I was reading an article the other day about how companies that successfully IPO typically show much higher valuations when they have a history of a proper board.
If you think about it, this is not surprising. After all, a board can add immense value to a company in a number of ways, especially with a strong complement of independent directors:
- Added knowledge and skill of the, typically, senior executives, coupled with different viewpoints;
- The accountability of the senior executives to the board, with objective performance management and enhanced overall governance;
- Strategic input borne of much experience across different markets and sectors – especially important as 7/10 executives polled by McKinsey said boards should spend more time on strategy;
- A strong sounding board for the executive team.
All this typically adds up to not only seeing increased, sustained levels of growth from the business, but stronger relationships with investors, bankers, suppliers and the like, with generally lower costs of capital.
This improves the financial ratios, enhances investor confidence and generally leads to a much more robust company, with a higher valuation.
Regardless of whether or not you’re planning an IPO, it’s clear that a proper board with independent directors will add value to your business, and the sooner you have this in place, the greater the value will be.