This document discusses corporate governance for directors of emerging companies. It begins by providing background on corporate governance reforms over the past 10-15 years in response to corporate scandals. It then discusses key aspects of corporate governance including the roles and responsibilities of boards of directors, management, and shareholders. The document emphasizes that directors must understand corporate architecture and how power is divided to effectively fulfill their oversight duties while avoiding conflicts of interest. Overall, the document aims to educate directors of emerging companies on best practices for decision making, compliance, and maximizing corporate performance.

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Corporate Governance –Directors of Emerging Companies
Donna Price and Debi Rosati
Corporate Governance –Directors of
Emerging Companies
Introduction
News headlines introduced us to stories of corporate mismanage-
ment, misrepresentation of financial results, accounting fraud and
other scandals that lead to devastating financial losses as well as a loss
of investor confidence in the capital markets and ultimately gave rise
to a widespread public outcry for greater corporate accountability.The
public outcry quickly led to multiple stopgap reforms of “corporate
governance” in both Canada and the United States, the offshoot of
which is a diverse array of corporate governance guidelines, practices
and regulation. Welcome to corporate governance in the 21st century.
In Canada, corporate governance reform evolved over ten years ago
with the adoption by the Toronto Stock Exchange of the recommen-
dations that unfolded from the 1995 Dey Report. In addition, in 2003
many of Canada’s leading institutional investors formed a coalition to
promote good governance practices in the companiesin which the coali-
tion members invest. (See Canadian Coalition for Good Governance
www.ccgg.ca) In 2005, every Canadian jurisdiction adopted corporate
governance practice guidelines that are non-prescriptive guidelines that
all public companies are encouraged to consider in developing their
own governance practices in order to provide greater transparency for
the marketplace. These guidelines continue to evolve and it is fair to
assume that both non-prescriptive practices and prescriptive disclosure
practices will continue to evolve through regulatory, legislative and
market-driven developments.
In the United States, passage of the now widely-known and largely
unpopular Sarbanes-Oxley Act of 2002 had wide-ranging prescriptive
implications for public companies and their directors and advisors.The
stock exchanges also enacted new corporate governance guidelines for
public companies and professional oversight organizations established
new standards of financial accounting and reporting.In the public capi-
tal markets, corporations face an environment of increased regulatory
scrutiny,increased shareholder activism and increased investor scrutiny.
A dissection of the corporate failures at many large corporations,

2. The Entrepreneurial Effect: Donna Price and Debi Rosati
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resound with the preliminary question, “Where were the directors?”
That is a reasonable question because directors have an overall duty to
manage the business and affairs of a corporation andthe public believes
that sound governance could have prevented the recent spectacular
corporate failures. In the new corporate governance reality, governance
rating agencies and other groups measure and evaluate the quality of a
corporation’s governance structure and practices.
Many of the reforms of the past ten years or so were largely market-
driven and aimed at restoring investor confidence in public companies
through tighter controls and improved oversight. Despite the reforms,
shareholder activism continues, particularly in the United States, with
activists acquiring shares in companies to enable them to replace direc-
tors with new candidates. Institutional shareholders suggest policies
and director candidates, and want full proxy access so that they are
allowed to directly nominate directors. Many companies have volun-
tarily adopted majority voting policies so that directors who receive a
minority of votes must tender their resignations. More recently and
closer to home, frustrated shareholders of two local public companies
initiated dissident proxy contests to replace incumbent directors with
new candidates. More than ever, it is important for corporate directors
to have knowledge of their roles and responsibilities as directors.
It is debatable whether the corporate governance reforms of the past
few years aimed at restoring investor confidence inpublic companies will
actually improve corporate governance in North America and whether
the increased costs of operating corporations will translate into better
financial performance or value creation.Conventional wisdom suggests
that there is a link between board effectiveness and corporate perform-
ance. The challenge seems to be finding the proper balance between
oversight responsibilities and value-added activities.
So what is an emerging company director to do about corporate
governance? It is our belief that directors of emerging companies can
gain invaluable and rewarding experiences in an environment which is
essentially incubated from the rigorous regulatory regime and public
scrutiny that their counterparts in public companies face. Emerging
company directors face many challenges and therefore many opportuni-
ties to influence new venture outcomes.We believe that the advice and
counsel of good directors will contribute in many ways to the success of
a venture. Apart from personal qualities and characteristics, we believe
that directors who embrace a fundamental knowledge of corporate
architecture and how it operates in terms of division of power and
decision making and an understanding of a director’s oversight role as

