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Cathy Minehan has been an active for profit and not for profit board member of a variety of entities over many and worked for 39 years with the Federal Reserve System, including as the President and Chief Executive of the Boston Bank Chapter.  In this episode she talks about the momentum of ESG (Environmental, Social and Governance) and the focus by business on long-term issues that will lead to long-term success.   Thanks for listening! We love our listeners! Drop us a line or give us guest suggestions here. Links Cathy Minehan NACD New England Bio Business Roundtable Statement on Stakeholder Capitalism Quotes For a long period of time there has been a discussion: should a company driven by the quarterly earnings releases and all of the interaction with the street, or should it really focus on the long run? Should it have a purpose and a commitment? Is that what the board of directors should be espousing, or should the board be right behind the CEO in terms of hitting short-term objectives?  This has been a debate for a long-time and the longer-term look is gaining ascendance.  I think that was clear in the 2019 letter from the Business Roundtable.  And now that organizations that are very important to boards of directors and to senior management - ISS, Glass Lewis, the major financial custodians who vote a lot of the shares - it needs to be very important to boards of directors. Big Ideas/Thoughts What is it that is motivating this movement towards stakeholder capitalism? I think it's a frustration with quarterly balance sheets and the quarterly demands that are made because it doesn't really give you  the best picture that you could have of companies that are being challenged by a lot of different things.  I also think some of the current challenges have made this even more important.  When you think about racial equity issues that were highlighted in the spring of this year, when  you think about pandemic issues and how much climate change fed into the pandemic, there are longer-term issues there, that businesses, to keep themselves healthy, have to come to grips with.   Am I saying that quarterly reporting of data and progress against what you've told the street, your goals are for the year, is going to go away? No, I'm not saying that. That's not going to happen. But there has to be a balance. You have to feel the short term needs of the markets, but have that longer run focus because that's, what's going to keep you in the running against a whole range of different challenges   Well, I think what's driving it is exactly what we were talking about: environmental footprints; social capital, both internal and external; major governance issues, what's the board look like? Is it diverse, and what is its focus?  These are just really important topics, and I believe they come out of this longer-term focus, this idea that companies need to be run for a purpose, that they have multiple stakeholders.   ESG is a way of reflecting the multiple stakeholders mindset. The environment, the climate, your supply chain, your customers, people who work for you, the communities you work in and how your board, the direction that your board gives you, the kind of governance principles that the board works uses.   Ron O'Hanley of State Street and Larry Fink of  BlackRock are just two of the big names that have committed to working with companies, investing in companies, holding the stocks of companies, encouraging people to vote shares in a particular direction that are  It's all about long-term.  ESG is risk management.   And when people like (O’Hanley and Fink) are saying “we're going to be looking at your company to see, are you managing the risk of the future in an inappropriate way, because that is an investment risk for what we do” that is really a strong motivation to move in that direction.   ESG provides a powerful lens for focusing on the long-term, and the key driver of a company's long-term success is effective, independent board oversight   If the CEOs of companies really are talking to their boards about stakeholder issues as opposed to shareholder issues and if the boards are really focused on that concept and that idea of purpose and commitment, I think it's going to change the lens with which the board members focus on the company.  It won't be enough that we paid everybody a bonus. We want to know who everybody is, and we want to know what's the gender equity, what's the racial equity, what's the wage equity in the company.   We're so used to thinking of equality, i.e., equal pay for equal work. Equal pay for equal work has been the law for sixty years, but when you look at the wage gap, the raw wage gap, i.e., what do women make versus what do men make, you will see that the gaps are large and staying large and get worse  when you put women of color, men of color, when you compare them to the wages of white men   Cathy, when we spoke earlier, you said something that really stuck with me.  There is a lot of focus on skills you need to serve on a board, but one skill you mentioned that a director must develop is the ability to realize. "If I don't have the skillset that is needed on this board at this time, I should step down." Well, I personally think that this ought to be something that every board member considers on at least on annual basis in some of the annual material that you are asked to provide - an analysis of your own participation and your own contributions to the board. I went through this on the Visa board. I was on the Visa board for ten years before it went public. I had a wealth of payment system experience from the Fed, but I did not have the technological background. Visa is a technology company. It does payments, but it's a big technology company, and the more and more they got into that, the more they wanted and needed tech CEOs' experiences to add to the board's perspective. We did a grid and it was clear the kinds of skills I brought, a lot of people on the board had them, and there were definitely some openings. So, it wasn't something that I raised my hand and said, "I'm going to step down," but in the context of these conversations, it became obvious that this was an opportunity for Visa, and it was something that I needed to recognize, and I needed to do, and I still look upon that as a very good decision on my part and a very good way of dealing with it on their part.

Bob Sherman has served as the United States Ambassador to Portugal. He is a shareholder at the law firm of Greenberg Traurig and serves on board of Novo Banco, a US PE-backed bank based in Portugal.  In this episode he shares his journey in the Obama campaign and then the Biden campaign and through that lens shares what he believes boards and companies should expect from the new Biden administration and how they may want to take advantage of the opportunities that will be available. We also talk about what governance structure for a US embassy looks like and the importance of getting it right.   Thanks for listening! We love our listeners! Drop us a line or give us guest suggestions here. Links Bob Sherman Bio   Business Roundtable Statement on Stakeholder Capitalism  Quotes On What Presidential Elections are about “When it comes to presidential races, it's really only about two things; stay the course or change. And if it's about change, the issue is, what kind of change?” “The thing that I learned in that campaign starting in Iowa was the presidential campaigns are about the future. It's not what you've done in the past. It's what you're going to do for people.”  Who Joe Biden is? “Joe Biden embodied these values: personal integrity, a commitment to national values and a desire to restore international relations.” “He believes in his bones that people need to be respected and that they should have a sense of dignity themselves.  This concept again of dignity and the notion, to use his words, of dealing people back into the process is going to be highly important.” “Joe Biden, by DNA and by disposition, is a different person than Barack Obama. He's a moderate, first and foremost. He's a creature of the Senate.” I believe that what we're going to see is a new social contract. I think you're going to see is a lot of focus on the business community and corporate America being a partner in the solutions to the problems that we face. Governance of a US Mission When I was preparing to be Ambassador to Portugal, Bill McRaven the four-star navy admiral, who just a couple of years previously was the architect of the raid that killed Osama bin Laden, said something that really stayed with me: "I am a four-star navy admiral." he said, "But you have to remember, when I'm addressing you, you have a fifth star; so you're welcome to call me Admiral, and you're welcome to call me Bill, but I call you sir, and not the other way around." “This is important. Chain of command is important to us. Military authority always reports to civilian authority. That's the way our government is set up, and that's the way we operate.”   Big Ideas/Thoughts Based on what Joe Biden has said and based on who he is, we have clues on what boards and corporations should expect in the new administration. The notion of stakeholder capitalism, beyond just shareholder fiduciary duty, is likely to be accelerated. Diversity of boards reflecting the diversity of the population will get a big push; equitable pay and executive compensation is also likely to get emphasis; and science being basis for decision making in addressing  existential threats in areas like climate change, energy, and healthcare. My wife and I went to Philadelphia together [during the first Obama campaign] and we were in South Philly at the time.  Again, the cornerstone of the Obama campaign was engaging voters one by one. That's what we did, and we were walking through neighborhoods, knocking on doors, engaging with voters, when we saw three African American women sitting on a stoop, and we thought, "Aha., these are probably good people to engage and likely voters for Barack Obama over Hillary Clinton given the fact that they were African-American. We went up to them to talk about why they should be voting for Senator Obama, and one of the women looked at us and said, "You know, my son has a learning disability. I can't get services for him; He's failing in school. He feels isolated, so now he's joining gangs because he feels like he's a part of something. I'm worried every day that I'm going to get a call that my son is dead. You tell me what Barack Obama is going to do for somebody like me." That was an eye-opening experience because you realize that within the country, there are so many people that don't feel there's any connection they have to the federal government, and there are people that feel that the American dream is out of reach. What Joe Biden has made clear during the campaign is that he believes in predictability, that government should be predictable for the business community. So, I think we're going to see a much more consistent approach to the issues than maybe we have seen in the past. That decisions should be science based so, I think that science is going to play a big role in how decisions get made in a Biden administration. And perhaps most importantly, there is his commitment to human dignity. He believes in his bones, that people need to be respected and that they should have a sense of dignity themselves. I think you're going to also see, not incidentally, non-politicized decision making. He said he wants to be a President for all the people and will work as hard for the people that voted against him as for those that did. This concept again of dignity and the notion, to use his words, of "dealing people back into the process" is going to be highly important. The concept that boards owe fiduciary duty to all stakeholders is gaining momentum, and has been for a while, and if what you're saying comes to pass, it will be something to really keep an eye on because leadership from the top could accelerate the momentum that’s been building and it'll be interesting to see where it leads us.

