Joe Hurd is a public and non-profit board director and early-stage investor. As an operating executive, Joe is the Operating Partner at SOSV, LLC, a $1B early-stage venture fund, where he leads strategy and business development efforts for the fund’s life sciences, deep tech hardware and mobile portfolio companies. In this episode, we talk about how technology is impacting every business and differences between US and UK boards.
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Joe Hurd Bio:
Joe Hurd is a public and non-profit board director and early-stage investor. Currently, he is a Non-Executive Director of Trustpilot Group plc (LSE: TRST; Audit, Nominations, Trust & Transparency), Hays plc (LSE: HAS; Audit, Nominations, Remuneration) and an Independent Director of SilverBox Engaged Merger Corp I (NASDAQ: SBEAU; Audit, Compensation). He spent three years as a Non-Executive Director of London-based GoCo Group plc (Remuneration, Nominations) until its successful acquisition in March 2021.
As an operating executive, Joe is the Operating Partner at SOSV, LLC, a $1B early-stage venture fund, where he leads strategy and business development efforts for the fund’s life sciences, deep tech hardware and mobile portfolio companies. He is also a Venture Partner for Good Growth Capital, a female-led venture fund; and advises innovative Silicon Valley-based pre-seed and seed stage startups on go-to-market strategy, revenue models, and international expansion through The Katama Group, LLC, with a particular emphasis on diverse founders.
Joe built his business career leading strategic business development, strategy and sales teams globally for Facebook, Gannett, and AOL/TimeWarner. During President Obama’s first term (2009-2012), he served as a senior political appointee in the U.S. Commerce Department, where he helped implement the National Export Initiative, a successful effort to double U.S. exports over five years. Active in his community, He is on the Board of Trustees for Menlo College (Development Committee), and the Computer History Museum (Audit Committee); and the American Swiss Foundation Board of Directors. Currently, he is a life member of the Council on Foreign Relations (Membership Committee, Co-Chair of the Diversity Subcommittee), the Trilateral Commission, and the National Association of Corporate Directors.
Joe graduated from Harvard Law School (J.D.), Columbia University (Master of International Affairs), and Harvard College (A.B. cum laude, East Asian Studies / Government). He is a member of the New York Bar and a Solicitor of the Senior Courts of England and Wales. Married with one daughter (16), two sons (13 & 6) and one Cavachon (1), Joe enjoys running, traveling (50 states; 62 countries), and reading historical biographies.
SOSV is a $1B multi-stage venture capital investor. The firm runs multiple world-class vertical startup development programs, and provides seed, venture and growth stage follow-on investment into superstar companies. Its unique full-stack model has delivered a net IRR over the last 20 years that puts SOSV in the top 10% of all venture funds worldwide. SOSV has funded over 1000 startups to date, and currently funds over 150 startups per year through five startup programs: HAX (hardware and connected devices), IndieBio (life sciences), Chinaccelerator and MOX (cross-border internet and mobile in Asia), and dlab (blockchain, data and decentralization). In addition, SOSV provides the seed capital to get founders moving, a global staff of hands-on engineers, designers, accountants, and scientists to speed up product development, over 1,000 global mentors with deep market and technical expertise, and an unparalleled network of fully outfitted laboratory and maker spaces to help startups go further, faster.
My role as an operating partner of SOSV is to work on an ongoing basis with six or eight of our top portfolio CEOs. I tend to focus building on my 20 years of experience in digital media, on strategy, corporate development, business development, sales, and helping them penetrate the market. We want entrepreneurs that will make the world better.
“Deep tech” is a phrase that’s come into vogue over the last three or four years, and the focus is on technology companies that combine three things. The first is, for our purposes, hardware manufacturing, something tangible, something that you make, something that requires engineering and engineering skills, and then there is software. And, most importantly, mission and purpose -these are companies that are solving problems where it may not be clear for another 3, 5, 7, 10 years, whether you’re actually on the right path.
UK PUBLIC COMPANY BOARD vs US
When you’re a director of a UK public company, you need to think about all of the stakeholders of that company, not just the investors, but the employees, the suppliers, society as a whole. I had to really take a step back and put my legal hat on for a minute and really understand what the fiduciary duties of a director are and work the interests of all the stakeholders into my decision process when I was in boardroom conversations.
