Many entrepreneurs make the decision at some point to bring in some outside directors to add experience, wisdom, contacts, opportunities or just a different way of thinking. This can be a very good idea as long as there is a clear concept of how they will interface with the entrepreneur.
Is the Board an advisory board or a governing board? It may be wise to keep outsiders on an advisory board where they can give advice but the business is not bound by them. If they are placed on the governing board, they can force changes in operating policy, or in some cases, in management. This can be risky.
Should outsiders be paid? Most small business people cannot afford to pay them, so they serve voluntarily. They may get a few nice meals a year out of their service, but that is it.
Others offer shares in the company to their outside directors. This is especially so in cases where the plan is to go public or cash out within a few years.
Either of the above considerations can be offered without putting the outsiders on the governing board. But if you decide to go that way, beware. Board members have a fiduciary duty to the company, not to you. And if they have "skin in the game", they are going to be less forgiving of entrepreneurial missteps.
I have been through situations with both legal clients and consulting clients where the outside board members banded together with one or two management people on the board to overthrow a founder CEO. In each instance it was deserved due to managerial incompetence, but the entrepreneur had nobody to blame but himself. He put himself in that position. The people he brought in to help him have ended up having to remove him in order to save the company.
These situations are difficult and delicate. No one walks away happy. The Board must act to save the company from the founder and then initiate a plan to bring things back to an even keel.
So, in summary, outside directors can be good for the entrepreneur and the company. But they can also be bad for the entrepreneur, and ultimately things may get real ugly.
Knowledge and power do not have to come as a package. When they do, the law of unintended consequences may come into play.
You pay your money and you take your chances with any option. No outside directors can mean your thinking is totally in the box and non-global. Outside directors can cure those shortcomings, but introduce others.
It is your company. You decide. But consider the options and the consequences of each one before moving ahead.
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