Paul Ayoub has served as the chair of several boards, including two significant nonprofit organizations, and is about to become the chair of the board of the largest nonprofit health care organization in the country, St. Jude Children’s Research Hospital.  In this episode he shares his views on board composition, the relationship between the board chair and CEO and the critical importance of diversity, equity and inclusion to the effectiveness of the organization. Thanks for listening! We love our listeners! Drop us a line or give us guest suggestions here.   Links   https://www.nutter.com/people-Paul-J-Ayoub https://www.linkedin.com/in/paul-ayoub-0941959/ https://www.nutter.com/trending-newsroom-news-paul-ayoub-boston-business-journal-power-50 https://hbr.org/2018/03/how-to-be-a-good-board-chair Quotes   On being chair of the Board First, you have to remember you are not the CEO -- you're the chair. So what does that mean? It means that you're really the coach; you're the producer. It’s not your vision. It’s your job to bring forth the collective vision and the collective wisdom of the people who are on your board  and to help the CEO be the best he/she can be. You also have to remember that you're really just the temporary steward of that position. I'm sure you've both experienced this, but sometimes people will start to own their titles and own their positions and it becomes their identity. When I have become a board chair, my first principal is that the CEO’s success is my success and so I have no desire to be out front from a management/organization point of view.  The Chair represents the Board and there are speaking opportunities and public-facing events where the chair represents the organization on behalf of the board and the organization.  The chair may sit at the head of the table, but there can be no ego of the chair. The meaningful reward the chair receives is knowing in his/her heart that the organization is successful and the CEO is successful.  How important is board composition and what's the best way to approach it? Board composition and culture are everything. I think of it much like a sports team . You can have a really talented team with a weak culture or you can have a great culture and a weak team and, in either case, you're only going to get so far. So, I think that the composition is critical. It's actually not just a good thing, it's an essential part of the fiduciary duty of a board to have the right mix of diversity of skill, talent, thought, background and, of course, critically, diversity in terms of women and people of color. It is not opinion, but proven fact, that diversity makes a board stronger and better . Also, it takes a dedicated investment in time to recruit, build, train and integrate a diverse board. What have you found as effective strategies with respect to off-boarding board members? Off-boarding begins with onboarding. So, when you are bringing people onto your board, it's important to tell them what the expectations and responsibilities are in every respect such as meeting attendance, doing the reading, and serving on committees.  One of those expectations also should be being prepared to leave the board when their term is up, regardless of whether you have limits.  I think the culture of term limits is more powerful than a bylaw that sets term limits .   Serving on the board of a nonprofit organization If you're going to be involved in a nonprofit, you should understand why.  In my view, it's a combination of duty, privilege and responsibility. I think we all have a responsibility to give back to our community, whether it's our immediate neighborhood or the larger community of the country of the world, and it's a privilege to do so.  But, upon beginning serving, understanding and fulfilling the fiduciary responsibility of being a board member is critical.   Big Ideas/Thoughts   Progress toward diversity, equity and inclusion has been slow - shamefully slow. It's been better of late, because world circumstances have dictated that it has to be better. There's a heightened sensitivity and deeper understanding that diversity means strength.  People understand that even if you don't approach diversity from the moral point of view or that it's the right thing to do, studies have shown that a diverse board is a stronger board and makes for a stronger organization.  As Justice Louis Brandeis, the founder of my firm, Nutter, said: "In the frank expression of conflicting opinions that lies the greatest promise of wisdom." Also, keep in mind that you can't be a board member and support diversity, equity and inclusion unless you are willing to rotate off a board to make room for someone who is diverse.  So, in driving diversity on boards I’ve chaired, I use that approach and it's rare to get a “no” when asking someone to rotate off of a board to make room for others.

Didier Cossin is the founder and director of IMD Global Board Center based in Switzerland, where he works with owners, boards, and senior leaders to enhance organizational performance using strategy, best-in-class decision-making and enhancing board culture and governance best practices In this episode he talks about creating a high performance thru enhancing board culture, fostering constructive dissent and focusing on governance best practices.   Thanks for listening! We love our listeners! Drop us a line or give us guest suggestions here.   Links https://www.imd.org/faculty/professors/didier-cossin/ https://www.linkedin.com/in/didiercossin/   Quotes Governance has been the key driver of performance in the markets and for organizations and the way I define governance, which I think is all encompassing, is the art of decision-making at the top of organizations.   Constructive dissent is pivotal in the high functioning board. Dialectic is the meeting of well-informed great minds that through a dialogue, builds up towards a better decision and thus constructive dissent. Yes, dissent, having a different view, but in a constructive way for the organization, bringing the decision to a higher level and whatever we do in governance, it's about fostering that constructive dissent towards decisions. When a board is looking for a new member, what should it be looking for to determine that this new member will fit into this structure that it, that he or she will add to the constructive dissent, will add not just to the diversity of opinion, but will be - and I'll use the term "cultural fit" - with the board.   I like the way you asked your question, because is it the cultural fit or is it enough of a cultural tension? My observation is that competency has less impact on decisions than personality.  Real diversity is going to be painful and you've got to figure out the level of pain that somehow is acceptable to drive effective governance. So the dialogue has to remain, but you need enough tension in that dialogue somehow.   I'm a strong believer in meritocracy. We do not have enough meritocracy in boardrooms. And we have many boards that get comfortable with board member, And somehow it's not very well socially accepted to remove board members.     Is it possible that you have a high performing board, but the company's not performing well or vice versa? It's very hard for me to see a well-organized and highly performing board in an underperforming organization. I haven't seen that.     Risk work is essential to good board work     Big Ideas/Thoughts What makes a great board? Several items. Skills and competencies, dedication from the board members, the level of caring for the organization, the level of passion, the level of commitment because we are human beings and part of our human quality is that level of commitment. The second one is what do people pay attention to? Do you have a board that focuses on what matters to the organization? And diversity, but in a deep way: diversity of perspectives, which of course is fostered by gender diversity and by ethnic diversity and by culture diversity, but truly should lead to a diversity of perspectives in order to foster that constructive dissent that is at the heart at the very heart of the governance principle. I was quoted in a famous financial newspaper for saying that 90% of boards are failing. I think it's improving a bit because people have more awareness now and in general I see better boards. But the state of health of boards is still not great, but it is improving.  When I say failing, I mean they are not fulfilling their fiduciary responsibility to the organization.