The first and the biggest difference between the US and UK is when you look at how governance is approached in the United States, it tends to be, as I alluded to earlier, shareholder first. You have fiduciary duty as a director to the corporation, the shareholders, sometimes the creditors.
In the UK, it’s much broader. It’s more of a stakeholder-first approach where you’re looking at, not just the investors in the company, the shareholders, but also the employees, the suppliers, the customers and society as a whole. The UK corporate governance code actually enshrines this in law and regulation where it is a very broad principles-based approach to governance as opposed to a very specific rules-based approach that you get in the United States.
It’s hard to say whether the UK is better or not better, but it seems to me if the law has codified the need to take into account all stakeholders. If the law has mandated certain kinds of diversity, gender and/or racial, I would say that is better. I don’t think it is just reflecting what your cultural background is. It would seem to me that that is better because it forces those companies to move in a direction that is likely to make them stronger, is likely to make them more responsive to their stakeholders – and that is a very good thing from a capital point of view at the end of the day
Employees Voice in UK
In the UK, they have said that directors and boards of directors have an affirmative obligation to reach out to the employees and bring the employees’ voice into the boardroom, whether they nominate a director to be the workforce net designate or even bring employees on the board in some cases. The code says that either one of your directors needs to be explicitly designated as the director that interfaces with the workforce or, if you want to take another model, you can bring employees onto the board and bring the employee voice in in that way.
Compensation for UK companies
Part of the corporate governance code required that directors of UK companies are paid a salary. There is no equity component to the compensation and that is in keeping with the independent maximum, that you’re not running the company for the benefit of the shareholders only. There’s nothing stopping me as a director from purchasing shares, provided that you adhere to the relevant purchase windows. So, that’s a pretty big difference between US and UK boards.
When I say: “every company’s a technology company,” what I mean is that over the last 20 years technology has become so pervasive as to how companies operate that even if you’re involved in a non-tech sector, you still need to integrate, rely on and be mindful of companies that have more of a tech-focused approach than your company.
Whether it’s brick or mortar retail, travel or leisure, or oil and gas, companies are now realizing that technology is integral to all parts of their business: how they measure the business, how they measure productivity, how their competitors are able to scale and acquire customers, how they are using HR to bring benefits to the companies – technology is a factor in virtually every facet of their business.
Joe Ayoub: [00:00:00] Hello and welcome to On Boards, a deep dive at what drives business success. Hi, I’m Joe Ayoub, and I’m here with my cohost, Raza Shaikh. On Boards is about boards of directors and advisors and all aspects of 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, as well as important issues that are facing boards, company leadership and stakeholders.
Raza Shaikh: Joe and I speak with a wide range of guests and talk about what makes a board successful or unsuccessful, what it takes to be an effective board member, what challenges boards are facing and how they’re assessing those challenges, and how to make your board one of the most valuable assets of your organization.
Joe Ayoub: Our guest today is Joe Hurd. Joe is the operating partner for [00:01:00] SOSV, a one-billion plus dollar global venture fund that provides seed venture and growth stage funding to startup companies in the technology sector.
Raza Shaikh: Joe is a long-time Silicon Valley investor in technology and has focused on digital transformation across content distribution, and brand advertising for two public companies.
Joe Ayoub: Joe is also a seasoned board member, including several public company boards in the UK, and very important: although he was born in the shadow of Yankee Stadium, he is a lifelong Red Sox fan. Joe, welcome. It’s great to have you join us today on On Boards.
Joe Hurd: It’s a pleasure to be here, Joe and Raza. Thank you for having me.
Joe Ayoub: Let’s start off with what you’re doing currently, because it has a real bearing on some of the things we want to talk about; your role as operating partner at SOSV. Talk a little bit about that and what you’re doing for them, and then we’ll take it [00:02:00] from there.
Joe Hurd: Sure, by all means. So as you noted, SOSV is a billion dollar early stage venture fund. We focus primarily in two main areas; life sciences and healthcare, and hardware and engineering, otherwise known as deep tech, and we tend to be the first institutional money in to investors that are starting companies to solve issues of human and planetary health. We want entrepreneurs that will make the world better.
We have over 1,100 companies in the portfolio. We’ve been around for 14 years with operations in China, the United States and Europe. My role as an operating partner is to work on an ongoing basis with six or eight of our top portfolio CEOs, and I tend to focus building on my 20 years of experience in digital media, on strategy, corporate development, business development, sales, and helping them penetrate the market.
