Board observer

Definition

A seat at the board table with every right except the vote.

Why It Matters

Search fund investors take these often, and a searcher usually meets one before they meet a director. The observer gets the papers, sits through the meeting and speaks, so the influence is real while the accountability is not: they carry none of a director's duties and none of the liability. Two things are worth negotiating in the same breath as the seat, because both are easy to give and hard to take back. Who exactly may attend, and whether they can be asked to leave a session where their own firm's interests are the subject.

In numbers: Three investors on the cap table of a $4M business can produce two directors and four observers, which is nine people in the room.