James Lam is a globally recognized risk expert, an early advocate of Enterprise Risk Management and the first-ever Chief Risk Officer.  He has served as a director and chair of the risk oversight and audit committees of both publicly and private companies. James was a commissioner for the NACD Blue Ribbon Commission on board oversight of disruptive risk.  In this episode he shares his most current thinking on the evolving state of risk management and the challenges and opportunities ahead..  Thanks for listening! We love our listeners! Drop us a line or give us guest suggestions here. Links https://en.wikipedia.org/wiki/James_Lam https://jameslam.com  Quotes I think taking a proactive approach to risk management is one of the key responsibilities for the CRO. So, think about yourself in the first line of defense. You're running a business. You're running the IT function. You're really focused on the day-to-day, and you might be responding to risk incidents or minor crises, but a Chief Risk Officer is much more forward-looking, much more proactive, looking at things outside in, looking at things much more long term….the Chief Risk Officer really provides the expertise, the time, the attention and focus on the most critical things that are going to drive performance in the future. So being proactive, being forward looking at key trends outside in, are really important things. I think it is important that the board provides input in terms of the kind of risk management reporting that they want to see, the kind of metrics, and also guidance on the risk appetite statement and the integration between risk and strategy.   The Risk Committee and the Audit Committee wear different hats. They have very different scopes and mandates. The Audit Committee is paid to think inside the box: SEC requirements, financial disclosure, Sarbanes Oxley, FASB, etc. You don't want to be creative in your accounting. You really want to make sure you're in compliance of all the laws, regulations and standards. Whereas the risk committee is paid to think outside the box. What are the uncertainties, what are the external drivers that could impact our earnings, our cash flows, our value? How do we expect the unexpected? How do we think around corners? So, you're really paid to think outside the box, and I think that is a very compelling way of contrasting the scope and mandate of the Audit versus the Risk Committee.   Big Ideas/Thoughts Even companies with risk committees might say appropriately that strategic risk, and reputational risk ought to be a full board agenda item. There are different ways of doing it, but I think the most important thing is to make sure that the risk agenda is well represented in terms of board and committee time. What are the things that we should look at in determining whether, and to what extent, a board bears the responsibility for the catastrophic problem that might derail a company? I think your listeners could benefit from looking at the Blue Bell Ice Cream case (link) and the Clovis Oncology (link) case, both of which I think have really elevated the standards for duties of care and duties of loyalty in terms of risk management and compliance, and that it is important for the Board of Directors in exercising those two standards to make sure that there is a risk management and compliance system in place, and that system is working effectively and that the board is getting the right metrics, the right reporting and red flags in terms of risks, and that they hold management accountable.   https://scholar.google.com/scholar_case?case=11357134939420858969&q=Marchand+v.+Barnhill.&hl=en&as_sdt=6,30&as_vis=1 (Blue Bell case) Delaware Supreme Court Ruling in Fatal Blue Bell Listeria Shareholder Suit (natlawreview.com) (Blue Bell case commentary) 2019-ca-2017-0222-jrs.pdf (justia.com) (Clovis Oncology case) Another Reminder From Delaware About the Duty of Oversight | WilmerHale (Clovis Oncology case commentary)   Chief Risk Officer The Chief Risk Officer is really tasked with making sure that there's a robust and effective ERM program, that risk management policies, risk assessment and analytics, risk management strategies, and executive and board reporting are appropriate. I would say the CRO is responsible to help the board and senior management to imagine the unimaginable. To expect the unexpected and be able to prepare for any scenario.  I worked with one Board of Directors and the company had a very strong ERM program.  In 2018, the board approved a pandemic management plan. Last year they stress test that plan and then when the pandemic hit early this year, they had a playbook.  The playbook didn't anticipate everything, but it had a curve with different stages of a pandemic, it had social distancing, PPE, you know, working remotely and so forth. We probably had 70 to 80% of the eventualities and that really helped the company be prepared for this scenario. I would say that company probably wouldn't have this plan in place if they hadn’t already addressed some of their core risks in their ERM program. A lot of companies get stuck in risk identification, So the way many companies do risk assessments and heat maps, they generally get people in the room, they say, what are the risks facing the company?  They might come up with 20, 30 different risks and they would assess the probability one to five and then severity one to five and they'll multiply the two scores to get an overall risk rating. I believe this approach is fundamentally flawed.  Let me give you a very specific example. What's the probability and severity of a Cyber Security attack that's happening to the company right now? Your firewall and your controls are able to protect against it. Probability is high. One to five, it has to be at five it's happening. Hundreds and thousands of times. What's the severity? It's low. The lowest you can be. It's a one. So, five times one is a five. What's the probability and severity of a major data breach. The probability is low. It's a one. Severity is high. It's a five, one times five, it's five. So, you end up with the same score for two very different situations.  The math behind probability times severity gives you expected loss, but your risk is not driven by expected loss, it's driven by stress loss or unexpected loss. In determining how to assess risk, I like to start with the key strategic, business, and operational objectives of the company. What's your strategy? What are the KPIs - Key Performance Indicators - that would indicate whether you're achieving that strategy? Then you say, what are the risks that could drive variability in those KPIs. What are the key risk indicators and risk tolerances for those risks?  So, start with the business objectives of the company and let that drive your risk assessment and quantification.

Mohamad Ali is the CEO of International Data Group (IDG, Inc.), a private technology media, events and research company. He has also served as CEO of a publicly traded company and has served on many public, private, and nonprofit boards. In this episode, Mohamad shares what he has learned about being a good board member as well as the intricacies of boards through his wide range of experience on both the board and company leadership sides. He also integrates the importance of giving back and the support he received after moving to the United States as a child.   Thanks for listening! We love our listeners! Drop us a line or give us guest suggestions here.   Links https://www.idg.com/ https://twitter.com/mhsali https://www.linkedin.com/in/alimohamad/ Biography His bio is available here: https://www.idg.com/about-idg-inc/ Mohamad Ali was appointed Chief Executive Officer at International Data Group, Inc., the world’s leading technology media, events and research company, in July 2019. Prior to this role, Mohamad was CEO of Carbonite, a publicly traded data-protection and security firm, where he grew the company’s revenue four-fold, to more than a half-billion dollars in four years. Before that, Mohamad served as Chief Strategy Officer at Hewlett-Packard where he played a pivotal role in the company’s turnaround and led the decision process to split HP into two companies. At IBM, Mohamad acquired and integrated various companies to create the firm’s $8 billion analytics software unit. At Avaya, he oversaw the $2 billion services group and served as head of the company’s research labs. Mohamad holds a B.S. in Computer Engineering, a B.A. in History and a master’s degree in Electrical Engineering, all from Stanford University. He serves on the board of iRobot (NASDAQ: IRBT) and was previously on the board of Carbonite (NASDAQ: CARB) and City National Bank (NYSE: CYN). Mohamad was honored as 2018 CEO of the Year by the Massachusetts Technology Leadership Council, was a member of the 2018 Public Board of the Year by The National Association of Corporate Directors New England, was named a 2011 All-Star by Massachusetts High Tech magazine, was named a 2008 40 Under 40 honoree by Boston Business Journal, and was a finalist in America’s prestigious 1988 National Science Talent Search.   Article: “I am Living proof of the American Dream” – link to article https://medium.com/authority-magazine/i-am-living-proof-of-the-american-dream-with-mohamad-ali-ceo-of-carbonite-851f0bd33c90   Quotes Onboarding I think one of the most important aspects of onboarding isn't actually the content that you learn, but the personal dynamics of the board and the board. It could be 8 people, it could be 18 people but it's a small number of people of often very high caliber people with very strong opinions…how you onboard someone culturally onto the board is a very important thing.  That's something I've seen done poorly and it's something I've seen done well.  We spend so much time and money with recruiters getting the right skills, doing the skills matrix and so forth and then, once the person's here, that's kind of when the hard work starts.   What's the best thing a board can do when a CEO has a major challenge, or the company is in a crisis? Great question, because in some ways we've all been there in the last six or nine months.  I would say that if you have a good CEO and the CEO has a good management team, probably one of the most important things is be supportive of that team, be available, be engaged, but be supportive… if you have a good CEO and there's a crisis, you hunker down together.     Big Ideas/Thoughts   What was impactful in the path leading to your success as you were growing up I'm one of the lucky ones to have gotten all the opportunities that I have gotten and to where I am today.  It wasn't just my mom and my dad that encouraged me because they were new to this country.  they didn't know how to navigate it.   There were people who went out of their way to help me for really no gain to them.  There were two school teachers in particular, in the public school system that showed me the way and guided me and eventually I ended up at one of these elite public schools where you have to take a test to get in and that launched me on my way to Stanford and my career.  Without these two people, who out of the goodness of their heart just decided to help me, I don't think I would be here today.  I always try to keep that in mind when I look at where I am and I think all of us are wherever we are, whatever success we've had, it's because other people have helped. I think it's really critical for us to all give back.   First Board Experience My first board experience, I would have to say that I really didn't know anything about boards, so it was very much a learning process for me.  One of the things that I did was just first assume that I didn't know anything about how boards work and that they had brought me on board for a specific reason. That's where I focused my time, helping them determine how to sell the company.  Then the other thing that I did was I observed, I watched what the other board members did.  I asked and I learned - there were several really great people on the board who were willing to teach me.   Learning what works for Boards by observing what doesn’t work I've seen a lot of things work.  I've also seen a lot of things, not work and that's really important.  We all talk about how failure is a really important component of education and learning and it really is.   How serving as a CEO has helped him as a board member It's tremendously helpful actually.  In some ways, it allows you to relate with a lot more credibility to the CEO. It's not that other board members who haven't been a CEO aren't credible, but in the eyes of the CEO of the company, I think knowing that a board member has been CEO and has been through the pains of being CEO, been in the trenches, has had to navigate the landmines that CEO deals with, it goes again beyond the technical aspects of the role and more to the emotional connection, and understanding that is shared with CEO   Board Composition and offboarding One of the things that I've seen done at multiple companies where I've been on the board is the use of a skills matrix and the skills needed to the company changes periodically, the use of the skills matrix has been very helpful.  For example, at iRobot, we do a skills matrix every year and we publish it as part of our SEC filings and it gives the board an opportunity to discuss what we might want to change, in short term, medium term, long term and all the board members are part of that discussion. It's not just transparent to our board members, but to all of our investors.   Diversity on boards I see progress, but not enough.  One example is that a few years ago there was a target of getting 20% women on boards.  We've met that target, but if you think about it, it's only 20%, it's not 50%.   M&A Most M&As, or a significant number of M&A transactions, ultimately don't meet the goals or produce the value expected. So where is the disconnect in this if two parties are really trying to do the right thing?   There is a three-letter answer to that and it’s ego, right? So, 75% of all transactions fail to meet their business cases. The good companies, the companies that know how to do M&A well obviously perform much better than that, because they do it for the right reasons.