Because these are early stage companies, oftentimes you’ll have CEOs that have good product market fit with [00:03:00] the company, and they’re now just trying to create and generate a pipeline of major corporates that want to partner with them. So, the firm, Shawna Sullivan and the rest of the general partners have brought me on board to really spend time in depth with our CEOs, and if I can help them generate a five hundred thousand dollar or a million dollar portfolio line of business or pipeline of business, we can have a materially-outsized impact in that company’s development, so it’s a pretty fascinating role.
Joe Ayoub: Sounds great. Could you just talk a minute about why it’s called deep tech? I know some of the listeners will know, but it will have a bearing on some of what we might want to talk about here.
Joe Hurd: So, deep tech is a phrase that’s come into vogue over the last three or four years, and the focus is on technology companies that really combine three things. The first is, for our purposes, hardware manufacturing, something tangible, something that you make, something that requires engineering and engineering skills along with software. And [00:04:00] most importantly, mission and purpose, these are companies that are solving problems that may not be clear for another 3, 5, 7, 10 years, whether you’re actually on the right path, but you’re starting to work on them now.
The classic deep tech example is the hyperloop by Elon Musk where he’s creating a tube that would go either over or under the ground to transport people at very fast speeds unlike anything that exists on Earth today, or all the space exploration projects that are going on right now. These are big gnarly problems that have an outsized impact on humanity that require hardware and software, but have mission and purpose at their core.
Joe Ayoub: So, one of the things we talked about is your first board seat, which came about in a somewhat unusual way. Could you tell us about how that took place?
Joe Hurd: Yeah, yeah, by all means. So, I had the good fortune to start my legal career. I trained as a lawyer and went to law school in Boston, but started my legal career in London, of all [00:05:00]places, with the UK global law firm called Linklaters, and I went there as one of the earliest American hires to help them build their US-based corporate securities practice.
I spent five years in London. I had the chance to really get to know the market and know the law. I qualified as a solicitor in the UK. My friends who know me know that London and all things England is an important part of my personal story.
So fast forward, 15, 20 years later, I’m in Silicon Valley and got a call out of the blue from a headhunting firm in the UK. There’s a company called GoCompare, which had just gone public, and they were looking to add some directors that had sort of Silicon Valley of technology experience to the board.
GoCompare was an insurance price comparison website that had a deep technology plate, classic two-sided marketplace business and they wanted people on the board that had digital tech transformation experience to help other management in its transition from private to public company. [00:06:00]
So, I was never planning on being a director. I never thought about being a director. I was 46, 47 years old at the time, but because of my London background and my current Silicon Valley expertise, I was on this recruiter’s radar screen, and I must say that Peter Wood and the team at GoCompare opened up an entirely new world to me, fascinating experience.
Joe Ayoub: Well, it’s interesting because you have, of course, very important, a Boston background, but you’ve been in Silicon valley for a long time, you spend time in London, you’ve been investing in tech for years, and so you’re able to bring all of that, including, in my view, the kind of investor mentality which is not typical in a public company.
So, it would seem to me that that would make you very valuable. How did that aspect of your background play as you sat on your first public company board?
Joe Hurd: It’s really a good question. So, the important thing that I had to learn moving from the [00:07:00] tech investor world to the public company director world in the UK, I know this is going to touch on a few areas that we might get into later in the conversation, when you’re a director of a UK public company, you need to think about all of the stakeholders of that company, not just the investors, but the employees, the suppliers, society as a whole. This isn’t trying to be corporate governance code, a duty on the directors to consider the company in toto.
That’s a lot different than being an investor where you are maximizing decisions for an investor return as a shareholder. I had to really take a step back and put my legal hat on for a minute and go back and really understand what the fiduciary duties of a director are and work the interests of all the stakeholders into my decision process when I was in boardroom conversations. It’s incredibly important.
Joe Ayoub: Yeah, different perspective.
Your background in technology though must have been extremely valuable to them. And one of the things you said when [00:08:00] we talked not long ago was every company is a technology company, which really did strike me as being right on the money. Could you talk about that a little bit?
Joe Hurd: When I say every company’s a technology company, what I mean is over the last 20 years or so, technology has become so pervasive in how companies operate that even if you’re involved in a non-tech sector, you still, as you go about your everyday business, need to integrate and rely on and be aware of and be mindful of companies that have more of a tech-focused approach can very quickly disintermediate.