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well as the value-added role will bring to bear better overall corporate
decisions leading to better overall corporate performance.
Emerging company boards are unlikely to spend more time on
compliance matters than say corporate strategy and other value-added
activities.However,as a prime constituent in thecorporate structure,we
believe that emerging company boards should have abasic understand-
ing of corporate architecture and adopt behaviours and practices that
contribute to the overall effectiveness of the boardin order to maximize
the probability of a successful venture.
Several organizations in both Canada and the UnitedStates now offer
excellent director education programs and continuing education events
aimed at directors. In addition, the marketplace offers leading research
and a variety of first class books and other resources about corporate
governance and boards.Our primary purpose is to provide readers with
a concise overview of corporate architecture and board oversight and
value added roles that are sometimes overlooked in the development
of an emerging company. We have made some effort to keep the text
free of legalese even though we address the basic oversight duties and
responsibilities of all directors. Our guidance is intended to have core
relevance to directors of emerging companies.
Corporate Governance is About Board Effectiveness
It is fairly safe to say that governance is more than simple compli-
ance with legislation. While compliance is a component of corporate
governance, governance is also about promoting accountability and
effective management through sound decision-making processes. The
legal requirements under which a corporation came into being did
not historically provide a regime within which a corporation would
operate. Corporate governance, or operations, was largely left to the
constituents,primarily the board and management.As mentioned,many
enquiries into more recent corporate scandals or failures begin with
the question “Where were the directors?” Board effectiveness begins
with an understanding of corporate architecture.This is not to suggest
that governance is only about structure – the behavioural aspects of
running a successful venture are essential. However, in the same way
that an athlete must know the playing field, a corporate director must
understand corporate architecture.
Corporate Architecture
To understand corporate governance,one must beginwith an under-
standing of basic corporate architecture and how acorporation operates
firstly, in terms of division of power amongst the principal corporate

4. The Entrepreneurial Effect: Donna Price and Debi Rosati
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constituents and secondly, in terms of decision making. A corpora-
tion is a statutory creation that is formed by fulfilling prescribed legal
requirements to result in the formation of a legal entity that has the
rights, powers and privileges of a natural person. The model has been
around for several centuries.
Even so, the model may not suit all new ventures and there are
drawbacks. There is inherent tension between management, who is
operating the business,and the board,who is responsible for supervising
management. Similarly, a venture capitalists with significant financial
stakes in a company must be mindful of the inherentconflicts of interest
between their fiduciary duty as directors,and therefore their obligation
to act in the best interests of the corporation, and the interests of the
venture fund. In other cases, the CEO (often a founder by tradition)
is also the chair.
This structure can create an accountability paradox for the board
and limit leadership and effectiveness of the board. When embarking
upon a new venture, thoughtful consideration of some of the potential
drawbacks with the corporate model is worthwhile.Additionally,while
we can never eliminate legal conflicts of interest,we can recognize them
and deal with the realities and perceptions of conflicts.
The principal constituents within a corporation model (see Figure
23) are the shareholders, the directors and management.The corporate
statutes dictate some of the powers of each of theprincipal constituents.
Auditors as well as other stakeholders such as creditors,employees and
customers often assume a role in the model as well.
Division of Power Between Management, the Board and
Shareholders
It is important to understand which corporate proceedings are within
the jurisdiction of the directors and which are within the domain of
management and the shareholders. As a general rule, the shareholders
elect the directors and subject to any unanimous shareholder agreement,
the board manages the business and affairs of the corporation. If the
shareholders are unhappy with the manner in which the directors are
managing the corporation’s business and affairs, the shareholders may
remove or not re-elect the board or, as we have seen more recently, ini-
tiate proceedings to replace all or some of the board. In general terms,
the shareholders may not overturn a decision of the board unless the
board acted outside the scope of its powers.

