4 Questions About Board Conflicts of Interest

board conflicts interestWhat are conflicts of interest?

For board members, conflicts of interest are “situations in which a person is in a position to derive personal benefit from actions or decisions made in their official capacity.”

Example: Let’s say that a director serves on a board for a rental car company, and he also works as an auto insurance salesman for his primary job. If the board he served on voted to buy insurance from his company, this would present a conflict of interest because the board member would stand to gain personally from that transaction.

For an incident to qualify as a conflict of interest, it must involve the clash between a director’s official duties and their own self-interest. Legally speaking, this sort of situation would obviously muddle a director’s ability to make the correct and impartial choice for the shareholders’ benefit.

What dangers do conflicts of interest present?

Conflicts of interest that have not been addressed can result in legal action taken against both an individual board member as well as the organization they serve. These intermediate sanctions can have an extremely negative affect on the finances of an individual or an organization.
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Building an Advisory Board for Your Startup

advisory board startup

Startups are unique, entrepreneurial creatures. For that reason, establishing a formal board of directors doesn’t often make sense until the company receives sizable investments from professionals who want board seats or require the existence of a board. Until then, the startup needs to be agile, but it can still benefit from the guidance of other leaders as an advisory board. So, how do you put together the right group of individuals for this task?

  1. Decide on a structure for the board.

Take some time to evaluate how you want your advisory board to operate and why you want it to exist. How many people do you want involved? (We suggest 3 or 5 members to start.) How often do you want them to meet? Will you hold formal votes, or will your meetings be more discussion-based?

  1. Look for specialists who fill in your gaps.

Have a tech background but are unsure about marketing? Look for a marketing executive who can help take you past the basics. Reach out to people who will make your startup more well rounded—not necessarily the people with whom you already have a lot in common.
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What Good Boards Can Learn from Great Teams

good board team

Putting together an effective board isn’t all that different from developing a standout sports team. OK, so you won’t necessarily be looking for someone who’s built for speed or for an athlete who’s able to push an F-150 using only their own strength. But you will need to create an environment that encourages group success. Here are some lessons we’ve gleaned from great teams that you can apply to your boardroom dynamics.

  1. Find specialists, but focus on determination.

Countless business journals (and our own blog!) have called for adding specialists to the boardroom; tech experts and professionals with entrepreneurial backgrounds have been particularly sought after in recent years. These “playmakers” bring big benefits to any boardroom. The tech experts, for instance, help provide a healthy defense against cyber threats as well as an innovative, offense-focused mindset.

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Directorpoint Ranked in BBJ’s Fast Track 30 for Second Year in a Row

Directorpoint Ranked in BBJ’s Fast Track 30 for Second Year in a RowYesterday, our company had the pleasure of attending the Birmingham Business Journal’s Fast Track 30 awards ceremony—a breakfast event at the Harbert Center in downtown Birmingham that honored the 30 fastest growing companies in the metro area.

Directorpoint was honored for posting 82.12% revenue growth from 2014 to 2015. Last year, Directorpoint was recognized as the second fastest growing company in the city. John Peinhardt, our Founder and President shares, “We are so proud to receive this honor once again and will continue to pursue rapid growth through careful planning supported by consistently great service.”

Our staff is thrilled to have been recognized by the BBJ for Directopoint’s persistent growth. It’s also exciting to share the spotlight with so many other outstanding Birmingham organizations, and we hope to help establish the city as a leader in technology and innovation.

Directorpoint Establishes Australian Headquarters

Directorpoint Establishes Australian Headquarters
Here at Directorpoint, we’re thrilled to announce that we have recently opened an official headquarters and data center in Australia. As our number of Aussie clients has grown, we have actively pursued ways to improve their product experience. The establishment of the data center, in particular, will allow Australian clients to experience significantly faster download and upload speeds while using our software.