So, whether you’re a recruitment company where it used to be the recruiters would search your company directories and go to conferences to look for potential candidates to recruit and place, now all of that is online. There are platforms like LinkedIn that can dramatically accelerate your ability to do business.
If you’re not familiar [00:09:00] with, A, how to leverage those platforms through partnerships where you leverage those technology platforms, big partnerships or B, if you’re not keeping an eye on other upstart companies that have technology more at the fore of what they’re doing, you can very quickly find yourself on the back foot and potentially disintermediated.
So, a lot of the interesting conversations I have are with directors and operators at companies that historically have been, whether it’s brick or mortar retail, or travel or leisure, or oil and gas that are now quickly realizing technologies, integrating all parts of their business; how they measure the business, how they measure productivity, how their competitors are able to scale and acquire customers, and how they are using HR to bring benefits to the companies, technology is an every individual facet of these businesses.
Raza Shaikh: Joe, well said, and McDonald’s is a software company and so is FedEx in some ways and technology is [00:10:00] impacting everything.
Joe Hurd: Yeah, that’s right. McDonald’s is a data company, what and how much, what are the trends. By all means, that’s exactly right.
Joe Ayoub: Do you think it’s essential that boards have people with tech backgrounds as board members, people that can actually identify the kind of risk that falling behind in technology might raise?
Joe Hurd: I guess this is going to come across as quite self-serving, but yes I do. We all know that diverse boards and diverse groups make better decisions, and when you take a look at a board and you look at sort of the skills matrix on a board, I think every company should have someone that has digital transformation or technology transformation or information security/cybersecurity, some sort of tech background on the board, much like you need people that have CEO leadership experience or financial experience or HR experience or sales experience, what have you.
I think it’s an incredibly valuable skillset to have in the boardroom, but you have to walk a real fine line, because I think as with any director that [00:11:00] has a particularly relevant skillset, I think it’s just good corporate governance for all of the directors to lean in and be part of the conversation and not overly defer to the quote unquote, “digital director” to carry the conversation. I don’t think that’s good for the director or good for the company
Joe Ayoub: No, I think that’s true, but I think what you said earlier, when you’re creating the skills matrix for a board, if you looked at it 15 years ago, you’d see three or four really important items; CEO, maybe C-suite, maybe CFO, couple of other things, but it was pretty limited. I think in the new world, it is much broader, and boards that don’t have the kind of, we say, diversity of perspective, and that covers a lot of ground, but tech is definitely part of that.
Obviously, it includes diversity of various kinds – gender diversity, it includes racial diversity, but it definitely includes areas that companies might not have traditionally [00:12:00] considered as part of their board, but you guys were just talking about McDonald’s you would not think of necessarily as a quote, “tech company,” and yet technology is driving so much of what they do that without that on their board, they would really be missing something that is undoubtedly critical to their future.
Joe Hurd: I couldn’t agree with you more. And I think what bringing technology into the boardroom also does is because many of the employees that have these skillsets may not necessarily be C-level employees. They may be younger, they may be more geographically, gender, racially diverse.
And again, going back to my earlier point, getting all of those different perspectives in the boardroom I think is an incredibly important thing in this day and age when technology and the competitive landscape is changing so quickly. For example, who would have thought 18 to 24 months ago that supply chain would have risen to the fore as being such an important issue for boards to consider with the onset of the pandemic and coronavirus, or [00:13:00] procurement in the wake of everything we’re seeing with the pandemic and Black Lives Matter and the focus on corporate diversity. All of those backgrounds are relevant to the boardroom now, I think.
Joe Ayoub: Yeah. The last two years raised a lot of issues about what boards really need in order to update the skill matrix of their board of directors. No question about that.
Raza Shaikh: Joe, as a Silicon Valley guy, you ended up on a board for a UK company. So, you have a really good perspective on both sides of the pond, if you will. What are some of the differences of governance and perspective from both sides of that? Maybe we can start with that and dive a little bit more into it.
Joe Hurd: Sure. I’d be happy to. There are some pretty important nuances and differences in perspective when you are a director of a UK public company as opposed to on a US public company board. And I think the [00:14:00] first and the biggest is when you look at how governance is approached in the United States, it tends to be, as I alluded to earlier, shareholder first. You have fiduciary duty as a director to the corporation, the shareholders, sometimes the creditors.
