11. David Rosen on the importance of boards in private companies

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.

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PDA Boston


“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.


Joe: [00:00:00] Hello and welcome to On Boards: a Deep Look at Driving Business Success. Hi, I’m Joe Ayoub and I’m here with my co-host Raza Shaikh. On Boards is about boards of directors and advisors and all aspects of board governance. Twice a month, this is the place to learn about one of the most critically important aspects of any company or organization its board of directors or advisors.

Raza: [00:00:26] Joe and I speak with a wide range of guests and talk about what makes a board great and makes a board unsuccessful, what it takes to be a valuable member and how to make your board one of the most valuable assets for your company.

Joe: [00:00:42] Our guest today is David Rosen.

Raza: [00:00:45] David has been a CEO, a board director a C-suite executive and entrepreneur, and an investor in private companies. He is the founder of the Acrelic Group, which works with companies on revenue, growth, strategic [00:01:00] initiatives, organizational alignments, and managing risk. He is also a founder of the Boston Chapter of Private Directors Association.

 Joe: [00:01:11] Welcome David. It’s great to have you as a guest on On Boards

David: [00:01:15] Thank you. I’m really glad to be here. And, I really think you’re talking about a very important topic here, so whatever I can do to help, Joe and Raza, I’m glad to be here.

Joe: [00:01:26] Great. So, David, you’re one of the founders of the Boston Chapter of the Private Directors Association. Can you tell us a little bit about what the PDA does?

David: [00:01:37] Sure. The Private Director’s Association or PDA, it’s a national organization that was founded in 2014 in Chicago, and really got ramped up in 2015. Its focus is to support the owners, board directors, investors, and C -suite executives to improve their board caliber as [00:02:00] well as the governance practices for private companies.

Now  five years later, it has 900 members across 17 chapters in the US and it serves its member goals and aspirations in four areas: First,  in identifying and positioning for their first or additional board director, employment or other business opportunities. It helps them in expanding their network of peers and smart business and board directors along with supporting thought leaders, academics and practicing service providers.

The third goal that our members typically have is learning and educating themselves about private company governance, best practices and challenges as well as up-leveling their skillset in board governance.

And finally, the last goal that most of our members have is that they want to get involved in a pay it forward and have an effective community where they [00:03:00] can pursue opportunities where they can speak, moderate, provide thought leadership. They want to often test their, skills or perspectives before they put it into practice or they want to collaborate in actionable committees.

Joe: [00:03:15] That’s great. Was there anything prior to the PDA that was focused exclusively on private companies, as far as you know?

David: [00:03:26] You know, that’s a good question. I’ve been a member for a little more than two years now. And I don’t know what was here before that, but, I think we distinguish ourselves as the primary organization and member-driven nonprofit towards private company issues.

Joe: [00:03:45] I gotta say it is interesting to me, you know, most of my work, in fact, exclusivel my work is with the private sector, that it is so recent that the PDA came into existence, but I suppose that does underscore the growing importance of [00:04:00] private company boards.

David: [00:04:02] Right. You know, it’s interesting, Joe, when I joined the PDA a couple of years ago, I didn’t think about private company governance versus public company governance. When I’ve done M&A work, and I’ve developed strategies to get into new businesses and markets I’ve never segmented the market by private versus public.

But what was interesting is that I found all these factoids and when I see these factoids happening at a macroeconomic level, you know that things are happening or bubbling up and things are changing in the current industry.

One factoid is that there’s more money on the balance sheets now, as of 2019,  in private companies, then there is a public company.

Another factoid that kind of blew me away to give me a sense of the, of the momentous size of private companies and their impact to our GDP, was just the fact that there’s more money being spent in [00:05:00] private family offices, not necessarily the businesses, but just family offices that invest multigenerational wealth, than there is in the total worldwide hedge fund market.

Joe: [00:05:12] Right. You know, Raza and I have talked a little about this in the past and it really is pretty stunning to think about. I don’t think it’s commonly recognized the extent to which the money and the private business world has grown so much.

Raza: [00:05:28] The private capital formation into companies has been a big, tremendous driver of, activity and wealth not only in this country, but worldwide. We also talked about it earlier in our podcast episodes that the number of  publicly traded companies since the .com bubble is almost half for what it is today. And so that also tells you the state of the public markets. So both of those dynamics combined really does mean that a lot of [00:06:00] governance need is on the private company side.

Joe: [00:06:04] I’m curious, David, what brought you to the PDA to begin with? I think you joined the chapter in Chicago. You said?

