Filling marijuana company boards is getting easier as industry expands

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Image of a board of directors meeting

(This story appears in the July issue of MJBizMagazine.)

Marijuana companies can lure talented professionals to join their boards more easily than they could just a few years ago, experts say.

Businesses in search of a new board member commonly task their own executives with filling the role or engage one of a growing number of recruitment agencies to find the right placement.

Those in search of board members seek experienced individuals who align with their company’s goals and strategy as well as complement current leadership.

“A few years ago, not many people would want to say they’re on the board of a cannabis company,” said Liesl Bernard, CEO of California-based recruiting firm CannabizTeam.

“Today, it’s much more of an exciting, sexy industry to be in. And the conversations are a lot easier to have with executives. They almost feel like it’s a plus that they are part of the cannabis industry versus something that they would want to hide.”

In January, CannabizTeam responded to client demand by launching its CT Board Placement service.

The division assists clients in the cannabis industry with identifying and recruiting candidates for board of directors positions. It also helps first-time board members learn the culture and nuances of the company they will serve as well as the broader cannabis industry.

Marijuana businesses typically seek board members with experience in financial reporting, retail and branding, testing and product safety or fundraising and capital formation, Bernard said.

“It’s obviously a very select group of people that we’re targeting,” she said. “Most of the time, it’s more of a proactive outreach to these candidates versus placing an ad and hoping people will apply for it.”

 Where to start

New York-based hiring agency ForceBrands also helps consumer-oriented marijuana companies find board directors and advisers. The agency works with businesses to understand their growth plans and recruits executives from adjacent industries such as food, beverage and beauty product retailers.

Before ForceBrands starts searching for board candidates, the agency assesses its clients’ business and culture, said Sean Conner, co-founder and chief progress officer at ForceBrands.

“What you really want to think about is: Who are the people that are going to help me get to these next five milestones over the next three to five years?” Conner said. “It’s not just the name, it’s someone that you can actually feel comfortable picking up the phone and having direct access to because they really care about the brand and the business that you’re looking to build and structure.”

Once companies identify their business goals—such as growing sales or launching new products—they can seek directors with the relevant experience to help reach those targets, he said. Business leaders said they also keep in mind what needs they have on their current working groups and board committees, including those covering auditing and corporate governance.

 Identifying candidates

In February, Agrify announced that Stuart Wilcox, the former chief operating officer of multistate operator Curaleaf, joined its board. Agrify, a Massachusetts-based purveyor of grow solutions, wanted someone who could help explain the “customer pain points” that cannabis businesses experience, said Raymond Chang, CEO and chair of Agrify.

Chang met Wilcox at MJBizCon in 2019. After Wilcox left Curaleaf, also headquartered in Massachusetts, in September 2020, Chang floated the idea that he take a seat on Agrify’s board and persuaded him over three or four months. In all, Agrify’s board comprises seven directors, including Wilcox and Chang. The company also has a two-person advisory board that offers guidance.

“With every single one of my directors, I always try to get to know the person on a personal basis first,” Chang said. “Once I confirm it is the right fit, then I approach them (about joining), and it’s a pretty easy conversation because we already know each other on a personal level and understand that this would be a very complementary and comfortable working relationship.”

Regardless of the personal relationships, Chang said he encourages his directors to feel free to “say anything” and “be completely transparent and honest” with their thoughts about his performance and the company.

Business leaders frequently fill board seats with friends or colleagues, but working with recruiting agencies gives them access to a wider pool of professionals, Bernard said.

“Part of the maturing process within the cannabis industry is for companies to say, ‘We’re willing to step outside of our personal network because we know this is what’s best for the growth of our company, our profile and investor confidence,’” she said.

Finding the right fit

Recruiting firms can utilize interviews and personality assessments to ensure they are finding directors who round out their boards. One such assessment is the Motivational Appraisal of Personal Potential Assessment (MAPP), which screens for talents, interests and motivations.

Schwazze added three new board members during the first quarter of 2021 to help oversee the Denver-based, vertically integrated cannabis company that formerly operated as Medicine Man Technologies. The company has a six-person board as well as a four-member advisory committee.

Due diligence is key during the recruitment process to avoid future board strife and conflicts, said Justin Dye, CEO and chair of Schwazze.

“You do your background checks,” Dye said. “You get their references and then you also go find your (own) references that would know of them. You try to get a really good picture of the individual: how they behave, how they get along (with others), how they perform, how they think through things, where their value is, etc.”

Candidates interview with Schwazze’s executive team as well as board members. Dye ultimately makes the hiring recommendation to the board, which votes to approve or reject new board members, he said.

 Setting compensation

A board’s compensation committee commonly determines how directors will be paid for their service to the company and its shareholders. Agrify, for instance, has a compensation committee comprised mainly of independent directors who benchmark pay against industry peers, including companies of a similar size that also are listed on the Nasdaq, Chang said.

Agrify typically provides directors with 50,000 shares through an employee stock-ownership plan. The shares vest during a three-year period, he said.

To attract strong board members, larger multistate operators often provide directors with monetary compensation between $50,000 and $70,000, Bernard said. In addition, the MSOs provide 50,000-80,000 shares in equity that vest over two to three years.

Involvement with directors varies by company, but most businesses expect at least five to 15 hours of engagement per month, she said.

Dye communicates with at least some of Schwazze’s directors on a near-daily basis to update them on business operations or get their input on decisions, he said.

“Really good directors are there to think about the shareholder,” he said. “They’re there to drive performance and hold the board and the CEO accountable. They’re there to offer their time.”