Dede Orraca-Cecil is a member of Egon Zehnder, an international executive search and leadership advisory firm, where she leads efforts in almost every aspect of what a company or organization needs in leadership and governance. She talks about identifying company leadership and board building – what it takes and how the conversation has changed.   Thanks for listening! We love our listeners! Drop us a line or give us guest suggestions here.   Links https://www.linkedin.com/in/dede-orraca-cecil/ https://www.egonzehnder.com/office/boston/consultant/dede-orraca-cecil   Quotes “How have recent events, including the death of George Floyd and everything that's followed, impacted how diversity and inclusion is viewed on for-profit boards?”   I would say it has had a material impact. I think going into this we have had this conversation about diversity on boards over the last few years – it is not a new one.  We've seen slow progress with an initial focus on gender.  But what we're seeing now is a shift where there is more comfort or directness in engaging on discussions around racial and ethnic diversity and it's not just the boardroom.   I think what we've seen since May is really a more openness and in fact, more of an expectation coming from the client around running inclusive processes. People feel more comfortable or more empowered to say: “we need to do something about the representation on our board and in our organizations and we need your help and support in doing that.”   So, the client is driving a lot of these discussions asking: “How do we focus on this? What can we do differently?  How do we think about our pipeline for our board? How do we think about board readiness?  These are conversations that maybe before we might've been introducing or leading with and now we have a lot of clients who are beating us to the punch and asking that before we even get to it.      Big Ideas/Thoughts Building a High-Performing Board You’re looking for a more colorful tapestry of experiences on a board. You want to understand not just a person's capacity, but you really understand what is it that this board is trying to solve for and what are the certain skills that will help accomplish those goals.   We're in a time where, when we say "culture fit" that can sometimes set people off on a path where you're worried about creating a homogenous environment, so I want to just clarify.  We're not trying to create a board where “culture” means we all act the same, we all speak the same.  In fact, what we're looking for is actually different, the underlying kind of rules engagement.  How do we communicate? How do we show up? How do we create a space where you get that right level of critical thinking, creative abrasion, if you will?  You want a space where people can bring themselves fully to the board, in a way that also doesn't create sharp elbows or knock others out from being able to contribute their voice. Board searches and board work operate on a different cycle. In the best-case scenarios, you start looking for your directors with enough time and window to bring somebody on board. Not only just to find the right director candidates, but to actually spend enough time with the board itself, to get a feel for how they engage and interact.   Off-boarding board members Nobody wants to be the bad cop. Nobody wants to off-board, especially in a scenario where they are preexisting relationships, where you've gotten to know person over time and then I think that's fine. A little tongue in cheek, but that's probably why we have a some of the work that we have. It's much easier to hire an outsider to come in and help facilitate that process than to be the ones that tell your fellow director and off board someone. If you think about it, the board is one big team, and you really want to establish a sense of how effectively they are working together as a team.  It used to be that some people would call this board assessment, the spirit of it is “how do we make sure that we're the most high performing board that we can be.”  Often in those discussions or in those kinds of, engagements, it gives, the board chair a way to look across the team to see where new kind of capabilities could come in and, and where maybe some contributions are not as valuable.   “Why would a company pay six figures to find a board member? You know most boards believe that through their own networks, they can identify and recruit board members.  How do you answer that question? What's the value proposition?” We've seen an era where bad performance at the company level cannot just take down a company, but an entire industry, it makes you take a step back to think about the roles and responsibilities of boards. That has led to a shift in the nature and seriousness around board composition and responsibility and duties.  What competencies do we want to look for? What skill sets are we looking for? And how can we actually create more diverse and inclusive representation on the board as well?  These are areas that are complex and it's hard to necessarily just rely on your own network.  Going to a firm like ours or the others, allows you to tackle those efforts with reinforcements.   Diversity Pipeline “Raza and I have had conversations that for a while people used the lack of pipeline as maybe an excuse for not actually being as aggressive in diversity as they might otherwise be and in the conversations we've had in the last couple of months, it feels like that just isn't going to fly anymore. That's really, it's really just not a valid, like no one buys that excuse anymore.”   You can't say, well, I don't know where they are.  Or they don't exist, you know, we do exist. We are here and people's willingness to rely on some of that old complacency isn't there really anymore and the across the ecosystem.  Each of us is being challenged around norms that we used to assume or accept. One of those things being the pipeline. What does that mean and how does that shift the work? It can shift the work in a few different ways. When some says they can’t find somebody I ask  - is it true that you can't find anybody?  Well, it depends on what the spec is. It depends on what we're looking for and how we're defining a director's experiences in each event.  If you were to say, well, we only want a sitting CEO of a Fortune 50, well, of course that pipeline going to look very different. Do you then rely on that very specific spec and say, well, we tried, but the pipeline is different? Or do you think about what's underlying that request?  What are the true needs of the board.  Is it important to have a Fortune 50 CEO? Or are you actually looking for something else in that executive to contribute to the board. If we go there, we can actually move the spec a bit further and give ourselves room actually build a more robust and diverse pipeline.   What are the new models of leadership that you're exploring, what does that refer to? If you look at how the world has changed, we’ve seen greater convergence around sectors.  Often if you're leading a large institution, you're thinking about your employees, you're thinking about your consumers, but you're also thinking about governments and you are thinking about civil society. When you're looking at new models of leadership, it’s how do you actually engage across those things? How fluid are you as a senior executive moving from the public to the private, how facile are you in terms of engaging with heads of state and not just your consumer base. Then there's that other piece that we alluded to earlier, which is this notion of moving beyond thinking about shareholder value and really this concept of stakeholder capitalism. What does that require of a leader? How adaptive are you?  How are you looking at the individual?

