The Differences Between Serving on Public and Private Company Board of Directors

22 Jul

Most every person who serves on a public board also serves on a private company board, but not the other way around.

In discussing the differences with individuals who have done both they say it is similar to the differences of doing cross country skiing and cross country running. Similar ideas but you use different muscles.

The biggest difference around these two centers are information disclosure. With the laws that are in place for public companies (Sarbanes-Oxley) there must be full disclosure around the financial numbers, how they were derived along with transparency of relationships with both people and companies. A public company must provide it’s boards this information both consistently and timely. Both ESOP’s a Non-profit boards act more like a public company with their boards because of government regulations.

On a private company board information provided to the board is at the discretion of the company in most all cases. It is often difficult to get the complete amount of information from the company for a variety of reasons. These include old financial systems that do not produce appropriate reports, a desire for management to control what information is shared with the board and a lack of internal systems, etc.

The second big difference is ownership. In a public company two of the primary tasks of the board is to a) approve corporate strategy and b) hire and fire the CEO. Often times in a private company the CEO is a majority shareholder so the board ends up acting as an advisor on many of the key issues the company and CEO are facing without the ability to veto or fire.  

It is important to know what kind of board you have or that you are a member of to provide the greatest amount of value. For more information about how Cardinal Board Services can help please call or click here.