David: [00:06:09] I was invited to a speaker panel program in Chicago by a neighbor and friend of mine and the program itself and the way the PDA conducted its program, and the happy hour beforehand of networking was strikingly interesting to me. So not only was it a great program of content around board governance and private companies, but the networking portion where there was good cocktails and food before the presentation, I remember meeting at least six people who had amazing experience across the spectrum of family businesses or founder-led businesses and had great stories and they were smart people and they were friendly. One thing that attracted me was the culture of this association.

I’ve been a member of [00:07:00] NACD. I’ve been a member of the Planning Forum. I’ve been a member of the ACG, Association for Corporate Growth and I was also as a CEO of my own companies. I’ve been a member of Vistage off and on based upon what my needs were but I really liked the culture that I found here and the fact that it really it’s a culture that I’m not sure was basically a Midwestern culture or whether it was the principles that were driven by the founders. What I now know is it was really a combination of both, where they really pay attention to the members and the networking value, and the fact that most of our members want to expand their network when they joined the PDA.

Joe: [00:07:40] Yeah, well, it’s interesting because a lot of organizations offer networking, but it’s variable to say the least, sometimes it works, sometimes it doesn’t sometimes it’s just almost useless. So it’s interesting that that is one of the things you think is a real strength of the PDA.

I guess the mid-Western roots could [00:08:00] explain it and maybe, I mean, is it possible that it just, that the people, because it’s a relatively new organization, more likely to have more in common to begin with? Is that possible? I mean, I’m just trying to figure out what makes a group better at networking, more valuable to those members for networking purposes.

David: [00:08:20] Well, I can give you an example. So one of the things that was apparent to me after my second or third meeting was that no one was standing alone for too long and if I’d see someone standing alone, I’d see another member walk over to that person, introduce themselves, start a conversation, and then immediately move them over to somebody else that they could introduce them to that was probably in line with what was on their mind at the time and that culture, I think is principled and proactively demonstrated, but also [00:09:00] it may come from the Midwest.

I’m very visual person and you know, when I think of public companies, when I’ve looked at them in the past, I see them in their lanes and there’s a lot of conformity across public companies and how they govered.

You’ve got your FINRA lane, you’ve got your SEC lane, you’ve got your Sarbanes Oxley lane and you’ve got your IRS lane and all those lanes force you to manage and govern consistently across company to company. So when I think of public companies, I think that they’re managed and as long as you get the ball down the middle, keep it out of the gutters you’re going to hit the pins at the end.

I never realized until I joined the PDA that while I was learning more at a macro level, and I’ve looked at thousands of companies that were mainly private for acquisition by my clients, that when I look at the governance styles of private companies and even the leadership styles [00:10:00] there’s very little conformity. With my visual mind, what I think of as a miniature putt golf course, and so your first hole, you’re starting out where your cup’s 180 degrees behind you, and you’ve got to go through a windmill and a river to get there.  No two companies are ever alike because they’re no two miniature putt golf courses are alike.

Joe: [00:10:21] I just want to ask you though in terms of the companies that are involved in the PDA, is it everything from startup to major family businesses? Is it private equity and venture businesses? Is it all of that or does it focus on one area of private?

David: [00:10:39] Our members on a national basis come from almost all sectors of private companies and that includes family offices or businesses owner ,founder led companies, PE/VC backed companies, even employee owned ESOP’s -we have a number of people who are [00:11:00] on boards or are fiduciaries for ESOPs.

I’ve been in Boston for nine months now. We started the PDA in January, February timeframe and what I’ve noticed is that there’s a much more heavily, PE/VC backed focus here than there is in Chicago. I think that makes sense with all the tech companies here, the biotech companies here, there’s a lot of patterns, but at the same time there’s construction companies in Boston, there’s construction companies in Chicago and there’s construction companies in Tampa and all the other locations of the PDA.

I think that we’re going to develop our own flavor around technology, but we’ve got chapters in San Francisco, in LA that have commonalities with us and so we’re starting to bring our chapters together for social so that we can meet other chapters as well.

Joe: [00:11:53] Does it encompass both fiduciary and advisory boards? Is it all kinds of governance or is it more in the, the [00:12:00] roles of directors of fiduciary boards?

David: [00:12:03] We actually encompass both. We’re focusing on experienced board members because we believe that that if you get experienced board members, you’ll attract the aspiring and emerging ones,  but we, we really are very member-centric. So we pay attention to the various demographics of our members and the various goals of our members so that we can pay attention to their needs.