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Figure 23 - Principal Constituents of a Corporation
The powers of the directors are dictated by the incorporating statutes
that provide,subject to any unanimous shareholder agreement,that the
directors shall manage or supervise the managementof the business and
affairs of the corporation.
Management of the business and affairs of the corporation covers
a broad range of administrative, business and financial matters as well
as fundamental business changes over which directors have statutory
power.The statutory powers are also subject to restrictions that may be
in the statute, the articles or by-laws or in a unanimous shareholders’
agreement. Accordingly, these documents should always be reviewed
to determine the scope of corporate powers including limitations.The
types of non-delegable matters that fall within the scope of the direc-
tors’ powers are:
• Appointment of officers
• Adopting, amending or repealing by-laws
• Filling vacancies on the board of directors
• Filling vacancies in the office of auditor (in certain circumstances)
• Approving financial statements
• Declaration of dividends
• Issuance of securities
• Redemption of shares
• Acquisition of shares
• Borrowing money on the credit of the corporation
Auditor
Appoint
Appoint
Shareholders
Directors
Board
Committee
Consultants
&
Advisors
Consultants
&
Advisors
Employees
Management
Retain
Retain
Hire Retain

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• Giving guarantees
• Pledging assets
• Approving an information circular
• Approving a take-over bid, and so on
As noted, any of the functions of the directors may be restricted by
the shareholders pursuant to a unanimous shareholder agreement that
essentially relieves the directors of their discretion or power and the cor-
responding liabilities to the extent provided in the agreement.Under the
unanimous shareholder agreement the directors’ powers and liabilities
are assumed to the same extent by the shareholders.
The corporate statutes allow the directors to appoint management
(referred to as officers in the statutes) and to delegate to management
virtually all of the power and authority of the board except for the non-
delegable items referred to above.
While boards may delegate power and authority, they may not
delegate responsibility. In emerging companies, delegation of board
authority is often implied and sometimes indistinctas between directors
and management.Roles will be interpreted and practiced differently by
different boards in different circumstances. In other words, the deline-
ation of power and authority between the board and management is
often indistinct primarily as a result of role uncertainty coupled with
multiple roles being performed by few people.
Management (or officers) are distinguished from directors in that
they are responsible for the day to day operations of the corporation.
Furthermore, directors are subject to certain liabilities that officers are
not such as payments made to shareholders when the corporation is
insolvent and liability for employee wages. Directors and officers may
be equally liable for certain actions but officers may sometimes be held
more accountable because they are in position to control the activities
associated with a particular matter.
Shareholders invest in a venture and typically do not have more at
risk than the amount they paid for their investment.This is referred to
as limited liability. Unlike directors, shareholders are largely protected
from any liability for the actions of the corporation. This concept is
referred to as the “corporate veil”.
There are cases however, where the corporate veil has been pierced
and a shareholder has been held liable for the actions of the corpora-
tion. An understanding of the division of powers between the board,
management and shareholders may help to minimize the risk of inad-
vertently piercing the corporate veil and reinforces the need to “know
which hat you have on.”

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Corporate Governance –Directors of Emerging Companies
Shareholders of Canadian corporations have a defined set of rights
and powers under the corporate statutes.A general view of these rights
and powers of shareholders are:
• Right to elect and remove directors
• Right to appoint and remove auditors
• Make changes to the articles and by-laws
• Approve an amalgamation with another corporation (other than
with an affiliate)
• Approve the sale of all or substantially all of the corporation’s assets
• Approve fundamental transactions (a continuance or plan of ar-
rangement, for example)
• Approve the dissolution of the corporation
• Right to see certain corporate records
• Right to requisition a meeting of shareholders andsubmit a proposal
for consideration
• Obtain a court order directing an investigation of the corporation
• Restrict the powers of the directors
Additionally, a shareholders agreement (distinct from a unanimous
shareholders agreement discussed above) may also include a provision
that entitles certain shareholders (often significant venture investors)
to special information and approval rights as well as rights to nominate
directors.These are contractual rights that are negotiated amongst key
shareholders and are distinct from the statutory rights attributable to
shareholders.
It is quite common in venture-backed companies forshareholders that
have a significant interest in a corporation to have a right to nominate
persons to act as directors of the corporation.These persons are usually
referred to as nominee directors.The right to nominate individuals to act
as directors is generally a contractual right acquired under a shareholders’
agreement. It is important for directors and shareholders of emerging
companies to know that even though a director is nominated to the
board by a particular shareholder it does not mean that the director can
prefer the interests of the shareholder who nominated that director to
the interests of the corporation. A director must always act with the
best interests of the corporation in mind.
Current governance best practices recommend that there be a clear
delineation between the responsibilities of the board and management.
The stage of growth of the emerging company (or, in other words, the
“maturity factor”) challenges adoption of this practice.Often in emerg-
ing enterprises, the directors, officers and shareholders are the same
individuals making delineation of responsibility somewhat unwieldy

