In this episode of On Boards, Jonathan Foster joins hosts Joe Ayoub and Raza Shaikh to discuss what makes a board effective in today’s evolving governance landscape. Jon is the founder and managing partner of Current Capitals Partners.
Drawing from his experience serving on more than 50 boards, Jonathan’s book, On Board: The Modern Playbook for Corporate Governance, shares lessons on board evaluations, activist thinking, shareholder accountability, and why the best directors listen first.
The conversation also explores how boards should approach CEO activism, director offboarding, and the growing influence of AI. Foster argues that directors must actively educate themselves on emerging technologies while maintaining focus on thoughtful decision-making and long-term value creation.
Key Takeaways
- Effective directors prioritize listening
- Strong directors listen before speaking in order to understand the dynamics of the boardroom.
- Asking thoughtful questions is more effective than dominating a discussion
- Credibility is built through observation, preparation, and collaboration – but saying what you think.
- Governance history shapes modern board responsibilities
- Landmark governance cases provide the foundation for today’s fiduciary standards
- Understanding the origins of duty of care and duty of loyalty helps directors make better decisions
- Governance principles become more meaningful when directors understand the stories behind them
- Honest evaluations are critical to strong boards
- Boards should directly address underperformance rather than avoid difficult conversations
- Annual evaluations are more valuable than arbitrary term limits
- If a director is not improving, there should be a respectful and honest process to offboard them
- Boards should proactively think like activists
- Directors should regularly evaluate the company from an outside shareholder perspective
- Boards can identify strategic weaknesses earlier by considering activist viewpoints internally
- Jonathan emphasizes balancing short-term pressure with long-term shareholder value creation
- AI oversight begins with education
- Directors must actively learn about AI before they can effectively oversee it
- AI should support board preparation, not replace board judgment and be used in discussions
- Boards should focus on AI strategy, ethics, governance, and implementation questions
Quotes
“ If you think you’re the smartest person in the room, you’re probably wrong. But even if you are, every director has just one vote, so you need to develop a consensus to get things done.
“ My objective is to not say anything for the first two meetings. I’m just listening; you learn a lot and gain credibility by just listening first.”
“ I try to make every decision I make as a director, as if my family had 100% of its money in that one company’s stock.”
“ I don’t want AI in the boardroom — yet. A boardroom is a place to consider and have conversations and make decisions, not be overwhelmed by data.”
Links
On Board: The Modern Playbook for Corporate Governance
Guest Bio
Jonathan F. Foster is the founder and a managing director of Current Capital Partners LLC, a mergers and acquisitions advisory, corporate management services and private equity investing firm. Jon spent a decade at Lazard, primarily focused on mergers and acquisitions advisory work, ultimately as a managing director.
He has been on more than 50 boards, including Fortune 500 companies, private companies and companies involved in restructurings. Foster has served as chair, lead director and on the three major board committees as well as special, transaction and CEO succession committees. He has been chair of two Fortune 500 Audit committees. He has also been an expert witness in corporate litigation for some 60 cases.
With decades of experience, Foster has written, spoken and been quoted frequently about governance and finance topics and has guest lectured at various universities. Jon lives in New York City with his wife and goldendoodle; he has two adult children.
Transcript:
Joe: [00:00:00] Hello and welcome to On Boards, a deep dive at what drives business success. I’m Joe Ayoub, and I’m here with my co-host, Raza Shaikh. Twice a month, On Boards is the place to learn about one of the most critically important aspects of any company or organization; its board of directors or advisors, with a focus on the important issues that are facing boards, company leadership, and stakeholders.
Raza: Joe and I speak with a wide range of guests and talk about what makes a board successful or unsuccessful, what it means to be an effective board member, and how to make your board one of the most valuable assets for your organization.
Joe: Before we introduce our guest, we want to thank the Law Firm of Nutter McClennen & Fish who again sponsored our most recent On Boards Summit in their conference center in the Boston Seaport. Nutter has been an incredible partner with us in every way, we appreciate all they’ve done to support this [00:01:00] podcast.
Our guest today is Jonathan Foster. Jonathan is the founder and managing partner of Current Capital Partners, a mergers and acquisitions advisory, corporate management services and private equity investing firm.
Raza: Jonathan spent a decade at Lazard, primarily focused on mergers and acquisitions, advisory work, and ultimately, as managing director. He has served on more than 50 boards, including Fortune 500 companies, private companies, and companies involved in restructuring.