Diane Hessan is successful entrepreneur, CEO, author and has been highly recognized for the broad range of impactful work she has done.  And she has served on virtually every type of company board and seen the work of the board from many perspectives.  In the fascinating conversation, she shares her insight and opinion on the experience of running and serving on a board.   Thanks for listening! We love our listeners! Drop us a line or give us guest suggestions here.   Links https://salientventures.co/ www.cspace.com   https://muckrack.com/diane-hessan     Quotes First Board Experience My first board experience was very hands on.  It was a real passion project because we all were completely dedicated to the mission.  I started by spending way too much time on operating issues and eventually sat back and became more strategic.   I thought it would be great for my family and my job and my learning, to broaden my horizons and to learn how to do some other things. I had a conversation with a friend of mine who was on a whole bunch of boards, and I just said to him, I feel like I want to do something bigger. I feel like I want to give back and not focus on myself so much and yeah, he said, what are you passionate about? I said, I'm passionate about kids. I'm passionate about antiviolence, I'm passionate about homelessness. He was just like "Diane. I have a great organization for you and they really need marketing help" because that was why people wanted me on their boards at the time. It really was a great fit and I basically got it by talking to somebody who had already been there.   There were times when I would say something and I learned to say, “is this a board issue or is this not a board issue?” I mean, I was just very explicit about it.      Changes in the Boardroom because of Covid Every organization that I'm on the board of no matter whether they're for profit, nonprofit, et cetera, have had talks about the impact of COVID on how their employees are working, how they're building culture, how they're recruiting, retaining, onboarding, what the impact is on people working from home, when they should open up again, whether they should give their employees free stuff to be able to be more effective at home, how they handle the huge challenges of employees who are parents and how to make everyone feel fairly treated there.   (Companies are) Looking for shifts in customer behavior and customer requirements is also a really interesting topic.  Most of these companies have new go to market strategies, new strategic partnerships, interesting new acquisitions, and I think in general, new ways of actually reaching out into the marketplace and building strategy around that.   And for me it's meant much more time on my boards of just doing my homework and reaching out and try to see what other companies are doing and just generally getting educated so that I can be as helpful as possible.   What makes an effective board meeting? I think the great board meetings are when the CEO says, “here's your deck or here's three pages about what's happening in the business. I have three issues that are keeping me awake at night, and I really want your help on them. Here they are. A, B and C.  Please come prepared to help.”  Spending a board meeting with four hours of PowerPoint is the worst most boring thing in the world.  And it really doesn't help.     Big Ideas/Thoughts   Learned about being a Board member from being a CEO Number one, when your business is going well, you want your board to just ask questions and beat you up and challenge all of your assumptions.  You're energized.  You're doing well.  You want a board that gives you watch outs and says, well, what about this? And could we grow this faster?   When a business is not going well, you don't really, as a CEO, want to get beat up. So, when things weren't good, I really appreciated board members that were supportive, that helped me look on the bright side that shared with me information about how other companies were also struggling.  So, when things are good, you want to tough board when things are bad, you want a board that walks in your shoes and also knows how to be supportive.   I learned how sometimes asking questions is more valuable than giving advice to the CEO.   One of the things that I learned from being a CEO, but also from being a board member.  Guess what: the board meeting is not just about the CEO making the board happy. The board meeting is also about making the board members feel that they're contributing. One of the things that I've done in one of my boards…. We're going to talk about this for the next hour and a half.  I'm going to leave the last half hour of this conversation to just go around. I'm going to give each one of you a chance to just do two to three minutes more of final thoughts on this issue….Sometimes you're in a big room, you got a lot of people talking. You feel like you can't get a word in edgewise. I know I feel that sometimes and if you're an introvert, and some of my best board members have been introverts, they just give up, they just don't want to interrupt and jump in and say, I have something. So if people know that they'll have their say at the end, because you're going to go around the room and give everyone a chance to talk, you sometimes get extraordinary advice from people who otherwise just would have given up on participating… and after a while you get really good at packing your 120 seconds with everything you wanted to know.  We all as board members want to feel that we're adding value and we can't do that unless the board process works really, really well   On the broad range of company boards I wanted to broaden the industries in which I work and it is particularly fun as a board member to just dive into an industry where you've never really looked at financials before.  You've never really thought about how they make any money.  And you have to learn an entirely new language. It's just a great stretch experience   Term Limits I don't love term limits, but I love bringing fresh faces onto a board.  In some industries that's more valuable than others. If you're in an industry, banking is an example, sometimes business knowledge, knowledge of the industry and knowledge of the company and its functions has an outsized impact on your ability to be successful on the board. And year after year, the more you learn, the more valuable you become.  You get to the point where you have somebody that's been on the board for 10 or 15 years and they are outrageously valuable. They have the history, they still are full of impact, et cetera, and it's hard to say goodbye to those people.  But every time you bring on a new, extraordinary board member it changes the conversation. It opens up the possibilities. It brings in all kinds of perspectives that you thought you never had before, and I think that's really valuable. Especially now that the world's changing so fast. As the world changes, the skills that we need and the perspectives that we need are also changing.    Boston as a collaborative investment community Boston is an extremely collaborative community, so that whereas other ecosystems like San Francisco or New York have a reputation for being competitive - you know:  My fundraising is bigger than yours. My product is better than yours. My app is cooler than yours. My black turtleneck is blacker than yours, - in Boston I really believe that the biggest question that you get asked when you're trying to build a company is “what I can I do to help you?”

Ed Pendergast has served on numerous boards - public, private, and nonprofits - for more than 40 years.  Very few people have had the opportunity to serve on such a broad range of boards over such a long period of time as Ed, and for good reason.  He is the consummate board member.  Armed with a deep understanding of business finance and operations, and what it takes to be an effective board member, Ed exemplifies the qualitied that every company seeks on its board.     Thanks for listening! We love our listeners! Drop us a line or give us guest suggestions here.   Links https://dunnrush.com/ http://pendergastco.com/ Quotes Impact of the pandemic:   “Well, it's varied pretty dramatically.  I sit on five boards…and some of them have been hit very hard, some are booming.  It seems to depend upon the industry they're in or the impact that coronavirus has had on the business.”   “You probably have heard more talk in the last few months about supply chain than you have in the rest of your life.”   “In our investment bank, we are advising companies generally not to sell the business right now because valuations are so strange.”     Question: If you're advising a family owned, operated business, and they're thinking about forming a board for the first time, but they're hesitating and there are several reasons why they do. What advice do you give them?   Answer: Well, I advise them not to start out with their uncle's lawyer and their brother's banker, but that they try to think about “why are we having this board?” What type of skill sets do we need that would be helpful to this business and try not to pack it with all people you've known for a long time? It's okay to have a couple of people that you've known a long time, but it's very helpful to think outside of the box.   Question: When people say “we don’t have time of the money for a board, what kind of advice to give them? What do you tell them?   Answer:  Well, what's the return on the investment?  If we can bring together five people with great talent, some of which you don't have in your business who can help in business development and it costs you $50,000 and it generates a strategy that builds the business from $50 million to $250 million, pretty cheap.  On the other hand, if you don't put it together properly, it can be a pain in the ass and not be successful.   When there's a crisis is when the private company board is really helpful to calm things down. How are we going to get through this?  How are we going to work our way out of it?   Big Ideas/Thoughts Board meeting haven't changed much – we’ve had a focus on coronavirus that we didn't have before , but board meetings always have talked about risks and how do we deal with risk and what are the risks we haven't foreseen? And how do we think through that process?   One difference is that when you're in person, you have some casual time, you usually have a meal. Something when you're off the topic. When you're on a zoom board meeting, you're on topic, the fraternization, the getting together, the personal aspect of it is missing and so it's harder to gauge how people really feeling or what's going on. When you're sitting across from somebody at dinner, you really get a different approach. And that's particularly true in boards where we have traditionally had the senior leadership team present at the dinners.   And that's key because one of the major parts of being a board member is to make sure that the people are the right people. That they're performing properly, that motivated properly, and develop properly. And that's harder to do through video conferencing. Going forward, I think you're going to see a lot of closings, a lot of bankruptcies, particularly companies relying on disposable income: airlines, restaurants, hotels, casinos, even clothing.  I think it was Bloomingdale's that said they're only selling tops. On why more private companies are forming boards.  Well, part of it is that the visibility of governance has expanded dramatically.  I think a good deal of it as to what the National Association of Corporate Directors has done, to raise the visibility, the standards of sitting on a board have clarified over the years and, many people who have started their own business had worked for a larger company and have seen that there was some efficacy to the board in family businesses.  Particularly when family members say we need somebody outside of the family to have a role here so that we can listen to people who have had outside experiences.   Question:  One thing that seems to be a constant challenge for many companies is refreshing the composition of their boards.  The board that may have been right five years ago is not necessarily the right board today.  What is the best approach of reviewing the composition of the board and offboarding when necessary? Answer:  Refreshing the composition of a board is probably one of the thorniest issues any board faces. One way to address it is to have a regular evaluation process. How the board going, how individual board members are going, how committees are being operated. but it's a tough process. I have some ex-friends that I have counseled off boards and, as I sometimes say, it's not who got you here it’s who is going to get you there

