Why Your Board Needs Outside Directors
Larry Putterman
Board Director | Advisory Board Member | C-Suite Mentor | Open to Board Director and Advisory Board Opportunities
Boards without outside directors do not make objective decisions. Boards need outside directors to see all sides of a problem and find the best solution.
Outside directors bring incredible value with their “fresh eyes.”
I believe boards that have not brought somebody new to the organization in the last one to two years run the risk of stalling the growth of the company.
Public companies are obligated to have outside directors, but private and family businesses are not.
The Wall Street Journal states: “In US public companies, outside directors make up 66% of all boards and 72% of S&P 500 company boards.”
7 Benefits of Outside Directors:
- Unbiased advice: Their advice is not tainted by the existing boards views and politics.
- Different perspective than insiders: A CEO needs different views and perspectives to problems that only outsiders can bring. This is especially true for a family business.
- Objective: Outsiders have been there and done that and can add the objective advice that boards need to distinguish crises and normal situations.
- New skills: New board members skills and experiences bring a different view to problems and discussions.
- Credibility: It sends the message that you are a serious organization. This can help with negotiating new financing, selling the company or an IPO.
- New resources and contacts: Outside directors bring a whole new set of contacts and connections that can be leveraged. Contact introductions include customers, suppliers, and bankers.
- On your side: Outside directors are on management’s side and will give opinions and advice that the company’s lawyers, accountants and bankers cannot give.
I was chairman, CEO and board director of SafeData, a data backup and recovery company. Our premium service offering was cloud-based high availability. High availability is data replication from one server to another.
We had an exceptional outside director who benefited us in all 7 areas. We spoke with him daily. He made the difference in our growth and successful sale of the company.
For your public, private or family business's success, find exceptional outside directors to complement your board and management team.
Which of the 7 Benefits of Outside Directors resonates with you? Why? Can you list others? Why are they important?
P.S. – Do you need an Outside Director? Please contact me. I am available to help you see your business through “Fresh Eyes.”
CEO, Chief Cheerleader & Talent Scout
4yGreat article Larry Putterman!! Outside directors bring a whole new set of contacts and connections that can be leveraged. Contact introductions include customers, suppliers, and bankers. = #Diversity
Business Adviser | NED | Chartered Accountant with a great interest in B Corps companies
6yHi Larry Putterman I agree with your article, but then I'm biased as I work as a Non Executive Director. Having said that over my whole career I've worked in a number of fast growing ambitious businesses that have benefited enormously from the skills and experience of NEDs. They helped us avoid many problems and made the path to profitable growth easier. They became our trusted advisers that we turned to whenever we needed to talk things through. As a NED it's great fun sharing our experience, we have made a large number of friends (without us having to go native) in a number of exciting companies.
PRINCIPAL PARTNER at O.O SOLANKE & CO, SOLICITORS ADVOCATES, CONSULTANTS ON CORPORATE GOVERNANCE AND TRANSPARENCY
8yPushing the frontiers of the engagement further is to ensure that independent directors are independent in every sense of the word through their tenures. Collateral relationships that have impeaching effect on their independence should always be looked at. It is perhaps the refresh and critical alternative viewpoint needed to drive the frontiers of the boards of modern day joint stock companies
Facilitating Growth & Value of Customer Service Operations
9yIt’s one thing to bring outsiders into the fold; that is not enough. Listening to them, as alluded to in the article, offers powerful insight. Finally, acting upon the advice, as appropriate, is the goal.
Planned, People-centred, and Professional Non-profit Organisations
9yI'm with Barry here. NFP boards especially need to include independent directors. In pursuit of 'the cause', sometimes these well meaning governors miss the proverbial trees for the wood. Additionally, of particular importance are the skills such persons offer representative Boards. Independence keeps groupthink in check.