Professional board of directors

As a director, you are often very much alone with major strategic decisions which are made based on intuition and gut feelings

You are busy with the daily operation, management of employees and all the administrative work and perhaps forgets to reflect on whether the long-term course is the right one? In this article, we explain why a board of directors or advisory board, based on our work with clients, can help you increase the growth of your business by having the right trusted advisers around you.

Science has proven many times that companies with an external board of directors or advisory board outperform their competitors both in terms of growth rates and profitability (read e.i. the 2019 study from CBS here). In the same study, which documents that companies increase turnover significantly by having a professional board of directors, they also estimate that less than 20% of the Danish A/S’ and ApS’ that are actually in operation have professional external boards of directors. Why this paradox?

Of course, the outcome depends on the way the board of directors is used and recruited. The board of directors does not give any benefit if the board members never meet, if the board consists of friends and family, or if you do not listen to their advice and recommendations. The last is most important. To achieve an effect, you as a director must dare to be open about your limitations and honestly communicate these for you to get the necessary help. The task of the board of directors is not to please the director, but to say the things that they, with their understanding, believe are best for the company. Therefore, you must decide: Do I represent my interest as an owner or my interest as a leader? If you do not dare to lower your guards, a board of directors or an advisory board is not for you. But if you do dare? Then read on.

Focus on the competencies

If the board of directors or advisory board is to create value for your business, the board must be put together with candidates who complement the existing competencies of the management. If you run a successful production company, you probably are in good control of logistics and production, but are you digital enough? Do you know about the new markets that you are considering entering? Do you have the necessary financing in place? Here, the board can come with valuable inputs. Therefore, the purpose of the recruitment should be to ensure that the company can get the necessary advice within the many different areas.

At the Nordic region's largest recruitment platform for boards of directors and advisory boards www.nBoard.dk, they have helped hundreds of companies recruit for boards of directors and advisory boards. In a speech at Baker Tilly's Business Club, Director Joakim Bruchmann stated:

What is the difference between a board of directors and an advisory board?

While the board of directors is regulated in section 115 of the Companies Act and thus must comply with several formal requirements, an advisory board is not legally defined. This often means that it is a more flexible and cheaper constellation, which can be an excellent place to start - a kind of "board light". On the other hand, a board of directors has significant advantages in connection with a change of ownership and stages of financing as they are responsible for the company and thus have given their approval of all reported matters in the company. In other words, an investor or buyer has the board’s guarantee that everything has gone strictly by the book.