From Startup to Exit: How—and How Much to Compensate Your Board

Board compensation is not one-size-fits-all—and it should change dramatically as a company grows. In this episode of TCA Crossroads, Dave Berkus walks through board compensation from the earliest startup stage through mature private companies, pre-IPO companies, and ultimately the public markets. Early-stage directors and advisors are typically compensated primarily with equity, often through non-qualified stock options that vest over two to four years, while cash compensation becomes increasingly appropriate as companies mature and the demands, complexity, and liability of board service increase. As a company approaches an IPO, compensation may transition toward restricted stock units and meaningful cash retainers, reflecting substantially greater workloads, committee responsibilities, governance requirements, and director risk. David Friedman adds the practical perspective that compensation is only part of the equation. Board members and companies should have a clear written agreement defining responsibilities, expected time commitment, compensation, vesting and any cliff, consulting expectations, and what happens upon termination or a change of control. Directors also need to understand the tax consequences of receiving stock versus options, exercise windows, cashless exercise provisions, indemnification and D&O insurance, and whether unvested equity accelerates in an acquisition or IPO. The central lesson is that a good board-compensation structure must work for both sides: it should align the board with shareholder outcomes while fairly recognizing the director's time, expertise, network, risk, and increasing responsibilities throughout the company's life cycle.