So we have fiduciaries. We have a deal makers. We have a lot of service providers. I think somewhere about 25% of our membership are service providers, but interestingly enough, part of the Chicago culture again, is that everyone knows that when they’re at an event for the PDA, it’s really a pay it forward, share your intellectual property and knowledge in a solicitation-free zone. So there’s no real solicitation going on. It’s okay if you go outside [00:13:00] and say, “Hey, can we meet another time or something else?” but we really are looking for people who want to give back and pay it forward. 

Joe: [00:13:07] Can you talk a little bit about some of the programs that offers that you think are particularly effective?

David: [00:13:12] We offer some amazing programs for our members and again, it’s focused on the needs and goals of our members, including ourselves. One of our most attractive programs is our directors development program: that’s a hands on program where an experienced board member who has typically been involved in recruiting, more board members for their boards will be a mentor to a PDA member that gets assigned to them.

And what that mentor does is that they help them one review and improve their board CV.  If they have one, they’ll help them improve it. If they don’t have one, they’ll help them create their first board CV, which is really important if you want to get selected out of those two or 300 [00:14:00] candidates to get down to the top 10 that are going to be interviewed, you need to have a board resume that speaks to your board experience or your potential for a board experience.

The second thing they do is they walk the mentee through a 70 plus page compendium document that’s been created from the founding of the PDA back in 2015. It’s a document that spans all the challenges and governance practices across the various forms of private company models.  Family business issues, where you have a fiduciary board, you’ve got a family board and then you’ve got somebody wearing their matriarch cap on or wearing their grandchild hat on, and how do you distinguish what they’re asking and how do you keep things in order, to, you know, the various forms of ESOP models and what the issues are CUT . If an ESOP gets an offer for a dollar above their current market share [00:15:00] price, what do they have to do? Do they have to sell an ESOP company? Those are real tough issues that have to be resolved.

I didn’t finish your other question, which was other services that we offer to them as a part of what we talked to them about. One of them is we offer a free board listing service and that board listing service goes to board directors or board chairs or owners of companies. And in fact, their recruiters actually use our pre-board listing service, where they recognize that they can reach out to the 900 plus PDA membership and they can find a real fertile ground for their candidates to be found. In 2019, we had 52, assignments put through the PDA membership.

Joe: [00:15:47] The resource you have for  listing people available for board positions is particularly interesting to me.  I help companies build boards, and the  the more [00:16:00] diverse areas I can go to find those board members is really, really attractive. I think that’s a terrific resource, particularly if it, if it actually works and it sounds like it really does. I mean, I know there are others that I’ve counted that don’t they say they’re doing it, but I don’t think it’s really working that well, this sounds like an excellent function really

David: [00:16:19] Yeah. the real distinction is that my understanding is that other associations and organizations actually charge fees for a service like this.  So  I can’t speak to those other programs, but by having a free board listing service with very qualified people, it’s a big connection.

The other thing that we offer our members is that we have, very early on, the PDA has been putting on about three zoom presentations a week since the pandemic started. And they.

Joe: [00:16:50] Thats a lot  zoom!

David: [00:16:53] It really is, and I believe that they stepped up to the plate a while other associations were [00:17:00] clueless on how to continue programming during a global pandemic. You see all these conference companies and in-person conference event companies that are still maybe only put on one or two events.

Ours set out with a goal of putting on two a week and have consistently put on three or more a week and all about private company governance issues and dealing with, avoiding insolvency during a pandemic, or how does the board govern itself during pandemics to, dealing with, shifting roles of boards in a crisis and how do you support your C-suite team without violating some of the typical tenants of board governance, roles and responsibilities. I’ve been very happy with how PDA stepped up to the plate in that area.

Joe: [00:17:50] I think you make a compelling case. I can see why you’d be a very effective leader in the PDA because it really does sound good so let me just ask you [00:18:00] this next one to three years what are the goals at least, for the local chapter? What would you like to accomplish?

David: [00:18:08] I’m a growth person. I’ve been very happy with the growth I’ve received from my own companies and my client companies and we looked at the marketplace , we think that our targets are middle market companies that are considering their first boards or have already placed a board and those companies are likely to be in the 10 to half a billion dollar size range.  What we found is that there’s 15,800 companies just in Massachusetts alone that are between 10 million and a billion. And so, there are only about 13,000 companies that are between 10 million and a half a billion.

So either way you slice that market segment, that’s just for Massachusetts. We believe that we should easily be able to grow [00:19:00] into a thousand members or 2000 members in the new England region as a whole.

We’re also starting to figure out, should we call ourselves Boston or do we call ourselves Boston and New England? Or do we just go by New England? I want people to be clear that we are centered in Boston, not in Springfield or not in, you know, where the Philharmonic plays in the summer, but that were centered in Boston.

