Startup Boards, 2nd Edition

Chapter 5Board Functions

Early in the life of a company, the board is often small, numbering between three and five people. At this point in the company's development, board business is often presented simultaneously to the entire board. As Paul Berberian (Sphero co-founder, Company Six founder/chair) correctly points out, “In startup boards, there is not much to govern. The board has to support the CEO with their resources, opinions, and their experience—where they see what has worked in other companies and what has not.”

The Role of Board Committees

As a company grows, its board of directors and the number of things the board needs to consider also increase. As the level of oversight of the board expands, the board forms specific committees, including audit, compensation, and nominating/governance. Existing board members serve on one or more of these committees. Each committee has a charter describing the responsibilities, including structure, processes, authority, and committee membership, described below.

• Audit: Oversees the company's accounting and financial reporting processes and financial audits. The responsibilities include ensuring timely audits, independence of audits, and communicating with the independent auditors about any relationships or services that could affect the auditor's objectivity and independence.
• Compensation: Establishes CEO and executive team compensation, oversees equity compensation grant policy, and reviews outside data or hires outside experts ...