There was a time when outside members of a Board of Directors were fairly common in small businesses. Outside members help broaden the experience and perspective represented on the board, improve its network of contacts, and add an often important "devil's advocate" to the mix in major decision making.
But, more recently the increased cost of adding outside members, the increased disclosure it requires, the dilution of control and decision making, and exposure to liability for the outside members have all made outside members less common.
However, in high growth ventures the requirements of outside investors are that they have the right to add members to the board beyond the founding team of entrepreneurs.
Kauffman e-venturing has a new collection of articles on how to successfully manage a board with outside members and how to properly deal with issues such as D&O insurance and Sarbanes-Oxley.