Joe: His book, On Board: The Modern Playbook for Corporate Governance, was published last year. Welcome, Jonathan. Thank you so much for joining us today on On Boards.
Jonathan: Thank you. It’s a pleasure to be here.
Joe: Jonathan, tell us about your book and in particular what you learned in writing this book. Given your extensive background with governance, I’d be particularly interested [00:02:00] to know what you learned along the journey writing this book.
Jonathan: So, first, the book I set out to write because I thought it had not been written and some publishers agreed with me was, first, a contemporary history of transactions, the amazing rise of the institutional investor and the importance of ESG, which now appears to be waning, and only with that context can you really understand today’s governance; the standards, the expectations, the laws, and the requirements.
You really can’t talk about the duty of care and the duty of loyalty if you don’t really understand the Loft Candy case and the Van Gorkom case, for instance, and so I hope that history is not dry; it’s full of anecdotes, stories, and interesting personalities, but that contemporary history really forms the background for everything governance.
What did I learn? I [00:03:00] learned that governance really is ubiquitous, and I knew that it was important for more than just public companies and value creation, but I talked to 77 people, most of whom are quoted in my book.
While I focused primarily on lawyers and bankers and judges and CEOs, I purposely went and spoke with an expert in healthcare, Mario Carbone of the famous Carbone Restaurant in New York City, and I realized that Mario was as thoughtful on leadership as anybody. That Beth De Leon, one of the leading authorities on healthcare in the US, truly believes that governance of healthcare institutions has a direct impact on patient care.
So, what I really learned that was new and also some interesting details was that governance is important in almost every organization. I hope there are lessons in my book for organizations of every kind although it is [00:04:00] focused primarily on public company oversight.
Joe: Could you expand a little about why you believe that understanding the history of corporate governance is so important for directors to see.
Jonathan: In my book I say, because I honestly do recall from high school English, amazing as that sounds, that Charles Dickens once wrote, “It’s in vain to recall the past unless it influence the future,” and the reality is we talk about the duty of care and the duty of loyalty as being the bedrock of being a good director. We talk about the business judgment standard, which you want to stay under, not the entire fairness standard, but I think those concepts come out of the clear blue sky unless you understand where they came from. And the duty of loyalty comes from the Loft Candy case back in the thirties, and the duty of care comes from the Van Gorkom [00:05:00] case in the eighties.
I do think that you can memorize what some lawyer tells you those two duties are. If you go back and understand the story and the judicial opinions, which are not that dry, they’re kind of interesting and the personalities of Jerome Van Gorkom and TransUnion, which led to the duty of care being defined.
If you go back and actually learn about Charles Guth, who ran Loft Candy and bought the rights and the formula to Pepsi Cola, drink we drink today, and used the candy company’s people and capital to buy Pepsi for his own account, and he got sued, and the Delaware Supreme Court ruled back in the thirties that the duty of loyalty says you’ve got to look out for the company, not yourself.
I truly believe we can be more informed and more effective directors if we understand the history of [00:06:00] rest of things that we probably take for granted, and I just gave you four examples.
Joe: Excellent examples, by the way, especially the last couple, I think that is, a must learning for anyone that joins a board the huge number of interviews with really impressive people. What surprised you most during the interviews you conducted?
Jonathan: Well, one thing that surprised me in a very positive direction was I was fortunate enough to sit on the board of Wheels Up, the aviation company, with Admiral Mike Mullen, obviously a leader of our Navy, but only the 17th Chairman of the Joint Chiefs of Staff. Now, when Admiral Mullen was done with his military career, he joined the board of General Motors, of Sprint, of Wheels Up, and I wouldn’t have thought that background made a great director. I sat on the Wheels Up board with him, as I mentioned, he was a great director. Why? Well, he had great command of the room. [00:07:00] He listened first and spoke second, which is my first rule of being a good director.
When I interviewed Admiral Mullen, who I’d gotten to know reasonably well, I literally said to him, “You’ve been giving orders for decades. How did you become a good director?” And he said, “It was hard for me, but I learned the only path to success in the boardroom was asking questions to move the group to where I wanted to go.” From the 17th leader of our military, which is two million people strong, that was a remarkable comment I thought, and one that we should all take to heart as we strive to do better in whatever organization we’re involved in; listen first, ask questions and speak when you need to.
Joe: I think that is really excellent advice, especially listen first, because [00:08:00] active listening to me is one of the most important attributes that any board member can have. Good for him that he was able to make the transition from his role as a commander in the Army to being an active listener in the boardroom, I think that is ability to him.
