Because a startup board of directors plays an essential role in getting a young company off the ground, it’s common to offer various forms of compensation to the leadership committee.
Start With Shares
While many startup board members get paid for their efforts, it’s common for the compensation to start with shares in the company instead of an immediate payment. This is especially common for very new organizations with limited funding and startup capital. With this option, startup board members receive a small percentage of ownership in the company that is largely ceremonial at the time, but will result in compensation as the company grows and achieves success.
Cash Compensation
Once a startup begins to bring in revenue and earn a profit, it’s common to provide each member of the startup board with regular compensation. It’s not intended to replace their regular salary, but instead serve as additional compensation, often $1,000 to $3,000 per meeting, for the extra time and effort they spend advising the startup board.
Retainer Fee
Up to $10,000 may be given as a “retainer fee” that encourages original board members to keep their positions from year to year, which helps to maintain stability and consistency as the young company grows. Directors may continue to receive equity shares once they begin to receive cash compensation, but this equity will often reduce over time.
Factors That Can Impact Startup Board Member Compensation
Not every startup provides compensation to its board members, especially early on. There’s also no requirement for every member of the board to receive the same amount of compensation. Some factors that impact whether members receive compensation include:
- The startup’s current revenue, expenses, and overall profit
- The specific role, responsibilities, and level of experience of each startup board member
- The board’s current level of involvement in the company, which often decreases as the startup becomes more established