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and impractical. Regardless, the statutory division of powers and al-
location of liability between directors, officers and shareholders makes
it important to always “know which hat you have on” in the corporate
decision-making process.
How a Board of Directors Makes Decisions
The collective body of directors is referred to as a board of directors
and the board of directors operates as a unit. This means that no in-
dividual director can cause the corporation to take any distinct action
unless the board authorizes and directs a particular director or directors
to do so. It is typical for boards to try to decide matters by consensus.
However,matters that are voted upon are typically decided by a major-
ity vote of the board. Directors may not vote by proxy, meaning, they
cannot delegate their authority to another person to act for them at a
meeting of the board. Shareholders, on the other hand, are entitled to
and frequently vote by proxy.
Each director is equal in terms of power and authority and direc-
tors, including nominee directors (discussed above), must be free to
exercise their authority and discretion unimpeded by obligations to
shareholders and other stakeholders.The decisions made by a board are
a question of business judgment that is exercised in the best interests
of the corporation.
Method of Obtaining Board and/or Shareholder Approval
A board will be judged on the decision-making processes undertaken
which can sometimes be more important than the decisions actually
made by the board. Some questions to consider in terms of process
include:
• How many times did the board meet to discuss an important issue?
• How much time was spent on an important issue?
• Did the disinterested directors approve the contract or transaction?
• What information and materials did the board receive and review
in connection with an important issue?
• Was the information purposeful and comprehensive?
• Was the information provided in sufficient time to permit a careful
review?
• Were probing and thoughtful questions asked?
Workable processes contribute to effective corporatedecision-making
and fulfilment of duties and can be adapted for companies of all sizes.
As a primary governance practice, emerging companies should imple-
ment effective decision-making processes from the start. This means

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ensuring that the board obtains the proper information upon which
to base decisions within an appropriate timeframe to allow adequate
consideration and deliberation.
There are two basic ways in which decisions of directors may be made
and rights of shareholders may be exercised which is either by written
resolution or by a resolution that is passed at a meeting.
Even though it is often usual for directors of emerging companies
to meet in a casual manner for the transaction of business, generally
speaking,the board must act at properly constituted meetings and some
degree of formality is necessary. There must be notice of the meeting
(normally by-laws make provision for the length of notice), a quorum
present,a chairperson present,a question posed inthe form of a motion,
a vote held and minutes of the proceeding and an awareness amongst the
meeting participants that they are concurring to decisions as directors.
The informal dialogue, whether by an exchange of email or written
correspondence,that occurs outside of duly constituted meetings of the
board is generally not sufficient evidence of the board’s decision on a
matter.Meetings convened by conference telephone,electronic or other
communication facility are permitted under most corporate statutes and
are generally valid provided all directors have consented and directors
can communicate with each other.
Once a board or the shareholders approve a motion (a proposal to do
something) at a meeting it is called a resolution and resolutions made
at a meeting of directors or shareholders must be recorded in minutes.
A resolution may also be passed outside a meeting if it is in writing
and signed by all of the directors entitled to voteat a meeting of directors
or all of the shareholders entitled to vote at meetings of shareholders.
The written resolution is effective only once all directors or all share-
holders entitled to vote have signed it.A written resolution is designed
to enable directors to fulfil their statutory obligation and shareholders
to exercise statutory voting rights without the formalities of a meeting.
In the absence of a written resolution, the directors and shareholders
can only fulfil their duties and exercise their voting rights at meetings
for which formal notice has been properly given or waived.
In considering a question or matter at a board meeting,it is important
that the board understand what is expected of them in terms of a deci-
sion on the topics presented, especially those matters that fall within
the mandatory approval category. In very general terms, depending
upon the strategic significance of a particular matter and the maturity
factor (referred to above), the level of engagement and involvement
of the board and shareholders in corporate decision making will vary.