Jonathan: And Joe, just to underscore the point you just made. Towards the end of my book, I have 10 recommendations for good governance as I asked people, what is the most important thing you would say to a new director. Without fail, it was, go slowly, listen before you speak. If you think you’re the smartest person in the room, you’re probably not. But even if you are, if you can’t move the group to your view, you’re not going to succeed.
Pete Stavros, head of private equity at KKR said, listen before you speak. Charles Elson, former head of the John Weinberg Governance Center at University of Delaware and one of the most important voices in corporate governance [00:09:00] today, said, listen before you speak. It’s a cardinal rule. I’ve now been on 57 boards. I try to remember that every single time I walk in the boardroom. In fact, my objective is to not say anything for the first two meetings. I’m just listening; you gain a lot of credibility just listening.
Raza: Jonathan, earlier when we spoke, we also talked about this thing called offboarding because one of the things for boards is to be able to have a skill matrix and be up to date, yet we see that board members are on boards for a really long time; it’s really hard to actually offboard people from the boards. What are your thoughts on things like age limits or term limits or how to keep the board refreshed and how to manage offboarding?
Jonathan: So, Raza, I’m going to disagree with your preface. I don’t think it’s hard to [00:10:00] offboard somebody. You say to this person, “This isn’t working out. We don’t need your skillset. We’ve asked you to improve in these two areas and you’re not doing so.” A board fires a CEO. A CFO fires a head of finance. It can be done.
On seven occasions I’ve been on a board where we had an underperforming director. Our chairman suggested this to each of these people they work on these couple of things. It was largely about being prepared, not digging into the details too much, being respectful of others. They didn’t improve enough, and we asked them to not stand for nomination the next annual meeting.
A CEO is not a tenured Supreme Court Justice or a tenured professor and director has to lead by example. I hate term limits. I think they’re dumb. I’ve been on the board of one public company for 15 years. We’ve had three different [00:11:00] CEOs. I think I’m a better director now than I was 15 years ago. I reluctantly have come around to believe that you do need an age limit. Now, if Warren Buffet wanted to be on your board, would you say no?
Joe: He’s the example everyone cites.
Raza: Yeah, it’s true.
Jonathan: But I do think at a certain age, you are probably retired, you’re probably not as current as you think you were, and I reluctantly think that generally, particularly in a public company context, we are particularly visible, 75 is probably the right age, but the thought that you’re a great director in year 10, but in year 11 you should be gone because of an arbitrary term limit?
Do individual evaluations every year. If you’re not performing in year three, get rid of the director politely, but don’t keep until you get to a term limit. That’s unfair to the shareholders.
Raza: So, Jonathan, you would say that the better way for managing [00:12:00] that effective governance would require honest evaluations, including individual evaluations, and that is what brings accountability to the boardroom. How have you seen the evaluation processes and what are best practices that you would suggest?
Jonathan: So, I wanted to preface that by saying there’s no perfect answer, and the reason is only the directors are in the room all the time. So, as a practical matter, only the directors can do the evaluations, and it’s not ideal for having the team evaluate the team. I think that the trusted general counsel or the trusted chairman who’s not the CEO should inquire orally, ideally on a video conference so you can read the body language, what each director thinks of all the other directors, and you need to expect that successful people will be honest.
I don’t [00:13:00] love outside services because I think it’s hard to talk to somebody about difficult issues and you don’t really know the question well. There’s lots of high quality firms and if you want to use one of them, that’s fine. I’ve used them before, but my preference generally is someone you know; a particularly trusted general counsel, particularly well-regarded chairman, and I like explanations of these evaluations in the proxy statement so they have some meaning.
Joe: I just want to jump in on that because I think you’re right. I think that’s part of the job of the chair and the non-gov committee or whoever it is that’s assigned to it. I wonder about the self-evaluation. By that, I mean asking other people on the board what they think. Sometimes that does work, but lots of times they are either friends on the board or people that you’re in business with, et cetera, et cetera, relationships [00:14:00] that I have found impede Being totally transparent about one’s feeling about fellow board members, and that’s why I have seen when outsiders come in, outside firms, really good ones, they can do a better job because I have seen people be more honest because it’s quote unquote anonymous. Whereas the chair knows, or whoever the chair of non-gov, whoever’s conducting it, will know what you think about Bob or Raza, and lot of people don’t want that. Have you experienced that?