David R. Koenig has been fascinated by and focused on understanding risk virtually his entire life and is recognized as a global leader on the governance of risk.  He has held executive and board positions, published across multiple media (including 2 books: Governance Reimagined and The Board Members Guide to Risk), founded the DCRO (The Director’s and Chief Risk Officers Group),  co-founded PRMIA (the Professional Risk Managers’ International Association) and advised many companies in a wide variety of industries and sectors, over many years.  If you listen to this episode, you will understand that managing risk, in a comprehensive, forward-looking manner is an essential best practice in running any business. Thanks for listening! We love our listeners! Drop us a line or give us guest suggestions here. Links http://www.linkedin.com/in/davidrkoenig https://dcro.org/ https://davidrkoenig.com/the-board-members-guide Quotes My father introduced me to the stock market when I think I was 10 or 12 and I was just fascinated by what made stock prices go up and down.  It's, you know, it's kind of a sad story, but that was part of what I was raised to understand. “Any company not doing the type of risk analysis you've described is not really looking at its strategic plan in a holistic way. They're missing an important piece in trying to project what it can really accomplish.” The reason you put a Risk Committee in place is to understand the impact of let’s say cultural changes.  Once you start piecing those all together and say, “where does this come back and impact us?” it becomes much more clear that it's akin to understanding your clients better, to understanding market share better, to understanding your competitors better.  You have now a much clearer picture about the things that affect the bottom line of your success and what you might do about them. That's the forward-looking aspect of risk management and again, culture is but one example. The really good Chief Risk Officers are the ones who think like businesspeople. They're not control people. They are people who have the same mindset of an entrepreneur, the same mindset of the head of a business unit.  In fact, the best thing that risk managers can be doing within the business units is advising those businesses on how to take risks well.  Since they think like a businessperson, questions a board might ask are "What opportunities to take risks better do you see?” "Are we competitive in terms of what it's costing us to get the capital to pursue our objectives? "What aren't we looking at closely enough?" Big Ideas/Thoughts I started by helping organizations to understand the risks that they could or couldn't control and ways to change that more to their liking.  I worked with airlines, endowments, portfolio managers, banks, all sorts of different entities to help them change their risk profile, You want to understand as much of it as you can.  You're never going to understand every part of it.  Let's, for example, look at factories that pollute.  In the 1970s, I grew up not far from Gary, Indiana.  We would get some of the steel mill air that would come to our town.  Lake Michigan was polluted, there are places up there that you couldn't believe people were swimming or eating fish from.  But those companies weren't being charged for that pollution.  Then the Environmental Protection Agency came along, rules about clean water, clean air came along and now the Southern shore of Lake Michigan in most places is pristine and beautiful.  Those firms a lot of them aren't there anymore, or if they are they've significantly revamped what they were doing, and the problem was that they were not accurately paying for the cost of doing what they did. One of the things that risk management does is give you inputs that you're generally not seeing now  - which is: what is the cost of pursuing our objectives or in some cases, the cost of not pursuing something else. I've been in this risk management profession for 35 years or so and most companies still don't have formal risk management departments. I think the question really is for a board to have a conversation about how well they understand the complexities of all the systems they depend upon for success.  If they feel like they've got a handle on that, they can have a really deep discussion, and if they really feel comfortable that they get those complexities and how they interrelate, you may not need a risk committee.  But I find it challenging to think an organization of $100MM in revenue, or maybe even half that size, can't generate enough positive return through a better understanding of risk to justify some investment in risk infrastructure. I'll just talk about a company I talk about in the book what in essence was the equivalent of a Risk Committee at an executive level that was looking at the kinds of things that would threaten their ability to serve their customers.  There's a good story in Texas Monthly talking to CEO, their senior executives around sustainability and supply chains. They started looking at the possibility of pandemics back, I think, 15 years ago and so they knew what to do.  They had a plan laid out. Another example, and this is not a formal Risk Committee at the company at that time, but it would be the equivalent of such, saying, “how are we going to make sure we can stay in business?” If something interrupts our normal facilities for operation? When I worked there in Des Moines, Iowa, which is where the company is based, it was the largest city at the time in the country to lose its entire water supply because of the confluence of two rivers flooding that overwhelmed the 30 foot high banks of their water treatment plant. Suddenly everything in downtown Des Moines was flooded and unusable because there was no fresh water.  The next day I was told to meet at a specific point.  I went to that point.  I was handed a folder.  The folder told me exactly everything I was going to be doing for the next 12 hours and over the next week. We were up and running, managing a multibillion-dollar risk portfolio in about a day and a half.  If they hadn't been thinking forward within what was the equivalent of their Risk Committee, that would have been never happened and I can't tell you how many millions we might've lost, because we weren't able to do anything about our exposure The case for a Chief Risk officer.  Once it gets up to the board, you don't necessarily want to have business unit specific discussions about whether you're taking the right risks.  It's really a question of how is the CEO looking at this and how is the CEO incorporating all these different moving parts?  I would say the Chief Risk Officer is somebody who has that task of taking all these disparate technical skills and technical roles and bringing them into a common risk framework. Cyber risk has become a massive concern and it's been there for a while, but the DCRO did a survey recently and there's a multiple fold increase in the amount of phishing attacks that companies are seeing because they have employees working home.  I've seen people who are really smart fall for these because they're getting really good.  To the extent that our corporations are more effective risk takers, they're better employers, they're better at returning into their community, they're better at serving their customers, they're better at serving their suppliers.  All their relationships become better. If you have a board nominating people to join the board, to replace people who are leaving, they're almost always going to be more naturally drawn to people who are like them. We see that in our social sorting in all parts of our own lives.  It's much easier for us to be around people like us, who agree with us in times of threat when an organization's facing a competitive challenge or crisis, like we've got with COVID.  But lack of diversity in board composition creates risk. 

Ian Sheridan has been innovating in the financial world, in a variety of roles, for many years.  He has brought that innovative mindset to the venture fund where he is a managing partner, Vestigo Ventures.  In this episode of On Boards we discuss the fascinating approach in the use of data they employ in making investment decisions and to how they work on the boards with the entrepreneurs that lead the companies in which they invest.  Thanks for listening! We love our listeners! Drop us a line or give us guest suggestions here.   Links https://www.vestigoventures.com/ https://www.linkedin.com/in/iansheridan1/   Quotes “The boards are small, they're, intimate - business conversations dealing with every aspect of business.” “The best entrepreneurs are driving the company and their teams … the board is there in this early stage to be a coach, to help them navigate, maybe it could be networking within the industry, whether that's growing the business on the distribution side or working with the regulatory compliance side of things – whatever it takes.” “We use data to source, underwrite and empower our portfolio companies.” “What’s different about this crisis?  Well, I think the first piece is working from our home. Right? So, how do you stay connected?  How do you keep that relationship at the right level and make sure you're really understanding where is that person today and what are they facing and how can I move through that issue?  ……I would say as challenging as these times are, and the real pain that's happening across the planet and our country, I do see an unbelievable spirit of innovation and drive from these entrepreneurs that hasn't been shaken through this process.”   Ideas/Comments   FinTech is about two things: reducing costs and providing an delightful experience to the customer. This is what all the innovation and improvements in FinTech revolves around. Now we live in a world very if you can think it, we can probably create it and that is what investing now means. The opportunity that Cogo Labs affords us is the ability through big data to predict with a tremendous amount of accuracy which is the next IP address in North America that has the potential to go viral.  What are the big ideas that consumers are thinking about? And then we train our machines to go through that data and say, Vestigo, these are the companies you should look at, these are financial services or FinTech companies to consider and do it very early in the day.  If you know what the early adopters are doing on one side, and then you can see what everyone else is doing, you can run some really cool math to understand and predict the next thing.   When Vestigo invests in a company and becomes part of the board the company gets the benefit of the collective expertise of all partners at Vestigo regardless of who actually is on the board. All partners at Vestigo have been operators, serial entrepreneurs and that is really an excellent value-add for the company. Boards at this early stage are very intimate and although there are various committees and other governance practices and there are a lot of hats to wear and as a board member one is thinking across the business model. The role as a fiduciary does not change but there is a lot more of a bigger white board to work with. The CEO or the founders of these companies, these are passionate people who are going to run their companies. and, and the best know how to, how to use their board for counsel and advice, and, and potentially, networking.  So, whether as an investor a board member or a board observer, we're here for the people we've invested in and that's kind of a 24/7, whenever they need us, we’re there for them.

David Rosen has been a CEO, served in other C-suite capacities has served as a board member and is a life-long entrepreneur – and has developed a passion about the importance of boards in private companies.  As a result, helped found the Boston Chapter of The Private Directors Association (PDA), a national organization whose focus is to support the owners, board directors, investors, and C -suite executives to improve their board caliber as well as the governance practices for private companies.   Thanks for listening! We love our listeners! Drop us a line or give us guest suggestions here.   Links http://www.linkedin.com/in/davidarosen PDA Boston Quotes   “I won't start a company without creating a board almost from the beginning.”   Big Ideas/Thoughts There are a lot of governance needs is on the private company side, which is why I believe the PDA is so important.  There is more money on the balance sheets now, as of 2019, in private companies, then there is in public companies, while the number of publicly traded companies since the .com bubble is almost half for what it is today.   The private capital formation into companies has been a tremendous driver of activity and wealth not only in this country, but worldwide I advise my clients from the beginning that they should think about board governance- after they've learned cashflow balance sheets and cost of goods sold it is time to start focus on governance issues It really behooves a board to understand the skill sets that are required for the current and long-term future of a business, which may be different from what it was three-five years ago.

