Hello, this is Got Family and I am Carey Berger, and we are telling stories from the crossroads of business and family.
As you probably know, we’ve talked in the past about boards. You’ve heard about a Board of Directors, or Board of advisors, and we’ve talked about a family board. What is a board, okay, and how you pay them? Why do you pay them? Let’s just start with the question of, what is a board. The short answer is it takes the knowledge of an individual, multiplies it with other individuals, and makes it something that can survive the loss of any one member. That’s the key thing about this board, that the expanded knowledge allows you to specifically choose board members that may have specific areas of expertise or experience, and that is something that is again unique to adding more people as opposed to trying to build those experiences in your own life, that just takes too much time sometimes, right? So, what does it mean? Well, once you’ve got a board, and that board is serving in whatever role in a family board, or a Board of Directors, the next question becomes, what I pay them, or should I pay them? Let me start by saying I think you should pay them. All right, let the cheering began, and the next generation is saying, “look, I get paid for this!” I’m not saying it has to be a bunch, but you have to make it something that allows you to be able to say this is business, and I have a right to be somewhat demanding of this because I’m paying you for it. My dear daughter did a project for me in business one time and she was willing to do it as a favor, which was wonderful to give me this gift, I said, “no, please let me pay you for this because I want to be able to be more demanding, I want to be able to force you to a standard that I can because I bought it, I paid for it,” as opposed to never looking a gift horse in the mouth, as the old saying goes. I think that’s part of it is by making it a business that you did pay for it, you have the ability to still politely and respectfully say, here are the standards, here are the expectations, here’s the performance level, and I’m requiring this much time and this much commitment, this is what you get paid to do. Okay, second thing is, how much? My answer to that is pretty simple, and maybe too simple, but here’s the easy answer; ask yourself what level of decision this group is being asked to deal with. If they are answering questions like a CEO of your company, what would it take to hire that CEO? Use $300 this time because we assume that so and so worked 300 days of the year, and working pretty hard, and I’m going to go ahead and give him $300 a year, which means it’s a dollar a day. Now I’ve got this dollar a day equation, and I look at the same decision-making group I’m looking to and say, okay how many days am I asking them to work? Now don’t just count the meeting itself. Is there a day of preparation? Is there a day of follow-up? Is there anything else going on? Normally, for every one day on target it’s somewhere between three and four days actually in preparation and follow through, and so, if I’m going to have four meetings that I must say it’s 12 or 16 days of work that I’m actually asking them to do. So, on that math, at a dollar a day, you can figure it out, right? That’s what I would encourage you to do. Think about, what is this business? How big is it, how small is it? What would you pay somebody? What would somebody be paid if they were being hired to run this business? Whether it’s a family business, or the family leadership or whatever it is, I would hire somebody at X dollars, and then divide that out in a daily rate and pay that as your board fees. That’s my starting point. Then you get into all sorts of other discussions about whether or not they get the access to other benefits, and how the taxes work, and all that other stuff.
That’s enough for today. This is Got Family and we’re telling stories here from the crossroads of business and family, and I am Carey Berger.