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A wide range of decision possibilities are available in the decision-
making process. For example, the board may “accept” a management
report without endorsing it or the board may “adopt” a management
report which means the board concurs with the recommendations of
a report. In addition, the board may “confirm” a management activity
which means the board ratifies or sanctions an action.
Maintaining Corporate Records
Records of minutes of meetings and resolutions of the board and
shareholders must be maintained pursuant to corporate statutes. The
failure to minute meetings or to sign resolutions and to follow proper
corporate proceedings becomes an acute problem when the relation-
ships amongst the governance constituents become challenged or a legal
opinion is required on a transaction or a government taxation authority
is doing an audit.
The Oversight and Value-added Role of Directors
by David Beatty and Tim Rowley, Directors Education Program, Rotman School of
Management, University of Toronto, 2008
Figure 24 – Oversight of Board Directors
The Oversight Role of a Director
The primary responsibility of directors is to oversee the management
of the business and affairs of a corporation. This is referred to as an
oversight duty.As a general matter,a business corporation’s objective in
conducting business is to create and increase shareholder value.To this
end,in addition to performing an oversight duty,boards also perform a
value-added role. Decision-making generally involves developing cor-
porate policy and strategic goals with management and taking actions
on specific matters related to those policies and goals. Other matters,
Putting the Right People... ... in the Right Boardroom...
... to Govern the Right Issues.

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such as changes in the charter documents, election of officers, (and
other matters referred to above), require board action (and sometimes
shareholder action) as a matter of law.
All directors must understand that decision-making and oversight
responsibilities come from prescribed standards ofduty and conduct.The
corporate statutes impose two principal duties on directors: A fiduciary
duty and a duty of care. As fiduciaries, directors have an obligation to
act honestly and in good faith with a view to the best interests of the
corporation. As a general partner in a venture capital firm, a fiduciary
duty is owed to the venture fund investors but as adirector of a portfolio
company a fiduciary duty is owed to the portfolio company.This is an
important distinction.
At all times, while serving as a director of a portfolio company, it
is important to know whether you are wearing a shareholder hat or a
director hat – and to keep the hats on straight. Even though a director
may be nominated by a particular shareholder, a director may not act
contrary to his fiduciary duty to the corporation. Inside (employee)
directors must also adhere to the same fiduciary standards as outside
(non-employee) directors. A director must at all times ensure that
other relationships do not compromise or appear to compromise their
director responsibilities.
Awareness of conflicts of interest circumstances that are prescribed in
corporate statutes is helpful so that when duties collide,directors declare
and disclose their interest and in most cases refrain from voting on a
conflicted contract or transaction.Where conflicts of interest are present,
the disinterested directors should approve the contract or transaction
and in some cases, shareholder approval should be sought. In certain
circumstances, it may be necessary to resign or to adopt procedures to
address a position of conflict. If things go wrong, it is important to be
able to demonstrate that a director was acting in the best interests of
the corporation.
As a director, you must exercise the care, diligence and skill that a
reasonably prudent person would exercise in comparable circumstances.
This is known as the duty of care. In discharging the duty of care, a
director must be concerned about process at least as much as, and per-
haps more than,the actual decision taken.The duty of care underscores
the need to implement corporate governance procedures to guide the
board in decision-making. This means that pre-meeting, meeting and
post-meeting practices should be oriented to providing the right in-
formation within a timeframe that will permit diligent discussion and
decision. If a board makes a decision that may be contentious from a

12. The Entrepreneurial Effect: Donna Price and Debi Rosati
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business perspective, provided the board gave sufficient thought and
consideration to the decisions and were otherwise diligent, it will not
normally be criticized. This is sometimes referred to as the “business
judgment rule”and generally speaking, courts will not substitute court
judgment for the business judgment of the board.
The environment for boards has changed in recent years and requires
directors to be more proactive in fulfilling oversight responsibilities by
assuring themselves that there are systems and processes in place to
prevent wrongdoing. Accordingly, a board should periodically review
corporate systems and controls and other recurring matters and make
further enquiries if necessary.
Directors of companies of all sizes must also recognize that personal
liability, which may come from a variety of sources, is a reality of board
service. In many cases, liability can be minimized by diligent and con-
scientious conduct.It has been said that the bestdirectors are those who
have an inquiring mind. Directors of emerging companies should seek
assurances that the indemnification provisions contained in by-laws are
adequate and consider the stage at which contractual indemnities and
directors’ and officers’ liability insurance is appropriate.
The Value-Added Role of Directors
In the formative years of an emerging company, the director’s role is
more often weighted to a value-add role and as the company matures
the role becomes more weighted to an oversight role.
Keeping in mind that the overall role of the board is to maximize
shareholder value, directors also provide a level of insight, business
acumen and personal network that extends beyond the company’s
management team.These are some of the components that contribute
to a director’s value-added performance.
The collective board should have sufficient industry knowledge and
domain expertise (such as technical, operational or finance) in order
to add value to board decisions and strategic priorities. Paramount to
their duties, directors must select and oversee the CEO and monitor
company performance. A value-added board should provide insight,
advice and support to the CEO and management on key decisions and
issues confronting the emerging company. Caution: “Nose in, fingers
out!”Boards must balance being too engaged in the day-to-day opera-
tions, with performing primarily an oversight role.
Putting the Right People on Board
Fundamental to the success of any team is having the right people
and the board is no exception. Recruitment of new directors requires a