As an organization out of Birmingham, Alabama, we’re very proud to be positively affecting decision-making processes in boardrooms across the globe. Our team sees this expansion as the next step further in expanding our international reach. John Peinhardt, our Founder and President, shares, “We are very excited about our prospects globally and are thrilled that Australia is home to the first of many international Directorpoint offices. We believe the new data center will help us provide an enhanced experience for our clients who are currently operating in Australia.”
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Board Membership 101: Risk Management

Board Membership 101: Risk ManagementDecades ago, the notion of “risk management” boiled down to the simple act of buying insurance. These days, however, board members are expected to be much more involved in overseeing and evaluating their company’s level of risk. According to PwC, risk management includes “the identification, assessment, and prioritization of risks and the application of resources to minimize, control, and mitigate the impact of unfortunate events on a business. It is the job of a board to oversee that their management teams have adequate risk management policies and procedures in place.”

Overseeing risk isn’t a job that falls solely on outside directors, though. According to the Harvard Law School Forum, internal executives are expected to handle the day-to-day risks of their business operations, but directors should, “through their risk oversight role, satisfy themselves that the risk management policies and procedures designed and implemented by the company’s senior executives and risk managers are consistent with the company’s strategy and risk appetite.” In other words, it’s the job of the board to ensure that the CEO and senior executives are completely engaged in systematic risk management behaviors.
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Board Membership 101: Self-Evaluation

Self-Evaluation

Since boards of directors are self-governing bodies, it’s important that they take the time to reflect on their performance both individually and as a group. The New York Stock Exchange requires listed companies to participate in some form of an annual self-evaluation, so many organizations already have a process in place. But for some of these companies, board self-assessments are met with an attitude of obligation rather than receptivity to the benefits of a well-executed evaluation.

For other, smaller companies, the practice of yearly self-evaluations has simply been overlooked in the past. These assessments, however, provide an outstanding resource for bettering board functionality. For example:
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Board Membership 101: Financial Oversight

Board Membership 101: Financial Oversight

Chances are good that if you ask a stranger on the street what a board member’s most important job is, they’re likely to mention finances. Boards have long been seen as the “make it or break it” play callers for corporations that either boom or bust. Financial oversight, while closely related to fiduciary duties in general, calls for a board member’s attention to detail and ability to understand the current position of the company’s financial assets. Although every decision a board member makes may not be a financial one, all of their decisions will affect the financial future of the organization they serve.

Providing a company with great financial oversight takes serious effort on the part of board members. Here are some ways that they can excel:

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Board Membership 101: Policy Shmolicy

board member policy

Policy-making may not be the sexiest side of board membership, but it is an absolutely vital corporate director duty. Company policies affect every aspect of governance and decision-making—from CEO selection to board management guidance and beyond. In a time when expectations for board members are soaring, policy-making has also become a significant way to reduce risk.

According to Mitch Dorger, experienced CEO and governance consultant, boards should be creating a strong policy focus. He writes, “Clear, concise and current policies improve the overall management of the organization…By having these documented, …[the board] speaks with one voice—avoiding a problem that many organizations have with multiple sources of policy guidance.” Unfortunately, many boards struggle to maintain a policy focus. Dorger continues, “When I was still a chief executive officer, I led an effort to get my board to establish and document the policies that were needed to govern the organization…When I talked to the board about creating a policy focus, there was some confusion about what policies are and what they are not.”
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Corporate Titans Call for Better Governance in WSJ Ad

Corporate Governance

If you’re perusing the latest issue of The Wall Street Journal, take a moment to flip to the back of section A. You won’t be able to miss the full-page spread that was secured by 13 of the country’s most influential business leaders. The ad, which is signed by people like Warren Buffet of Berkshire Hathaway and Mary Barra from General Motors, has one major purpose: to offer up commonsense governance principles “in the hope that they will promote further conversation on corporate governance.”

The article, which is also presented in full at www.governanceprinciples.org, begins by outlining how the future of the economy relies heavily on companies “being managed effectively for long-term prosperity.” It points out that millions of Americans’ retirement savings, college savings, plans to buy a home, and more are directly affected by decisions made by board members at major corporations. The authors continue by insisting that although they don’t agree on every single aspect of corporate governance, they can offer up six major principles on which they can agree. The principles are summarized in the main article but can be viewed in depth here.

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