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Saturday, December 21, 2013 1:30:02 AM
First off, to state the obvious, directors need to be compensated for their work. The higher caliber of director you desire, the more you will need to compensate. Directors, like shareholders, also need to do their due diligence. This requires not only the time of the director, but also the time and expense of the company. A director candidate is going to want to meet with management, view the processor, etc. There are also ancillary costs involved. D&O insurance is an obvious one. Anytime someone raises a complaint of whatever nature against a public corporation, fingers start to be pointed toward the directors (JBI has seen this, even in the case of a director who was on the board for about a month). That means more named insureds, more risk for the insurer, and (of course) more to pay in premiums, not to mention more exposure to the company itself by virtue of required indemnification of the directors, even for events that may fall outside D&O coverage.
Directors do not just waltz into a corporation and work for free, carrying all the risk exposure on their owns heads. There are many costs involved, particularly if you want qualified directors. Time + cost = need for money to cover.
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