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well-defined profile to facilitate the recruitment process. This requires
developing a skills matrix that outlines the skills required by the board
together with the skill competencies of the current board and when
their term expires. With this matrix, selection committees are able to
plan for the recruitment of new board members.Often,the recruitment
strategy must extend beyond the personal network of the CEO and
the existing directors. As an emerging company matures, the skills and
qualifications for board candidates will change and therefore recruit-
ment is often an ongoing process.There are sources available to access
qualified board members such as:
• Institute of Directors (ICD) Directors Register at www.icd.ca/
directors_register
• Women in the Lead 4th edition directory at www.womeninthelead.ca
• Executive Search firms
What Makes an Effective Board?
To achieve effectiveness, a board needs the right people in the right
boardroom to govern the right issues.
…in the right boardroom is about putting in practice good govern-
ance that defines:
Responsibilities:
• Establish a clear understanding of expectations between the directors
and the CEO. This can be achieved through charters or mandates
for the board and a job description for the CEO and the chair of
the board.
• Ensure that all directors understand their responsibilities as directors
by holding an orientation session for all new directors.
• Be diligent and act in good faith with prudence and integrity.
• Attend all board meetings and prepare in advance for board meetings.
Structure:
• Board committees should be established to deal with issues that re-
quire more time than is available at board meetingsand the members
of the committees may have specialized knowledge or expertise.
• Establish a meeting calendar.
• Plan for director succession, consider term positions.
• Attend director education and training and industry updates
• In-camera sessions with non-executive board members only.

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Culture:
• Encourage a culture of trust and consensus between management
and the board.
• Build board and management collegiality.
• Avoid being complacent and prepare to ask questions and challenge
assumptions.
• Strive for excellence in the boardroom.
• Encouraging ongoing communication outside the boardroom.
• Meet the senior management team by inviting different members
of the management team to present at board meetings.
Evaluation:
• Conduct a formal annual performance evaluation for the CEO.
• Establish an evaluation process to assess board effectiveness.
Agenda:
• Managing the agenda with time allocations.
• Developing a consent agenda.
• Developing a strategic planning session for the board through a
one/two day offsite.
Chair role:
• A strong competent chair is a critical factor in board effectiveness.
• The chair should have the time and ability to lead the board and act
as a liaison with the CEO and senior management.
• The ability to manage strong-minded or dominating members and
the ability to take charge in times of crisis.
• The Corporate Governance Committee should have theresponsibil-
ity for developing a process for appointing the chair that involves
the entire board.
Independence:
• Promoting board independence and appointing a lead director if
the CEO and chair are the same individual.
• The lead director would lead and chair meetings of the independ-
ent directors and should in practice conduct regular independent
directors meetings.
Before Joining a Board – Know the Company You Keep
Before joining an emerging company board, prospective directors
should perform due diligence which entails asking questions that will
assist in confirming that the experience will be meaningful and that

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personal liability issues will be negligible.Bearing in mind that a board
acts as a unit,becoming familiar with the personal backgrounds of your
potential fellow board members is worthwhile. Understanding the
history of the company and the backgrounds of senior management
is also worthwhile. Going beyond what is written is also prudent and
of course a thorough review of the company’s financial statements and
records is also a must.
Before accepting a board position, prospective directors should con-
sider the following questions:
• What is the board culture and how does the board operate?
• Who is the chair and what is their style and experiences?
• Who are the other board members and what are their skills,experi-
ences and competencies?
• What are some of the challenges/opportunities the emerging com-
pany faces?
• How much time and level of commitment is required?
• How do my skills, competencies, experience fit with the companies
needs now and into the future?
• What are the board dynamics between the CEO and with senior
management?
• How much cash does the emerging company have, and when is the
next round of financing and how much?
• What is the compensation for board & committee work?
• What is the company’s directors and officers (D&O) insurance
coverage?
• What is the relationship of the board to any major shareholder?
• What type of relationship does the board (or audit committee) have
with external auditor and internal auditor?
• Do you have any other relationships or interests that may conflict
with your duty to the company?
• How many committees will you be expected to sit on (or chair) and
how often do they meet?
• Does the company have a code of conduct and conflict of interest
guidelines?
• What is the expectation of directors to invest in the emerging
company?
• Why did previous board members resign and what is the term of
service?
• Does the company sponsor director orientation and director educa-
tion?
• Do the board and committees have mandates?