In the UK, it’s much broader. It’s more of a stakeholder-first approach where you’re looking at, not just the investors in the company, the shareholders, but also the employees, the suppliers, the customers and society as a whole. The UK corporate governance code, actually enshrines this in law and regulation where it is a very broad principles-based approach to governance as opposed to a very specific rules-based approach that you get in the United States.
Raza Shaikh: That is different. Here in the United States with the Business Roundtable’s statement of corporate purpose and many other things, the needle is trying to move a little in that direction.
Joe Hurd: That is true.
Raza Shaikh: But legally, it still is the shareholder primacy that’s required [00:15:00] from the board.
Joe Ayoub: I was just going to ask, how far advanced do you think governance in the UK is on company boards in terms of recognizing the importance of all stakeholders versus the United States? So, there’s a stake in the ground, it started to move, but are we a decade behind? I mean, I don’t know if you can put it in terms of years, but how far advanced is the UK, since it’s incorporated in their statute or in their laws, I should say.
Joe Hurd: I think you hit the nail on the head. The linchpin is the current state of the law, both as passed by Congress and as derived through the courts. It’d be very difficult to put a timeframe on it, but what I will say is a lot of the advances that you’ve seen, Raza, you mentioned Larry Fink and the BlackRock letter and all the conversations around ESG and all the debate that we’re having now around bringing employees’ voices into the boardroom. That’s already been codified in statute in the UK.
How long would it take for that to [00:16:00] happen in the United States? Oh, that that’s a couple of years, at least, and I wouldn’t necessarily say it’s better or worse because you have to have laws that reflect each country’s individual culture and approach to doing business, but what is interesting to see is serving on a UK corporate board where we are now having conversations around what are the financial metrics going to be to apply across all companies to account for climate change and the impact of climate change, the TCFD disclosure regime?
I don’t know if we’re there in the US on that level. In the UK, they have already said that directors and boards of directors have an affirmative obligation to reach out to the employees and bring the employees’ voice into the boardroom, whether they nominate a director to be the workforce net designate or even bring employees on the board in some, cases. I don’t know if we’re having those specific conversations in the US at that level of law and statute.
Raza Shaikh: Some ways to go. What would be other differences that [00:17:00] you can highlight?
Joe Hurd: There has been in the UK for the last two-plus years an important conversation around racial diversity on boards. It’s called the Parker Review. Racial diversity in the UK is slightly different than how racial diversity is defined in the US just owing to the historical patterns of immigration in the UK versus the US.
But the Parker Review has gone through the FTSE 100 companies, and then even below to the FTSE 250, and they’ve sent the precept that by the end of 2021, there should be at least one ethically-diverse member on UK company boards, and that’s become a maxim and those companies that do not have an ethically-diverse member will have to explain or comply and factor that in. And that’s completely in keeping with the leadership on gender diversity five, seven years ago that the UK and other European boards took, so I think that’s one interesting development.
The US is also having conversations about diversity in boards, and whether it’s Goldman [00:18:00]Sachs or NASDAQ, or again, Larry Fink of BlackRock pushing US companies to be more diverse, but having that commitment across publicly-listed companies in the UK with a time period and then explain why it’s not happening, that I think is a pretty interesting development, pretty forward-thinking
Joe Ayoub: It’s hard to say better or not better. You said that earlier, but I’m going to put this out there that it seems to me if the law has codified the need to take into account all stakeholders. If the law has mandated certain kinds of diversity, gender and/or racial, I would say that is better. I don’t think it is just reflecting what your cultural background is. It would seem to me that that is better because it makes those companies, it forces those companies to move in a direction that is likely to make them stronger, is likely to make them more responsive to their stakeholders, and that is actually a [00:19:00]good thing from a capital point of view at the end of the day.
Am I going too far with that do you think?
Joe Hurd: No, listen, I think, no one will think you’re going too far. I think it is certainly a valid thing to debate and discuss. Another way of looking at it is the world has changed since a hundred years ago when a lot of these laws were written. Society has changed, the nature of who is in leadership and who is able to be influential in society has changed, and one would only expect that those societal changes would have a knock-on effect.