Episode Description Larry Stybel talks what a board need to do to really do its job properly and the critical role of the Nomination/Governance Committee in that process.  Do we have the right talent on this board?  Are the board members sufficiently educated to handle their fiduciary responsibilities? And does the board understand that it has primary responsibility for defining the corporate culture?   Thanks for listening! We love our listeners!  Drop us a line or give us guest suggestions here.   Links https://www.boardoptions.com/   https://www.stybelpeabody.com/   https://www.issgovernance.com/ Quotes “If you really don't understand the industry that you're in, who is your chief learning officer for the board of directors, and in many cases, by default, the chief learning officer of the board of directors is the CEO  and if the board also has the responsibility of evaluating the CEO's performance, is there something wrong with this picture?   Board evaluation is that time when the board shines a spotlight on itself and says, “what are we doing positive and negative to advance shareholder value?"   “Every company that I have ever worked with says we are innovative, and the question is: who's the role model for innovation? If it’s not the board, then where?”   “I think the board has primary responsibility for defining the corporate culture, and then the CEO has the responsibility for executing the corporate culture.”     “The board is usually putting the spotlight on the CEO and senior management. So, in that way, I can understand why putting the spotlight on themselves is not something they actually want to do. Right it goes like this: “I think performance evaluation is great for you, Joe, but not for me.”     “There is a song by Leonard Cohen, and I think you know it, Raza, “Everybody Knows.”  And that song applies to boards. Everybody knows who's making a major contribution and everybody knows who isn't. They just don't want to talk about it.”   “There's a kind of cliché that I that I see among young, inexperienced founders it’s called "the problem solved problem." And that is: we had a problem, you know, 70% of our revenue is coming from one company and that one company is threatening to go to a competitor. I flew to California and I talked with the CEO and I got him not only to stay with us, but to increase our business. And I go back to my friends and family board and I say, we had a problem, its solved - and they say, great, what's for dinner?” “I think podcasts like these are, are an excellent way for board people to learn while they're driving or learning while they're exercising.” (Thanks Larry!)     Ideas/Comments If a board wants to keep what is often a superficial sense of collegiality, they don't want to do board of directors self-evaluation because you're going to get to issues that one or more board members are going to be uncomfortable with. When board self-evaluation is defined as an event, it usually is a onetime event. If a board is really serious, they're going to do board of directors self-evaluation. People think of diversity in many ways. Gender diversity is one of them, racial and ethics diversity are others but the way, somebody does problem solving is another important dimension to add to the matrix of what you need on a board to make it truly diverse. I have encouraged CEOs to do on boards is to send something to the board even once a month or a one pager. It could be a snapshot of financials. It could be three or four sentences about what's going a brief, but helpful, update so that when you're walking into the board room, or even when you're getting the materials for the next board meeting, you have been updated all along. No surprises. The board should not be surprised. You should not walk into the board room and find out something's been going on, What happened with Equifax (theft of the credit records of 143 million people) should be part of every board education course., First, they did not immediately inform people that their data had been stolen. They delayed it for six weeks, which gave the hackers a chance to really use the information they had stolen.  And the second thing, maybe even more egregious, members of the senior management team actually sold shares of stock during the time before the public knew that the breach had occurred so they would not take a hit on their stock shares. And this gets back to corporate culture. So, what was going on at Equifax that made senior executives think that what they did was okay to do?

Planning for a crisis is not a luxury and boards must be a very good at crisis management - we’re seeing just how important that is right now.  For this topic, we’ve assembled an incredibly experienced panel - our first panel episode - to delve into the role that boards are playing, and must play, during a crisis.  Jay Lorsch Bio Jay Lorsch is the Louis E. Kirstein Professor of Human Relations at Harvard Business School. For the past 35 years he has specialized on the functioning and operations of corporate boards and is widely recognized as Recognized as a leading expert on the subject. His full bio here: https://www.hbs.edu/faculty/Pages/profile.aspx?facId=6502 Ellen Richstone Bio Ellen Richstone is a former Fortune 500 CFO and former CEO of a private company. She has been sitting on public company boards for over 15 years- on micro caps up to Fortune 500 in size.  She is currently sitting on the board of three public companies in : Technology; Industrial and Clean Tech. Her prior board experience includes companies in: Consumer Products, Bio Tech, Financial Services and Pharma. She also sits on the Board of NACD New England and is both an NACD Board Leadership Fellow and also received the first Distinguished Director Award from the Association of Corporate Directors. Rick Williams Bio Rick Williams is Managing Director of Williams Advisory Partners, LLC. He has a breadth of experience as an executive and board director for technology companies including medical technology, software, and financial services. Rick is a nationally published thought leader. His soon to be published book entitle “Create the Future – for your company and yourself” is a is a “how to field guide” for leaders who want to think creatively about where to take their organization. Williams Advisory Partners provides CEO and board advisory services for middle market technology companies. He was Chairman of the Board of Point Care Technologies and formerly was Chairman of a quasi-public bank/VC firm. Rick is on the board of an ocular drug delivery company and a leading company in gene therapy. Rick is past President of the Harvard Business School Association of Boston. He was a management consultant with the global consulting firm Arthur D. Little, Inc. He is a physics graduate of the University of Pennsylvania.   www.WilliamsAdvisoryPartners.com Quotes “Clearly, number one is the focus on employee health and employee safety. The takeaway I would give on this area is the need to balance empathy, safety and yet execute where execution is still critically needed.” “There is a demand for increased communications with all parties promptly, clearly with increased transparency, and this is all stakeholders - employees, customers, supply chain, and of course shareholders.” “How does all of this change our long-term strategy - or not? What pivots should we be making within our strategy for the long term?” “I think it's very, very important to have board leadership and to recognize that one of the board's primary duties is to make sure that leadership is in place and functioning effectively, not only with the board but with management.”   “I think  the “trick” of being a lead director or a chairman is to figure out how to build a relationship with management through the CEO and how to maintain cohesion within the board so that the two groups, that is management and the board, can work in a collaborative way for the good of the shareholder, for the good of the company.” Ideas/Comments We're going to rethink the reliance that companies have on their supply chains and critical resources: are they exposed to getting cut off in the kind of crisis that might happen over time?   In today's world, boards have to be ready to move in and deal with a crisis - whether the crisis is externally generated like this one is or whether it's a CEO who suddenly has a heart attack or decides he wants to quit, the board has to be very good at crisis management, and that really goes back to the leadership of the board. Succession planning is being done very differently than the way we traditionally have done it at the board level, given that you need to really dive down into many levels, which the board doesn't usually do.  The reason we must do that is because, as people get sick, you need to make sure that the critical areas are covered.  We’re learning lot about management at levels below the very top. Has there ever been a time when honest, authentic communication has been more important for a company? Messaging must be realism about the challenges facing the company, a message of brutal honesty as to what is going on and what the threats are - and at the same time, a message of hope.

George Davis has been a trusted advisor to multinational, public sector and private equity backed organizations seeking guidance on critical boardroom issues for many years.  We discuss with him what boards of directors need to do in a crisis, how this crisis is different from those in the past and what it may mean in the future for companies and the boards that serve them.   Thanks for listening! We love our listeners! Drop us a line or give us guest suggestions here.   Links https://davispartnersgroup.com/     Quotes   A good board member understands their role and how to be supportive from a governance perspective and to fight the inclination to become a part of the management team. 10:38   I try to counsel people to say, look - this is when the CEO needs more room to breathe, to be able to pivot, to react.  Don't choke him or her with a hundred questions because you're concerned about something you have not agreed to that the board thinks is a concern. 11:44   Some of the fundamentals that have always been true will, post crisis, be even more of a focus as it will be clear how important they were.  A truly diverse board, with many different perspectives and skillsets, is far more likely to be able to advise their CEO than a board that wasn't as well constructed. 17.19   I have a strong belief that after this crisis board appraisals and board succession planning will become a hot topic.  Just like CEO succession planning became a hot topic after the 2008 crisis.  In each case the question will be: did we have the right people around the table? 19:36   How do you layer the competencies and the matrix skills of the board to match where the future of the company is going to be? And with this huge consumer disintermediation that's going to happen post Covid-19.   Fight the urge to be false predictions of overconfidence. Be extremely clear in your communications, honesty right now is way more appreciated than anything.  So, if it's uncertain, say it's going to be uncertain. If it's going to be hard, tell them it's going to be hard. I think false positives destroy morale. 25.50     Ideas/Comments Crisis management protocols and feedback loops and risk mitigation are pertinent to today's crisis, but in the past, everybody felt that it was either an economic turn or there was a cycle and we’ll pop out of it. The magnitude of change in board rooms today is quite different.    If you've developed a strong foundation of trust and transparency with your CEO and their team then it's going to be a lot easier to say:    “Go do what you got to do. We just need a briefing. We need a one hour. We don't need a long board meeting, for example, because we know you're going to do the right thing. We know you're going to tell us what we need to know, and we know you're going to tell us the truth about it. We trust you.”   The boards that don't have that relationship are going to struggle ansd it's going to highlight this fundamental thing that we talk about all the time about having that relationship with the leader of the company.