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• How do you evaluate your board effectiveness?
• Who are the key stakeholders?
Some of the resources and information sources to research during the
due diligence process are industry analysts reports, financial reports,
websites,existing and former directors,the CEO,CFO,the auditor and
the chair of the board, venture investors as well individual and com-
munity networks.Due diligence continues after joining a board and an
exit strategy should be considered to the extent that an unacceptable
event or situation arises.
In Closing
We believe that board effectiveness will lead to improved governance
and corporate performance.Boards are critically important and dysfunc-
tion in the boardroom can and will lead to performance shortfalls.Even
though governance reform, through new guidelines and regulations,
will pressure public company directors to be more effective, directors
of emerging companies can begin their journey towards director effec-
tiveness long before entering the public capital markets and we urge all
directors of emerging companies to begin that journey.
Donna Price
Donna is a corporate secretarial and governance service specialist.
Donna’s principal focus is providing support to companies and their
board of directors on corporate secretarial and governance issues.Donna
has over twenty-five years experience in assisting corporations, from
start-up to public, profit to non-profit, with various aspects of business
law, business transactions and corporate governance matters.
Donna has worked with public companies (both domestic and cross-
border) in all facets of public company compliance, the interplay of
management,the board and shareholders,proxy solicitations,acquisition
actions and governance practices. She has also provided transactional
support on private and public financing transactions. Donna has also
worked with the legal counsel, boards and management of non-profit
and charity organizations.
Donna served as a senior business law clerk and specialist in the
Kanata Technology Law Office of Gowlings and in the Toronto and
Ottawa offices of Osler Hoskin & Harcourt LLP.She provided consult-
ing services to Meriton Networks Corporation (formerly edgeflow,inc.)
and previously served as assistant corporate secretary of Alcatel Canada
Inc. (formerly Newbridge Networks Corporation). She has also served
in executive positions for community-based organizations and served

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Corporate Governance –Directors of Emerging Companies
as secretary for Junior Achievement of Eastern Ontario.
Donna is a member of the Canadian Society of Corporate Secretaries
and the Institute of Corporate Directors (ICD). She serves as co-chair
of the Ottawa Chapter of ICD.In her spare time,Donna is a nationally
certified fastball coach and works with fastball coaches and athletes.
Debi Rosati, FCA, ICD.D
Debi is a corporate director focused on corporate governance and
corporate strategy for emerging technology companies with over 20
years in financial,operational and strategic management in the technol-
ogy sector. Debi comes with experience on both sides of the financing
equation; she draws upon her entrepreneurial/operational experience
as co-founder/CFO of technology start-up TimeStep Corporation
(acquired by Newbridge Networks) and venture capital experience as
General Partner at Celtic House. Debi has also held senior finance
positions with Tundra (formerly Newbridge Microsystems, a division
of Newbridge), Cognos (acquired by IBM), and BDO Dunwoody.
As a Corporate Director, she serves on the board of Sears Canada
Inc, Ontario Lottery Gaming Corporation, neuroLanguage Corpora-
tion and Distil Interactive.Debi was chair of theboard of the Canadian
Internet Registration Authority (CIRA) and formerly on the board of
Axis Investment Fund (acquired by Best Funds), Canadian Advanced
Technology Alliance (CATA), and OLAP@work (acquired by Busi-
ness Objects).
Debi is actively involved in giving back to her community through
her leadership roles with the Institute of Corporate Directors (ICD)
as co-chair of the Ottawa Chapter Executive Committee and as a
member of the board of governors of Carleton University and board
member of the Women in the Lead Inc, and as well as a member of
the 20/20 campaign cabinet of the Ottawa Hospital Foundation and
on the Advisory Council for the Business Faculty of Brock University.
Debi graduated from the Institute of Corporate Directors,Directors
Education Program (March 2008) and is an Institute of Corporate,
Institute-certified Director, ICD.D (May 2008). Debi received her
Honours of Bachelor of Business Administration (1984) from Brock
University and is a chartered accountant (1985).