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Excerpt from Character 8: Director

Michael Best
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on May 31, 2017

Only a tiny minority of small businesses appoint outside directors, but pinning down a number is difficult. Business literature largely ignores the topic, and even sources such as the Canadian Federation of Independent Business and Statistics Canada — which can usually tell you anything you need to know about small business — offer no insight. The closest I came to a number is the 5 percent suggested by a 2014 Forbes article entitled “Outside Board Members Bring Needed Experience and Perspective to your Company.”

The article speculates that small business owners don’t appoint outside directors because the owners think they’re smart enough, they think it’s too expensive, or they think it would constrain their decision-making abilities. I can buy these reasons, but I’d add that many small business owners probably haven’t given the matter much thought. I didn’t. Of course I now know that I should have. Twenty-twenty hindsight is cruel in its clarity. However, you can avoid this future frustration by not repeating my oversight. If your small business is one of the 95 percent, now might be a good time to consider whether it could benefit from the appointment of an outside director. And if now isn’t the right time, the circumstance of your business could change (e.g., as a result of growth or expansion into a new field), so you may want to keep this discussion in mind.