Advisory Board Payouts-Fair or Foul?
With the avalanche of startups in the booming economy, it makes sense that industry leaders are solicited for input, constructive criticism and guidance, in the form of advisory board participation. Being asked to sit on a board has always been considered a mark of respect and privilege, but it may shock you to know that these days, it's also profitable.
The state of affairs
A recent article by Gary Rivlin in The Industry Standard, "The Advisory Board Game," cited that it's not usual for advisory board participants to receive up to 20,000 stock options at a strike price of around 25 cents. Some might see this as merely compensation for lending one's expertise and guidance. Call it a signing bonus or call it a bribe, the question remains: Does it pose a conflict of interest?
As I see it, potential conflicts of interest arise when consultants are asked to serve on boards—consultants who make their living by imparting knowledge and recommendations to the customers they serve.
Does having a financial interest in a company taint the buying process for consultants and their clients? Brad Mintz, vice president/manager of graphic services, McCann-Erickson, turns to consultants when he hopes to learn more about technologies affecting advertising production. He's the first to admit that he would have concerns if a consultant made technology recommendations without disclosing board relationships he or she may have formed. "It would make me unhappy to find this out after the fact," Mintz notes. "You've got to know this up front, in order to make a well-educated decision. Many people hire consultants because they're not knowledgeable about the technology; therefore, the consultant is directly influencing the buying decision."
How many consultants disclose information about the alliances they've made with technology vendors? In my opinion, they are few and far between. However, perhaps the burden of responsibility should be shifted back to the customer and not fall on the shoulders of the consultant, after all.