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How Private Companies Can Benefit From Boards

While private companies are not required to have boards of directors, some may want to. Here are 6 reasons why having a board in a private company is a good idea.

  1. Neutrality. It can bring independent opinions to family-owned businesses, particularly one that is feuding, according to the E-Commerce Times. A private company board may have the courage to oust a family member when the family itself might not.
  2. Seeing the bigger picture. Financial Executives International tells this story: In 1990, four executives launched a startup that would allow people to use their phones to look up stock quotes and purchase groceries. The company grew quickly to $50 million but eventually flatlined. The reason: The company thought people would use phones instead of computers. “If you are a hard-charging young company with blinders on, you need to have outside advisers to see the big picture,” John Bachus, one of the original founders, told The Washington Post.
  3. Expansion opportunities. A small startup or family owned business may launch the company based on their experience in one area. But they soon discover that to remain competitive, they must be experts in another area. One way to successfully launch in that other area is to bring in board members with that expertise.
  4. Venture capital. Knowing that you will be looking for investors at a certain point in your growth strategy, bringing in board members who either are venture capitalists or are well connected with them would strongly position your company for the future.
  5. To make the company more secure. If a company is heavily in debt, a potential lender might require the company hire a board of directors to provide a larger guarantee that the company is headed in the right direction and will do what it says it will.
  6. Growing beyond its management ability. Deloitte suggests that private companies consider bringing in a board when their company has “outgrown the capacity of the founders to manage it.”

Private companies don’t generally have the same level of resources that public companies do. Having a board of directors can help give these mostly smaller organizations some of the same insight and expertise their larger counterparts have, resulting in a stronger competitive advantage.

 

About Lynn Russo Whylly

Lynn Russo Whylly