Joe Baerlein, a nationally known strategic communication advisor for some of the country’s largest companies, trade associations, large non-for-profits, talks about what matters: always consider the long-term impact on the company’s brand and reputation - and never be afraid of providing truthful information or being proactive about providing it.   Thanks for listening! We love our listeners! Drop us a line or give us guest suggestions here.   Links https://baerleinpartners.com/ Message from Arne Sorensen, President and CEO of Marriott International https://twitter.com/MarriottIntl/status/1240639160148529160 Quotes If you are a CEO of an organization, you need to say we're doing everything we possibly can.  We're observing everything that the CDC, the various state departments of public health are telling you.  But we want you to know that we care about you. We are one community…this will eventually recede if we do everything. If the CEO of a particular company can't deliver that message and come across as authentic after two tries, then I would say that's not the messenger.  And you’d have to think about who might be the best messenger.  It could be the senior vice president of health and safety who may live this in his or her bones every single day. It could be the chair of the board - because people will smell in a second if you're not authentic.  13:08 I think this [Covid-19] changes everything. Why? Because it's unknown and I think smart CEOs are going to look at their board and say, what do you think? 7:46 [Information you provide to the press] must be 100% accurate because you do not get the proverbial second opportunity to make the first impression. 15.10   Ideas/Comments Companies have to have a communications vehicle that can speak to all of their publics, broadly defined, meaning who's important to them: their employees, their customers, their vendors, the community where they do business. And they have to be able to talk in real time. During the coronavirus crisis the separation of management and governance for boards will shift - it's all “hands on deck.”  Companies need the expertise of their C-suite, of their outside experts and their board now more than ever because they need to figure this out, together. When there is a crisis, the company's brand and its reputation is a responsibility of the board. When an unknown hits, you should at least have to have some operating principles on how you would react.  What are our highest risks? What could happen in this company from A to Z?  How would we manage those risks? What level of resources would we need?   What are the five worst things that could go wrong? What are the first five things you do?  It depends on what the business is, but it allows you to have a game plan, that you will alter depending on circumstances, when and if something bad happens.  But at least you have a game plan on how to respond when a crisis strikes.

John Hession, legal advisor, business advisor and angel investor, holds the world land record for number of board meetings attended.  He’s been working with emerging growth companies for over 35 years and he has seen it all.  He talks about the discipline, tough love and results required if investor backed companies are going to be successful.  It is a message that all boards would benefit from listening to and following.     Thanks for listening! We love our listeners! Drop us a line or give us guest suggestions here.   Links https://www.morse.law/attorneys/hession_john https://www.firstlightdx.com/   https://seraf-investor.com/compass/article/key-angel-investing-tax-issues-infographic   Quotes Well, if they're investor backed (companies), you know, there's an insistence on having a good strong board and that often means that simple phrase: tough love. 3:01 If you don't hire a good board and build a good board, you don't have great guidance for the company.  ….an investor-backed company, it needs results and oftentimes they're going to be a more difficult, they're going to be more challenging on management strategy. 4:00 Investor backed boards, are much more conscientious, much more deliberative, much more demanding on management (than most private company boards). “You need to solve this problem.” 8:33 I'm delivering this advice (to you as CEO of the company), Joe, and it has to come through everything.  Because I would like to see you succeed. And even if I have to give you tough love, it's not personal. It's because I want to see you succeed. 15.47 You can't have the CEO/founder be the chair.  If you're going to build an outside board, the chairperson, usually has to be someone who's got a lot of scalps on the belt, a lot of scars, a lot of experience, and been involved in boards.  16.29 Bill Moffitt, was probably was one of the best chairs I ever worked with. He had a way to drive the discussion, drive the agenda, to stop tangential discussions to stay focused on those action items that I talked about and demand performance and, on the action items.  He was the most masterful, yet at the same time, urbanely diplomatic chairman I've ever had the pleasure of working with.  He was just so good about assigning tasks, not only to the management team. But to other board members. 17.13  What if you don't find Mr. Perfect (as a Board chair)? How do you find the next level? How do you find a chair that you can make it work? Because the person you described, you just said he was one of the best chairs you've ever seen. Not everyone's going to deliver all the goods. What do you do if, you can't find that person or the chair is not that person? 18:49 1202B stock (capital gains stock) …. is the heart and soul and sinew of American capitalism. Why? The first $10 million of gain is zero capital gains tax. Now, who said the uncle Sam will, they'll give you a gift from town to town Joe. 23:09   Big Ideas  The disciplined approach used to identify board members in investor backed companies should apply to all private company boards as well.  It can be a board of five, seven, eleven - it doesn't matter.  Exactly what do we need?  What are the skills, expertise, attributes that we need in this person and let's go find him or her. It also applies to off-boarding unproductive board members.  It happens that there may be a more definitive incentive to do it in investor back companies. But what's the difference between those companies and a really productive, successful family company board where some of the board members really are just mailing it in?  Transparency and trust are fundamental to the management/board relationship, no matter what size company, what type of company.  And “brutal honesty” goes both ways.  So a founder has to be brutally honest with himself or herself.

Beth Boland is a force to be reckoned with.  Named one of Massachusetts “most influential lawyers,” Beth was first initiated into the world of shareholder defense working as a clerk for a district judge on the Mike Milken and Ivan Boesky cases. Now chair of Securities Enforcement & Litigation Practice at Foley & Lardner LLP, she also serves as President of the New England chapter of the National Association of Corporate Directors (NACD).  An expert on how boards operate, she champions the expansion of diversity on boards and has worked tirelessly to bring gender diversity to the boardroom. Thanks for listening! We love our listeners! Drop us a line or give us guest suggestions here Quotes “I think folks are really growing away from the idea of thinking of their board as a potential nuisance that they have to deal with, and [thinking of it] as one that is really a strategic asset.” [12:10] “I guarantee you that there are some rock star women and aspiring directors of color who will knock your socks off.” [19:05] “Take care of your people, who will take care of your product, which will take care of your shareholders.” [27:40] Big Ideas  The increasing interest of private companies to run their boards more similarly to their publicly held counterparts. [09:50] Board expansion and diversity. [14:53] Delaware courts’ decision to hold boards accountable for additional stakeholder interests. [22:38]   Links Beth Boland's Website Beth Boland on LinkedIn B Corps Business Roundtable NACD

Yvonne Schlaeppi is passionate about corporate strategy, and she believes it’s one of the most important things a board can do for their company. Spending a significant amount of time on board work, across many companies and several continents, Yvonne is highly experienced and enthusiastic in her work as a board member.  Having built a strong background working on boards in the U.S., UK and Europe, Yvonne shares her insight into the differences in boards across countries, how to navigate difficult decisions, and what we can learn from observing other boards in action.    Thanks for listening! We love our listeners! Drop us a line or give us guest suggestions here.   Big Ideas  Differences in structures and culture between U.S. and European boards. [08:27] What we can learn from observing other boards. [22:31]   Quotes “I do believe that being more present and involved and learning more about the company and what it’s going through makes for a more effective board.” [05:45] “Most boards would be well-served to spend more time on strategy, which is really where they can make their best contribution.”  [27:27] “The baseline for good board practice is to ensure, as best as you can as a board member, that your board undertakes decision-making in a deliberative, prudential and reasoned way.”  [30:03]

It’s easy to think of companies as big, faceless organizations, valued only for profit margins or stock potential. But it’s precisely when organizations are viewed only by the numbers, and not by the people working within them, that company culture suffers and things can go south. Rick Williams knows that the key to success is creating an atmosphere of openness and trust that makes for a great board of directors or advisors, and a healthy company overall. Rick spent many years as a consultant, founded his own real estate investment company, and returned to consulting once again. He has been an executive, board member and board chair - in addition to mentoring CEO’s. Now authoring his first book, Create the Future For Your Company and Yourself, Rick shares his most valuable insights into corporate culture and governance boards – namely that the best thing you can do for your company is to honor the people within it. Links Arthur D. Little Consulting Boston Consulting Group McKinsey & Company   Quotes “It’s a very human process…The truth is [companies] are collections of people working together.” [06:42] “You have to be somebody who’s an empathetic listener.” [11:40] “The leader has to set cultural expectations. So it has to be expectations for openness, trust, willingness to actually engage in difficult conversations. That’s where the culture part of it comes in.”  [20:42]   Big Ideas  The nexus of Williams’ new book and how it can benefit companies as a whole. [06:56] Creating an atmosphere of faith in transition of leadership. [11:30] How to develop a culture of trust and openness. [21:04]   Thanks for listening! We love our listeners! Drop us a line or give us guest suggestions here.