Refresh Organics - Harvard Case free essay sample

Summary – This case looks a decision that George Hausman, the co-founder and CEO of Refresh Organics (RO), makes regarding creating a board of directors. RO is a midsize, steadily growing, privately owned company which is a distributor of organic produce. RO has never had a formal board of directors, but Hausman had several close business advisors who he consulted with regularly and referred to as â€Å"the kitchen cabinet. † Hausman considered putting together a true board of directors or if simply making an advisory council would be better suited for the needs of RO. Ultimately, Hausman decided to form a board of directors of ten members, including himself and three out of four members of â€Å"the kitchen cabinet,† replacing his wife, an accountant, with a former Big 4 partner. On the board was also a new minority shareholder from a private equity firm, two executives from RO, and two executives from other companies. We will write a custom essay sample on Refresh Organics Harvard Case or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page The board had a strong make up of eclectic talents and experience. The one down side of the board was the some of the executives from other companies would get off topic during board meetings and sometimes members could not make it to the meeting. Hausman routinely sent PL statements and a balance sheet prior to board meetings, but elected not to for the 2Q meeting in order to discuss the issues in person as RO missed its financial goals. Board of Directors vs. Advisory Board – Prior to forming the board of directors, there were many considerations that Hausman should have made in determining whether to create an official board of directors or an advisory board. The first consideration is what level of control does he want the board to have. Generally, a Board of directors has a vote in company decisions such as hiring firing of executives, executive compensation, and option policies. On the other hand, advisory boards are an informal group who do not have direct say over major company issues and can be structured for a specific reason. Also, Hausman needs to determine what level of trust he wants to place on the board. Members of the board of directors have a legal fiduciary responsibility to advise management, whereas an advisory board members do not have such responsibility. Finally, Hausman needs to evaluate the cost. Since members of a board of directors have a great responsibility for the company, they are compensated accordingly, whereas members of an advisory board are not compensated or compensated to a lesser degree. Members Characteristics – Overall, Hausman did a good job on assembling his board of directors. When determining who will make a good board member there are several things to look for. First a good board has an expert in legal matters, accounting, marketing, human resources, and finance. The only expert missing from RO’s board is a human resources expert. Next it is important to ensure that all board members will be able to regularly attend meetings. While most board members were local, several were not, and it was an area RO could improve. Also for outside members of the board, it is important to have knowledge of the industry and/or target market. With the appointment of the EVP of a large health snack company, Hausman made a good appointment (although location is an issue), but the knowledge that the CEO of the tech company may bring to the table may not be valuable. Finally, it is important to have complimentary personality traits. Overall, the RO’s board of directors is a strong, valuable board. Why join a Board of Directors – There are many reasons to join a board of directors beyond the compensation, but specifically there are two key reasons. The first reason to join a board is for professional development. The opportunity to use and sharpen business skills, develop new understanding of an industry, serving on committees, and speaking at events are great for experience and exposure. Finally another great reason to accept a position on a board is the opportunity for networking. Since you will be meeting and working with other professionals, you have the ability to connect and expand your network of contacts which is an invaluable asset in business. While joining a board is not limited to only these benefits, overall, these are the top reasons to accept a position on a board of directors.