Jonathan: That’s a fair point and I follow your logic, but I honestly haven’t. I’ve actually experienced the opposite. So, I had a situation a number of years ago where I was relatively young on the board of a relatively large company, and our chairman, who was very special guy, was calling around doing individual evaluations for the first year, and he asked me about my view on the various [00:15:00] directors, and we came to a gentleman I’ll call Director X, and he said, “Jon, I sit next to you in the board meeting and I’ve seen you roll your eyes about Person X, and I want to know what do you think about Person X? I’ve been a CEO, I’m an experienced director. I know how to handle this properly. What do you really think about Person X?”
I explained that he didn’t pay attention. He was pecking away on his computer, clearly returning emails for a substantial portion of the meeting. I thought it was distracting and disrespectful. He said, Thank you, and there were other people said that. I’m going to address it.”
An outsider would’ve no idea about Person X, and I’m not going to say something that’s uncomfortable more quickly to a person I don’t know, but a person I do know. And I knew if I wasn’t honest about Person X, I would lose credibility with the chairman. If I didn’t answer a question on Person X to an [00:16:00] outside service who I don’t know who I’m never going to see again, that’s a lot easier.
So, again, I have high regard for some of these organizations that do this work. When they come to my boards, I greet them openly. I tell them what I think, but my preference on the market is someone you know and trust who can elicit feedback you don’t really want to give.
Joe: Thank you.
Raza: Jonathan, flipping it around the other way, what are the most reliable signs that a board is actually driving performance for companies?
Jonathan: Raza, it’s a simple answer, but it’s true. It’s all about stock price performance, and the shareholders elect the board to oversee the management team. We can have a long debate about investors are too short-term oriented, too much pressure for quarterly results. You need to focus on long-term shareholder value. But the reality is, at least in the public markets, I think long-term is [00:17:00] about a year and your stock prices got to perform. That’s the ultimate arbitrator.
Raza: So, you would attribute the success of the company’s stock going up to not only management, but that’s a reflection on the board’s performance as well.
Jonathan: Absolutely, because at the end of the day, the board is responsible for evaluating, compensating, and when necessary, replacing, whether through termination or natural succession, the CEO.
So, I don’t want to take too much credit. It’s all about the players, not the coach. for the coach puts the players on the field. So, any good coach says, “My players won the game. Or, you know what, we lost the game because my coaching was lousy.” Same thing with a good board, “My management team got the stock price up. Lousy performance, that’s on me. Didn’t move quickly enough on management. Didn’t ask the right questions. Approved a strategy with the holes in it.” A [00:18:00] board is a coach, managing team of players.
Raza: Great analogy.
Joe: So, one of the things we talked about when we talked a few weeks ago was that, I think you said directors need to think like an activist, but not necessarily act like one. What do you mean by that?
Jonathan: I mean don’t wait around for an activist to come along and propose something. You should think to yourself, “So, if I was an activist, I was going to take a 5-6% stake, and I want to encourage change. I know the stock price is too low. Here’s what to do. Wait for those folks to come around.”
Think like an activist. Get an outside perspective. Talk to an analyst who has a sell recommendation on your stock, and think about what would I do if I’m an activist, and then think to yourself, “Well, does that maximize long-term shareholder value or not?” So, don’t always take the action an activist would [00:19:00] take, but think about what would an activist say and do I think for this one company that would maximize value. That’s what I mean. It’s really important. It’s done by some, it’s not done
Joe: Yeah, definitely not done enough. great way to think about it. Do you think that activist expectations have generally improved board decision making, or do they more often divert focus on true long-term shareholder value?
Jonathan: I think it’s impossible to thoughtfully generalize in that way. I think that an activist is just another shareholder, but they’re a really noisy shareholder most of the time, and sometimes they’ve got really good ideas and sometimes they don’t. Let me give you an example, if I might.
Joe: Sure
Jonathan: I’m a board of a large auto supplier called Lear Corporation, and quite a few years ago, probably eight or 10 years ago, an activist came along [00:20:00] and wanted us to spin off one of our businesses and do a $3 billion stock repurchase.
Well, the optimist didn’t realize till we explained it that by separating these businesses, at least two bad things would happen. One, there was a big tax bill on the spinoff outside the US and there would obviously be incremental cost to set up a separate corporate organization.