Joe: [00:19:27] You got to figure this out. You’re going to live here. Tanglewood. You got to know Tanglewood

David: [00:19:32] Okay. Tanglewood. Right, right. only been back.

Joe: [00:19:37] Chicago is behind you now.

David: [00:19:38] Yeah, no, I got that. I’m very happy to be here, but the idea is that there’s a significant population here and because of the fact that there’s very little commonality, there’s a great need to better understand what could become common, what could be best practices around board governance in private companies.

[00:20:00] And so, I think there’s a great need and I we’re in a good position to fill that need.

Joe: [00:20:05] Perfect.

Raza: [00:20:06] Well, David, thank you so much for giving us a very wonderful introduction to the Boston chapter of, PDA.

I want to shift and talk a little bit about your work with the Acrelic Group.

David: [00:20:20] Thanks for asking Raza. The Acrelic group is really a holding company that itself is a strategic advisory of experienced business, operational and strategy executives and we focus on delivering high impact efforts for boards, owners, and C-suite executives of, middle market and larger companies or divisions of large companies.

We focus on four things, identifying, defining, and approaching new profitable sources of revenue. We focus around creating rapid operational improvements  [00:21:00] like the lean manufacturing levels that have occurred, we actually believe in lean strategies and lean operational tactics to make things done faster and to be more competitive on a global basis which many of our companies are.

We also believe that you need to couple your strategies and actions to the organization. In some cases you might have a culture that needs change and needs modification and in my experience of changing five, six, 10,000 person organizations, it’s not always getting them to do new, interesting things,  but sometimes it’s the difficulty of getting them to stop doing the things that they’ve always been doing and the results they’ve been getting and stopped doing that, which might be counter strategic or counter-cultural to the new business heading that they’re leaning towards. Making sure that there’s organizational alignment with the strategy and direction, [00:22:00] is very important.

And then finally, we also focus around  managing risk and longevity to the business, as well as any ESG or sustainability issues that may be important to the stakeholders of a company as well.

Raza: [00:22:18] David, what culture have you seen, for private boards that still makes them distinct?

David: [00:22:23] I would classify private boards in a couple of ways. it often spans the gamut of I have a board because they have great brand recognition in the industry and often I’ve talked to the owner of that company and I said, Oh, well, you know, you’ve got Wozniak on your board, when was the last time you talked to him? Oh, I haven’t talked to him for a year. I said, but my sense is he doesn’t invest in things that he’s not interested in and why aren’t you engaging him? He goes, well, I don’t [00:23:00] need them right now and so, but he considers him a board member. He’s an investor in the business and I look at that and I think, Oh my God, what waste of talent and what waste of, of connections that, that Wazniak could provide. I never understand how people have these boards and they just put up these brand names. It looks like eye candy on their website and they never speak to them and talk to them.

Raza: [00:23:25] David, this is what this whole podcast is about: how to turn your board into the most effective tool for you even though the CEO serves at the pleasure of the board, but really it’s the job of  management and the company to use their board as a resource and to really leverage it out.

Joe: [00:23:45] And I want to say, I think boards could be a significant driver of enterprise value. I mean, that’s what you just said.  I think people miss that. Boards are really when well composed, when well-built [00:24:00] can be a huge help in creating and growing enterprise value for a company.

David: [00:24:06] Yeah. Thank you.

Raza: [00:24:08] David, as you’ve invested in these companies, have you become part of their board and  is that also how you’ve seen, the investor adding value to the company?

David: [00:24:18] I have taken board seats in a couple of companies that I’ve invested in and the more I’ve learned about private companies and how they operate and the more I’ve learned and looked at it from a macro view, which I’ve been doing over the past couple of years. I won’t start another company without creating a board almost from the beginning, especially if I know that I’m going to take on outside investors.

One of the ideal values is, and the reason why I’ve joined the boards of a couple of my companies, that I know that when they go to take on outside capital, that that outside capital comes with a request for one or two board [00:25:00] seats.  So, if you start with two founders and you have an investor coming in with two board seats, that’s a board of four, therefore you really need a, an odd number board. You would typically say, okay, let’s bring on an independent board director.

Well, if you wait for those VCs or PE firms, they have plenty of people who they can bring in as a quote, independent board director, unquote and suggest that this person come on because they’ve got great experience and yada yada and the founders will typically, agree to that.