At some point, the law will catch up to society. I think we’re in the midst of all of those conversations now. Diversity is just one proxy, but there are others as well, whether it’s gender or sexual orientation, or even socioeconomic diversity, people are having those conversations, so what it means to bring people with varied backgrounds and skillsets into the boardroom. Those are good, healthy conversations to have. It doesn’t mean that any one approach is right or wrong, but let’s debate it and thrash it out and [00:20:00] eventually we’ll get to the right place as a society. That’s the hope.
Raza Shaikh: What about on the compensation side, especially for independent directors?
Joe Hurd: Yeah. It is really interesting again for UK companies, and again, this is part of the corporate governance code, directors of UK companies are paid a salary. You’re paid and compensated in cash. There is no equity component to the compensation and that is in keeping with the independent maximum, that you’re not running the company for the benefit of the shareholders only, and there’s nothing stopping me as a director from purchasing shares, provided that you adhere to the relevant purchase windows.
But I’m doing that on my own account and by my own volition, there’s no shareholder requirement to be on a board, and as I said earlier, you can’t be compensated with shares. So, that’s a pretty big difference between US and UK boards.
Raza Shaikh: It does make the independence part like much more serious. Does that play out as intended, that the directors in UK are more objectively [00:21:00] independent and building companies for that?
Joe Hurd: Yeah. I don’t know if I’d be able to answer that because I don’t know what the data is that you would look at to determine whether directors who are compensated in salary truly make more quote, unquote “independent decisions,” but what I will say is that if you are trying to adopt a stakeholder-first approach and at least hold up to the public that the directors are acting on behalf of all of these stakeholders in the company, then, yes, removing the stock-based compensation probably is one step in that direction, if that is your goal.
And that also, by the way, it’s not just for directors, but it’s also for operating executives. Another thing that I had to get used to as you look at executive compensation, and I saw this as I served on the remuneration compensation committee on the boards, the executives can be compensated with stock, but when they leave a company, there is a mandated, you need to hold onto those shares for [00:22:00]three to X number of years after you leave the company. You can’t just leave the company, sell your shares, take your money and go buy a house somewhere.
And that again, I think comes to just differences in culture that the UK society has towards executive compensation and US society has towards executive compensation, but there are those sort of structures built into the compensation philosophy for highly-compensated executives that does take some getting used to if you’re coming from the US.
Joe Ayoub: Yeah, it seems to me though, between the rules that apply to executives to hold their stock and the rules that apply to board members who can’t take equity as compensation for serving on a board, that those two things combined really change, if nothing else, the optics of what goes on at a board, that the board and its executives aren’t in some way colluding or even if it’s not intentional, moving in a direction that [00:23:00] will benefit them, maybe more than outsiders, so that they’re doing something to the company the last 90 days, the last year, whatever it might be, that will absolutely have an impact on their pocketbooks, but may not be good for the public at large and it would seem to me that particularly if you’re serving on a public company board, that isn’t a good thing.
It is not a good thing for non- insiders to feel like the insiders have a certain control over what might happen to their detriment. Now, we’ve seen lots of cases where it has been really abused , and I’ll just talk about WeWork. We’ve talked about this a few times, what that board put up with and that CEO for so long had to be at least in part driven by the fact that their stake in the company was increasing astronomically and they probably changed their approach, the people in that board, some of them were very experienced, but it feels [00:24:00] like they changed their approach in catering to the CEO because they didn’t want to mess up the IPO and the numbers they were talking about for that IPO before everything fell apart, it was a stunning number.
So, it’s hard to believe it doesn’t change how board members operate, it doesn’t change how senior members of the management team operate, and is that really okay? I mean, isn’t what the UK is doing, doesn’t that make more sense?
Joe Hurd: So, I would argue there’s probably a big difference between a privately-held company, which is the WeWork example or Uber or any of the venture-backed companies that exist in Boston, in Silicon Valley, and elsewhere, and a publicly-traded company.
If you want to compare apples to apples, publicly-traded UK to publicly-traded US, I could make just as good an argument that the US model is plenty effective in whether it’s the whistleblower statutes from the SEC or the insider trading laws that for [00:25:00] the US model and US culture and US society, they’ve got a legal regime that, by and large, works, by and large right.
But I don’t know if I could, if I would get into the WeWork example where you have a set of rules that don’t necessarily apply to the same degree as they would for a publicly-traded company, and look at that as being a like for like comparison.
