Every entrepreneur deserves an External Advisory Board or a Board of Directors with External Directors

• Because it’s lonely at the top of a company. To be the team, you need to be confident and determined. Do you have enough reliable and experienced people around you with whom you can discuss decisions or projects?
• Because you don’t have to know everything yourself. Other entrepreneurs have experienced similar situations and can help you learn from their own mistakes and successes.
• Because growth doesn’t happen on its own and sometimes you have to step out of your comfort zone, supported by someone who can guide you because they themselves have learned how to deal with risks.
• Because a sounding board can sometimes make the difference between a good idea and a brilliant move with a well-thought-out plan.
• Because your company is growing so fast without the necessary internal agreements and processes being worked out, leading to miscommunication with all the growing pains that entails.
• Because the transfer of the company is insufficiently prepared, whether it is going to the next generation within the family or being sold externally.
• Because there is insufficient separation between the interests and roles of the owners, shareholders, the board, and management. Is the company there for the shareholders, or are the shareholders and the family there to serve the company?
• Because you don’t have enough insight into the figures, profitability, and other performance parameters in your company. You only work in the company, but not enough on the company.

We like to think of the tough entrepreneur who does everything himself and knows everything better. In reality, entrepreneurship is a lonely job, with high intensity in terms of working hours and energy consumption. Nevertheless, mature (family) businesses in particular remain fearful that outsiders on an Advisory Board or Board of Directors offer little added value, with the underlying argument that they do not want busybodies in the company. What are these people going to teach us? What can they teach us?

When you look at testimonials from entrepreneurs who have taken that step, you see a very different reality. There may not yet be scientific proof that Count Buysse was right, but at deminor NXT we have found that most companies that take the step benefit from it, whether financially or simply in terms of their internal organization and operations.

There is often confusion, so let’s clarify:

• Advisory Board (AB): This is an informal body, set up on the initiative of the business manager or company. The AB provides advice, contributes ideas, and acts as a sounding board, but does not make formal decisions. As an entrepreneur, you determine the agenda, the composition, and the topics to be discussed. Everything remains confidential and flexible. Think of it as your personal think tank and sounding board: critical, involved, but without legal obligations.
• Board of Directors (BoD): This is the formal, legally required governing body of a company. All public limited companies (NVs) and private limited companies (BVs) in Belgium are required to have a BoD, although this may consist of only one person. The BoD makes all major decisions, oversees strategy and policy, and is accountable to shareholders and under the law. When you allow external parties to join the BoD, they are allowed to participate in decision-making and, to this end, they are also allowed to know everything about the company and become jointly responsible for its management. Appointments are made by the shareholders’ meeting and published in the Belgian Official Gazette. The BoD is the highest decision-making body, where formal power and responsibility come together. This is not without obligation.

The decision to appoint external members to a supervisory board or executive board depends largely on the stage of growth your company is at, but will also depend on how far you, as an entrepreneur or shareholder, are prepared to share control of the company with external parties in a transparent manner . Whether an external party wants to become a director in your company will also depend on how reliably the reporting, internal control, and risks within the company can be identified. That is why many entrepreneurs in their SMEs opt for a Board of Directors with external members as a first step.

External members receive compensation, but this is usually not their main motivation. It does ensure that everyone is committed. It remains much cheaper than hiring a consultant on an hourly basis. After all, you agree on a fixed rate per meeting, or for a whole year, with clear agreements about the number of meetings and their duration.

For the company, it should not be non-binding either: a well-functioning Supervisory Board or Executive Board with external members requires good preparation by the company for each meeting, providing the necessary information in advance so that advice or decisions can be made with full knowledge of the facts. After each meeting, it is also advisable to draw up minutes, with a list of action points to be followed up at the next meeting.

The choice of an advisory board or supervisory board is always a customized one. We often see entrepreneurs taking this choice and the search for external parties entirely into their own hands. Others seek external guidance for this. At deminor NXT, we are happy to help you make the right choice between a Supervisory Board or Executive Board with external parties, and we can introduce you to  the right partnerif you need guidance in finding the right  profiles. Good entrepreneurs make the difference between a company that grows, stagnates, or gets into trouble. A well-functioning supervisory board or board of directors with external members will, of course, only be possible with high-quality, committed, and driven “good” external members.

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If you would like a no-obligation discussion about the best approach for your company when choosing between a supervisory board and an executive board, or if you have any other questions about good governance, please feel free to contact us.