Useful post by Fred Wilson on building an effective portfolio company board. His points are equally relevant to mid-market or buyout investments.
To Fred's list I'd add the importance of recruiting non-exec directors who are eager to "have skin in the game." I've found you get a far deeper level of commitment from a director who has personally written a cheque for a million dollars.
Here's a cut and paste from Fred's blog:
1 - Have at least one founder on the board. Many VCs like to move the founders out of the way. They think they will be difficult and meddle. That's always a risk, but the benefit of having founders on the board vastly outweighs any downside in my mind. Having too many founders on the board is bad too. You want a diverse set of people on your board, not any one concentrated group.
2 - Keep the number of VCs on the board to two or three. The number of VCs on the board is in inverse proportion to the success of the deal.
3 - Local board members are better. They will come to the meetings. Avoid too many board members who live elsewhere. They'll call into the meetings. Trust me. And that sucks.
4 - Have at least one and ideally two industry insiders on the board who are independent of the founders and the VCs. They should bring operating experience. They should be mentors to the CEO. They should be local so they come to the meetings.
5 - Do the meetings first thing in the morning when people are fresh. No laptops and no blackberries other than the laptop that drives the presentation if one is needed.
6 - Bring the senior management to the board meetings. They should know the board and the board should know them.
7 - Try to do a dinner the night before at least four times a year with all the directors attending. Don't bring senior management to these dinners. They should be for board bonding which is key to a well functioning board.
8 - Always send the agenda and board materials at least one day in advance of the meeting and expect/demand that the members read it before coming to the meeting.
9 - Do not spend the meeting going through the materials slide by slide. People can read, expect that they will.
10 - Do spend the meeting reviewing where the business is, where it needs to go, and what strategic decisions need to be made to get there.
11 - Remember that the board works for the Company as much as the management works for the board. Expect board members to do what you need from them and manage them to make sure they do.
12 - Keep your board to seven members or less. Five is ideal in my experience but sometimes you need seven to get the right diversity. Two insiders, one to three VCs, and one to two industry people is ideal once the company gets to a certain scale.