ExpertCEO

There is an interesting question posted on "The Funded's" site. I quote:

"We are in the process of raising a second round. Our Series A board member (also lead investor from Series A) has been pro-active in helping us. Our other board members have been less helpful. I've asked them repeatedly for names of people they plan to call on our company's behalf. No word ..."

My situation is similar, and I'm wondering how to approach the termination of a board member who's frankly not contributing but who works closely with our lead investor. I want board members who can make a positive contribution to the company, but I also need to maintain my good relationship with our lead investor. The paperwork of the options granted to the board member in question is clear, and if he leaves the board, his un-vested options revert to the pool. However, it's still a complicated situation.
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This obviously needs to be approached with care. I would recommend the implementation of a process to review the performance of the full board and each individual director. Each director can perform their own self assessment, and if you feel it is possible to pull off, an assessment of fellow directors (on an individual basis). Then, the lead outside director (if there is one) or Chairman of the Board of Chairman of the NCG (if there is one) can compile the comments and performance evaluations submitted by each director for each other director. Once the results are compiled, the same person can sit down with each director and review the self assessment along with the compilation of other director evaluations of the director being reviewed. In this way, hopefully objective data on the contributions of the director (or lack of contributions as the case may be) can be laid out, and the director may decide for himself or herself (with a bit of encouragement) to move on. If by the way the evaluations suggest something regarding the director in questions performance that is other than the premise of the above question, perhaps this director deserves a second chance.

Failing the above, I would confidentially approach the lead investor and let them know of your concerns without suggesting the director in question be terminated. I would engage in a dialogue such as how can we make this director effective, of what can we do to get some contributions from this director, and see where that type of dialogue goes.

I should have mentioned one more thing here. If the above sounds to you like a lot of effort to achieve your objectives, be happy that you have put in place a best board practice (board and director evaluations) that will make your board more effective. And you can state in your corporate goverance summary (in the prospectus) when you go public that you have had this practice in place for years.

Ronlad's suggestion is very appropriate and I encourage the self-evaluation discipline for all boards. There are some precedent factors that make such an evaluation process more effective:

Sorry for that, I push the wrong button...
The precedent factors include:
1) a clearly defined "job description" for board members with performance expectations layed out and
2) periodic individual conversations with board members about their contributions and where their interests lie.
Often I have seen people come to a board position with the best of intentions but something changes in the rest of their life and they no longer have the bandwidth to contribute as they had intended. The individual conversations create an opportunity for those issues to be raised and dealt with privately. Often the person recognizes and feels awkward about their "poor level of contribution" but doesn't want to leave you in the lurch.
These one on one conversations are often best done in a low pressure situation such as a lunch or dinner .
Another suggestion to consider is that your poor performing board member may not have the connections you assume he/she has. It may be helpful to approach the individual with a specifc assignment such as, "Here are three organization that I would like you to contact ....."

It is not an uncommon situation... As in anything, it is all about setting expectations, and holding board members accountable to them.

I would begin a board level initiative of "building the board to support our next stage of evolution" or some such aspirational goal. Put together your thoughts on what the board should expect of itself and its members to meet the needs of the company going forward. Put your thoughts down on paper with specific role descriptions and expectations per type of board member (investor member, management member, independent member and chairman.)

Then hold one-on-one conversations with your current board members to discuss the document and get their buy-in (starting with the Series A investor).

To help you in defining the roles, I suggest a great paper called Basic Responsibilities of VC-Backed Company Directors that you will find in this blog post bit.ly/6g5PYl

You will also find in this paper a board member assessment survey... I suggest you add that to the expectations... that all board members get an assessment by their peers for their board level performance.

Lastly, figure out all the barriers to getting that board member off the board. If option vesting is the only impediment, suggest an acceleration of the vesting... Or tie the remaining vesting to specific deliverables (basically putting the board member on notice.) You will need the support of other board members. Ultimately, such a matter will go to a board vote if the board intends to fire the member.

I hope this helps.

I always choose people (BOD members and employees) judging first by character and positive attitude and then by the value they can bring to the company.
If someone has negative attitude and is not willing to change, then better leave ASAP.
If someone has the value and negative or indifferent attitude is dangerous for the company and I suppose your investor should know this and have a conversation with this member, independently and together with you, to change this attitude.
If this member cannot bring any value, she/he should leave anyway. The investor after all is putting his money into this and you should involve him in this issue.

create a corporate governance committee and have them nominate who will be on the slate for the next shareholders meeting.