, so that both you and others can benefit from your question and the answer to it.

What is a professional board?

Among other things, professionalism in board work requires a written contract specifying expectations, requirements and compensation. Mutual obligations, goals and success criteria are also described. The work of the board is clearly defined and the board is seen as and acts like a value adding part of the company.

How should a profession board be composed?

The optimal composition of the board depends on the kind of value it is expected to add and the goals that the company wishes to achieve. The value expected and the goals set determine the competencies needed on the board. In all boards competencies relating to the strategic development and control of the company are required. In addition to this, it is also a good idea to have a board with complementary competencies, so that professional, personal and inter-personal competencies are broadly represented. Please see “Board Composition” which can provide inspiration for your composition of the board.

How do I professionalize my board?

Some companies can and will do the analysis of competencies required on their board themselves, and then contact potential board members with these competencies. Other companies want professional sparring, advice and help completing this undertaking. Still other companies choose to outsource the task.

Which tasks should a professional board undertake?

A professional board should be responsible for:

1. Ensuring that the company has a solid strategy – and the right strategy

2. Ensure that the company has the required resources for executing the strategy – primarily cash flow and human resources.

3. Ensure that management and the board fulfill legal requirements.

How do I ensure development and evaluation of the professional board?

When a board is professional, we think that it is entirely natural to follow up on the common goals and success criteria of the board as whole, as well as follow up on each member. However, many boards still don’t do regular evaluations and therefore don’t benefit from the continual improvement that they facilitate. As a means for remedying this shortcoming, we offer Bestyrelsestjek™, which is a tool for evaluating the board.

Should the board get a liability insurance?

Many different positions on this issue exist. Basic insurance issues of risk relative to premium and coverage are worth considering carefully. It is generally our recommendation that the company get a liability insurance for board members.

What does a professional board cost?

The size of board compensation packages is variable and depends on the level of responsibility, tasks, and time required (e.g. the number of meetings). As a rule of thumb, chairmen receive about 20% of the compensation of the CEO. The compensation of the chairman is about 2 or 2 ½ times greater than that of regular members of the board. The compensation of board members is thus typically about 8-10% of the compensation of the CEO.

When does a task become a board task?

According to law, “Management is supposed to handle the daily management of the company in accordance with the guidelines and directions set out by the board. Daily management does not include undertakings that are of unusual type or of great importance for the company. Such undertakings require special authorization from the board…”

Should the composition of the board change as the company develops?

Generally, it is important to make sure that the competencies of the board match the challenges faced by the company. The company can be in an upstart phase, growth phase, consolidation phase, new growth level phase or in maturity, each of which requires different competencies. Additionally, special circumstances can also affect the optimal set of competencies – such as succession, change of CEO, turnaround, disposition of portfolio companies, or mergers. Please see the question “How should a profession board be composed?” for more detail.