COVID-19 and tax: The implications for governance
Tax developments that directors should be aware of.
For start-ups and high growth businesses there are three types of directors available to them – the executive director, the non-executive director, and the independent director. A good board will aim to have a mixture of these three types as each brings a different element to the table.
Executive directors have a dual role as employees of the company and as directors. As directors they:
An executive director brings an insider’s perspective to the table which can be very valuable when discussing the operations of a company.
The people you bring on board will represent your company, share your vision, and complement your weaknesses. (This is why you should not get people who resemble you.) They should have different skills to increase the "human wealth" of the company.
These directors bring an outside perspective to the table and often a wealth of knowledge and experience. A non-executive director may be representing a major shareholder but an independent director will generally have no other links with the company other than sitting on the board. Non-executive directors' principal role is to provide independent judgement. This includes:
The boundary often gets blurred in start-ups and high growth businesses. For example, a non-executive director may be appointed to fill a gap in knowledge and expertise, and end up assisting management in that area.
To gain true separation between management and governance it makes sense to include independent board members. Some owners can feel threatened by this independence, but in the end their outside thinking can enable the business to grow and develop valuable long-term strategy.
A good director is an active one, quiet ones are wasting valuable space, time, and resources. In many start-ups or high growth businesses formed in partnership, it is common for one director take the lead in the running of the business, while the other is the silent partner. Do the business a favour and pull in people with skills and experience, who have a voice and something to add value to the business.
For start-ups and high growth businesses, there are several benefits from having one or more independent directors: