39 minutes | Mar 15th 2020

5. John Hession on investor-backed company boards: discipline, tough love and results.

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.
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