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How do you pay for early stage counseling?

Grant one percent equity to each member of the external board of directors who acquires more than four years of service.

Many CEOs and board members sought advice on compensation and time commitments for board members. Here is my best advice, based on many and many years of management advice. Paying members of the boards of companies that are not lifestyle-oriented companies one percent of the fully diluted in the form of an option that acquires over four years of service. You do not pay professional investors who serve on behalf of an investment company or venture capital and who are paid by that company.

The price of the option should be set by an IRS 409a valuation, and should certainly be low enough to recognize that the common stock options are not worth as much as the preferred shares, given the numerous preferences of the latter. In addition, the option should contain a special clause that accelerates the acquisition to 100% when a change of control in the company, which aligns the board member with the best interests of the company herself. Otherwise, you could imagine an event in which the sale of a company to consume a few months before the final acquisition could cause a board member to find ways to vote for delays or even against a sale of the company, pending the full acquisition of its options.

For life – style companies or terminally – oriented companies, members of the board of directors should be remunerated by cash meeting. Usually, this payment rises to $ 1,000 per board meeting, adjusted upwards for public corporations to $ 3,000 per meeting on average, with special compensation for committee chairs and special meetings. These payments reflect the fact that board members do not work to obtain equity, but for the equivalent of consulting fees, plus the risks inherent in joining the board.

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To be clear, venture capitalists who invest in their funds are usually never remunerated for a consulting service, which is provided as part of the investment. Board members, the CEO and other paid employees are not compensated for advisory services or stock options or cash.

Travel expenses are often reimbursed by the company. The members of the VC board of directors sometimes ask for it, at other times no. It should not be offered to members of the RC unless there is a request.

Next week we will discuss what one should expect from a board member regarding the time allotted to the company.