Joe Ayoub: Well, I would say two things. One is you’re right. It’s public versus private, but it does highlight board member activity and how they’re likely to behave under certain circumstances. So, that is an extreme example there’s no question. And the amount of money that was, if you will, lost during that time is hard to say.
But if you want to look at public companies, let’s look at Boeing. Let’s look at what the Boeing board did or did not do for a long time and the litigation that’s going on with them. It doesn’t feel like they were paying as much attention to what they needed to [00:26:00] be paying attention to for a period of time that was pretty significant.
Joe Hurd: Yeah. So maybe the fix is for, and this would apply to private companies and public companies alike, the examples that you just mentioned are perfect examples of why you want to have diversity on the board where for privately-held companies and the board is comprised entirely of investors in that company, maybe the fix is bringing independent directors into those companies at the earlier stage and in sufficiently high enough numbers where they can bring those diverse thoughts, not be completely tied to the share price and keeping the CEO happy and have a really robust debate in the boardroom about the actions that the company is taking.
You can make a very cogent argument that when you’re an investor in a company and particularly working in venture fund and your ability to get into the next deal is based upon your reputation on working on the car deal, ” go along to get along” is probably not the phrase that I would use, but it probably wouldn’t be [00:27:00] too far off. You want to be founder friendly and obviously that can go to an extreme.
And I think WeWork was extreme, just like Uber was extreme, but if you want to create a system where you’re bringing more and varied and diverse voices into the boardroom at an earlier stage in the company and therefore open up more opportunities for people who want to serve on boards, private boards, public boards, what have you, maybe you do think about bringing independent CEO into a board earlier on and don’t make it just one because one person will get outvoted all the time, but you make it two or three, some sufficiently high number, where those voices can have an impact.
Joe Ayoub: Raza, what do you think?
Raza Shaikh: Yeah, but in the end, the incentives and alignment of incentives matters, and I think we’re all trying to figure out a best system that works for us. It’s not perfect, but I think it gets there.
Joe Hurd: Yeah, you’re right. And like I said, I think that the challenge and the opportunity is to at least put these issues on the table and have conversations like this on podcasts like this and other [00:28:00] forums where people can weigh in collectively, then we all get to a better place. I don’t know if we were having these conversations five or ten years ago. I don’t know.
Joe Ayoub: I think that might be true. I think the conversations are happening, but I also do think that the way that US companies, both public and private, look at their boards is in fact changing. It’s slow to change and that’s okay, but it is changing. And what you said about investor-backed boards, we’ve heard from several people who really focus on investor-backed boards, and the idea of bringing in a couple of independents, really it’s part of what we’re saying. It’s part of diversity of perspective.
It can’t be bad to have someone who’s thinking from a different perspective and knows the company and understands the company and understands the finances, et cetera, to be part of that conversation because you’re bound to miss something if you have people all who are in the same boat together. It just can’t be as strong. You can’t have five centers on a basketball team. Even though they’re all [00:29:00] very talented people, you really got to mix it up.
Joe Hurd: Ursula Burns, and I don’t have the article in front of me so the stats aren’t exactly at my fingertips, but Ursula Burns, the former CEO of Xerox, issued a study in August or September where she took a look at 18 of the top private equity funds and the companies they had invested in over the last 15 years or so. And I believe the number was 800 companies and of those 800 companies, there were 4,000 or so board members, and of those 4,000 board members, 1% of them were Black. And these are privately-held companies by the top private equity companies in the United States.
And granted, we’re only talking about African-American directors, but if you then extrapolate that to women and people from other races, this gets to your diversity point. These boards are not that diverse. And when you have, which is like your five centers analogy, you have to query really how much new and original and groundbreaking thought [00:30:00] is going on when everyone’s coming from a similar background and motivated by similar economic interests.
Joe Ayoub: Yeah. I think so. Did we talk about a director as an employee designee? Did you mention that?
Joe Hurd: Yeah. So, the director’s employee designee, that’s the workforce net. So, when you go back to the UK corporate governance code, you need to bring in the employee voice, that code says that either one of your directors needs to be explicitly designated as the director that interfaces with the workforce or, if you want to take another model, you can bring employees onto the board and bring the employee voice in in that way.
The reason why I highlight that is there is no explicit obligation on directors in the United States to be accountable or take into account employee thoughts. If anything, it’s something that may be actively discouraged. That’s what’s meant with management as opposed to governance being a director.
