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Choosing the Right Fit for Your Board of Directors


Choosing the Right Fit for Your Board of DirectorsIf you’re a private or non-profit company, you may be looking to add to your Board of Directors. This important body sets annual budgets, operational goals, ensures funds are available for those operations, and evaluates the job performance of the CEO. Most boards of directors have several top-level positions responsible for various aspects of the overall operation of the company. The CEO is the highest-ranking member of the board and often has the final say in company matters. The chief financial officer (CFO), as the title implies, is responsible for all matters relating to finances. The position of chief operating officer (COO) is usually designated as the second in command of the board and often handles the day-to-day activities of the company.

In addition, corporate direction stems from the personalities and beliefs inherent in the board of directors. Getting the right candidate to fit within the company “personality” is key in the board’s continued success. Here are several pointers to consider when look for a new director:

  • You want board candidates that understand and are in alignment with the CEO’s vision and corporate culture.
  • Confirm that board candidates have a solid understanding of your company and its place in your industry.
  • Find out what major contributions candidates have made on other boards or as an executive.
  • Check a candidate’s references via other board members. Independent vetting is valuable, and established, trusted board members have good insights and connections.
  • Confirm the candidate has a clear idea of how they will contribute to the board of directors. Board members do not get on-the-job training – they need to explain why and how they can add value.
  • Keep the number of members small so only earnest candidates join the board.

When looking for new board members or even in evaluating your current board, be sure to also review your Directors & Officers (D&O) insurance to ensure that coverage is properly in place. D&O insurance provides executive protection and is designed to cover claims resulting from managerial decisions that have adverse financial consequences. A policy can be tailored to offer protection for each director’s and officer’s personal assets, reimburse the business for its costs to indemnify executives alleged of wrongdoing, and insure the organization when named as a defendant in a liability claim. Independent Director Insurance is also available to cover independent directors if the organization can’t or won’t.

What is important to note is that there is no standard D&O insurance policy on the market. Each D&O insurance company has different forms, and most policies are generally the subject of extensive negotiations. To ensure that you are getting the broadest available terms and conditions and the appropriate insurance structure put in place, it’s important t work with an experienced and knowledgeable broker. Axis Insurance Services specializes in D&O insurance for public, private and non-profit organizations and can help you secure the coverage you require. Just give us a call at  (877) 787-5258.

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Blogged on: January 21, 2016 by Mike Smith
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