The reality  is that in many times, those independent board directors, quote, unquote, are typically investors in the funds that are investing in the new company and therefore have a significant concern about  what the issues are around that VC firm that might trump those of the business that they’re [00:26:00] investing in. The second thing is they might have a series of interim assignments that have been given to them by their PE or VC firm to go work in their portfolio companies and they might be getting significant six figure salaries from those either their portfolio of companies directly or the PE firm themselves.

Are they truly independent directors or are they really an extension of the investor? And so if you start with three board members, two founders and an independent, you’re  going to be in a much stronger negotiating position when you’re taking on outside capital to ensure that you have one, an odd number board too, that you truly have independent directors that you’ve selected, that might be unbiased and, and maybe more biased towards the longevity of your business.

Raza: [00:26:53] David, are you saying that, as you invest in these companies, not only you joined the board, but you also bring with you an [00:27:00] independent member that the founders can agree on?

David: [00:27:04] I advise them from the beginning now that they should think about board governance after they’ve learned cashflow and after they’ve learned about the balance sheets and after they learn about what their cost of goods sold is then I think it’s time to start introducing issues about governance.

Raza: [00:27:22] David, in this  world of private boards what challenges issues that you have, observed related to boards, some war stories or some other areas where it has been contentional, maybe because it is private?

David: [00:27:39] What I’ve seen that distinguishes strong boards in the boards that I’ve been involved with and I, I was lucky to be on an executive board of the largest ESOP in the world at the time a company called SAIC and  I got to see how they operate and function, and what I always thought was important for effectiveness was the strong [00:28:00] preparedness that you have for getting ready for a board meeting.

You’re not reading through the stuff real time. You should have read it and you should be able to talk about the issues so that you can come to action or decision in that meeting when you’re together with your peers on the board. A good friend of mine was on the board of Fidelity and he used to talk about, he’d get five binders of six inch sent to his home and it would take them about two weeks to prepare of full time time before he’d go to the board meetings and this was an amazingly smart guy. He was the head of DARPA at one point and just brilliant man and for him he takes half the time that anybody else takes to prepare for something cause he’s that smart. But I think open dialogue and discourse is really critical that  you not only dialogue about things but you have discourse and debate about them so that you’re not biased towards any one issue and making [00:29:00] decisions quickly for brevity sake, that you’re actually looking at all the issues in an unbiased way and making decisions based upon what, what makes the most sense to the ongoing strategy and direction and policies of the business?

Knowing when to ask the right questions and at the right time is a critical component of effectiveness of a board. The board paradigm of having your nose in and your hands out is really key and I think that’s the driver of knowing when to ask the right questions. You’re there to be inquisitive, but you’re not there to operate the business and you’re not there to take action.

It’s the CEO and the leadership team that have to take action, but you have to have the open dialogue too and very clear reporting that you’re seeing especially times like during COVID where you need to look at a lot of different data and you don’t know what the validity or the assumptions are [00:30:00] and you need to really get down to the bottom of what you’re seeing to know if there’s faint signals in there that you could take action on and are being ignored.

The other thing  is effective matching of the company’s needs in appropriate board director skills. There’s a lot of conversation I haven’t experienced as much because I focus a lot on high tech companies, but there’s a lot of conversation about people are over boarded. They have too many boards, or they’ve been on a board for 25 years or they’re really adding value and I think it really behooves a board to understand the skill sets that are required for the current and long-term future of the business, which may be different from what it was five years ago.

Joe: [00:30:42] Yeah, I think there’s no question that the crisis that has been created by this pandemic has caused a lot of companies to look at their board composition and really think about it.  It’s easy to be a board member or to be serve on a board when everything’s going great [00:31:00] but it’s true for both senior management and for the board that when there’s a crisis, you really get it.

You really understand where they the right. People in the board, wasn’t the right senior management, the CEO, whatever it may be. So I agree with you. I think there’s likely to be a fair amount of disruption, more disruption than normal in boards in the next year or two years, because companies that need help, and maybe didn’t have the right help during this crisis.

There are more crises to come. This isn’t the last one, but this might be a chance for boards to do what they should have been doing all along, which is to look at their composition and always be aware of what the skill sets are needed to drive it to the future.

David, it’s been great to have you with us today. Thanks for joining us as our guest on Onboards.

David: [00:31:50] Thank you. I really enjoyed being here and, I’m looking forward to listening and seeing more programs from you guys.

Joe: [00:31:56] Excellent! That we like to hear !

And thank you all for listening to [00:32:00] On Boards with our guest, David Rosen.

Please stay safe. Take care of yourselves, your families and your communities as best you can. Take care Raza.

Raza: [00:32:11] You too, Joe.

Joe: [00:32:12] Thanks.