Joe Ayoub: And from your observation, how did that play out?
Joe Hurd: So, I’ve now been on three UK boards; GoCompare, Trustpilot and Hays, which we just [00:31:00] announced ten days ago. All three of those boards have a director who is nominated as the workforce net, the workforce non-executive director.
So, some companies will pay an additional stipend for taking on the work. Others have it built into the overall director’s fee. But in all cases those companies has said to their employees, “This is the director who’s been nominated as the workforce net.” And what I’ve seen play out for me as a net is I often will go to brown bag lunches with the employees or go to site visits and make myself available to the employees, because I think it’s important, one, for me to get better understanding of the company and the culture, but I think also, particularly as a black director, it’s important for the employees to see me and be able to interact with me and know that I exist.
I think that just makes for better input from me in the boardroom, but I think it also getting to culture makes the employees feel, hopefully they feel a connection with me as a director that this is their company too and I’ve got as much of a vested interest in their wellbeing and they are [00:32:00]important as employees as they do.
Raza Shaikh: Despite the compensation differences and limits on those, would you still be recommending that people take UK board seats?
Joe Hurd: Hands down, hands down. To emphasize once again the need for diverse perspectives in the boardroom, it’s incredibly important. I think having the opportunity to work internationally and have that international perspective, that global perspective is important for any company.
If all companies are technology companies, all companies are global companies as well almost from the very beginning, just given the internet and platforms and the fact that competition is coming from all quarters.
So, having that global perspective is incredibly important, and then as ESG becomes more and more important and climate change becomes more and more important to affecting decisions made in the boardroom, I do think that Continental European companies, UK companies have a slightly different [00:33:00] approach to how they are accounting for and governing for and legislating around all of these issues.
So, for an American who wants to get early exposure or earlier exposure to these issues, which are eventually going to make their way across the pond, I think serving on a UK board is incredibly helpful and rewarding.
The other thing I would point out is, and I don’t know how long this is going to last, but I’m certainly seeing it now, people are much more comfortable. Boards are much more comfortable now meeting virtually as opposed to meeting in person. So, most UK boards will meet anywhere from six to nine times a year, which is much more frequent than many US boards, although privately-held companies sometimes meet monthly in the US. But for the six to nine meetings in a year, you’ll now see we’re going to meet in-person four times and virtually five times, and that type of a meeting cadence, I think, is a lot easier for US-based directors than it may have been three, four years ago when the expectation was that every six weeks you’d be in the UK attending a [00:34:00] meeting in person.
Joe Ayoub: Yeah, I think the advent of some virtual board meetings, because I think there’ll be a mix going forward, is going to help a lot of boards, because even in US companies, you can be far more geographically diverse a lot easier of your four or five meetings, two or three are virtual because you’re not really asking someone from California to come over, to come to Boston for five, whatever meetings a year. I think that gives companies a broader reach in the pool from which they can draw their board members.
Joe Hurd: I completely agree. Although I will say virtual is not a panacea, I still think that there’s no substitute for being in the room together and forging that personal relationship. And more importantly, having a pull aside and being able to take someone by the elbow and really understand their point of view and where they’re coming from, that you may not be able to do when you’re six or nine boxes Brady-bunch style on the screen.
Joe Ayoub: Yeah, there’s got to be a mix and it’s got to work for whatever the group is, and we’re all going to have to figure that out one [00:35:00] case at a time.
Joe Hurd: Exactly.
Joe Ayoub: Joe, it’s been great speaking with you today. Thanks for joining us.
Joe Hurd: Joe and Raza, thank you very much for the opportunity. One person’s view as always, but I really appreciated sharing my thoughts and observations with you and your audience.
Joe Ayoub: And thank you all for listening to On Boards with our special guest, Joe Hurd. To our listeners, we have a request. If you enjoy our podcast, please take a moment to review and rate it on Apple iTunes. It really helps others find and discover this podcast.
Raza Shaikh: Also the easiest way is to go to our website, onboardspodcast.com. That’s onboardspodcast.com. All episodes are available. And if you have questions, comments, or suggestions for us, please, we would love to hear from you. You can do it right on the website.
Joe Ayoub: Please stay safe and take care of yourselves, your families and your communities as best you can. And Raza, you take care, too.
Raza Shaikh: Joe, thank you. You as well.
Joe Ayoub: Take care. Bye bye.[00:36:00]
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