As regards to repurchase, they weren’t entirely wrong. We had net cash on our imbalance sheet, but we’re in a very cyclical industry – automotive. By any dispassionate credit analysis, a $3 billion stock repurchase will put too much debt on the company. We had a battle and we ultimately settled and we agreed to a billion and a half dollar stock repurchase, no spinoff. One director we picked that was new that they signed off on, so they weren’t [00:21:00] wrong. A stock repurchase was a good corporate finance move, and we were probably slow to start one. But their idea of $3 billion was insane.
Joe: Excellent.
Raza: Jonathan, I want to wrap up with two questions involving current events and governance. First, do you think CEOs should speak publicly about topics in the news? And second, how do you think boards should look at risks and opportunities presented by the meteoric rise of AI?
Jonathan: Well, there’s a lot in that, Raza. Let me address the first one first. Lloyd Blankfein, the former CEO of Goldman Sachs has written a wonderful memoir, which I recently read, and he made a really important point that I’ve been talking about for some time, which was a lot of the credibility of a CEO comes from being the head of an organization [00:22:00] and the correlator, of course, is your organization should come first, not your personal opinions.
I talk a lot when I speak about Tim Cook, the CEO of Apple, in this regard. That is, many will know Tim Cook is not only the CEO of Apple, but he’s a proud and somewhat visible gay man. He must disagree with President Trump’s social agenda almost, if not entirely, but he’s been to the White House. He made a substantial donation to the inauguration. Apple has made a substantial donation to this new ballroom the President is building, but when we had those tragedies in Minneapolis, Cook wrote a very empathetic moving letter to the Apple employees, and it was said that he contacted the President and said, “You got to find an off-ramp here.”
One bad tweet from Washington, and see your stock price plummeting. I try to make every [00:23:00] decision I make as a director, as if my family had 100% of its money in that one company stock. That’s why I think Tim Cook is acting. That’s what Lloyd Blankfein was raising, and I think that’s the right answer.
Raza: That is a great answer. What about AI?
Jonathan: You can’t go more than 15 minutes. We’ve gone about 17 without saying AI. You have to understand something before you can oversee something. So, AI reminds me of climate a while ago, ESG six, eight years ago. Now, it’s AI.
We directors can’t oversee it until we understand it. I’ve taken a couple of courses. It’s on my computer, it’s on my laptop, it’s on my phone. I’m learning how to use it. I’m asking questions. Only by understanding it can I help my colleagues and [00:24:00] I oversee it. So, that’s number one.
Number two is I don’t want AI anywhere near the boardroom. A boardroom is a quiet place to consider and have conversations and make decisions. I am using AI to summarize analyst reports, for example, or to go through the dependencies of a board book if I’m pressed for time, I will be honest, for example, but I do not want boardrooms I’m in overwhelmed by data and then I can overwhelm you with data. So, maybe someday, but not today.
What a board today should be doing, quite simply in my view, is learning about it. Like we learned about climate, like we learned about ESG, and should be asking questions, how are we using it? What is our budget? Who is our leader? What is our ethics policy? And keep it out of the boardroom until we’re ready to use it efficiently.
Raza: Jonathan, that’s very well said. I’ll say it this way that [00:25:00] when cybersecurity was issue of the day or was rising up, in some boards may have been a tendency of like, “Oh, this is our cybersecurity expert director.” But for AI, you can’t do that. It impacts everybody and hence all board members should know and understand it.
I’m just setting up open claw to see what it does and ultimately it is a tool to assist the board, not a replacement of the board, at least not yet, even though Joe and I have hypothesized the seven levels of AI replacing the entire board ultimately, but we are not there yet. For today I think you’re absolutely right that it’s incumbent upon each board members and top management to know and learn about AI and what it does to be able to understand and then be able to be equipped to kind of govern.
Joe: I would say too, I appreciate what you’re saying, but I think AI is dramatically different than [00:26:00] cyber or ESG or climate change. ESG, I don’t don’t even know where it is right now in the boardroom. It’s kind of an odd thing. AI is not going away and it’s not a matter of now I understand it. I think it is happening and growing and changing at such a pace that just the very act of trying to keep up with it is very difficult.
There’s no easy solution to it, but I really do think that this is different from other challenges that come into the boardroom. You’re the master of the history of board governance given your book. I honestly think this might be different than almost anything that’s come into the boardroom in our lifetime.
Jonathan: I would just make two points as to what you both said. Number one, I don’t generally believe in functional experts on the board. I need an AI expert. I need an HR expert. I think a board needs is successful, broad-minded business and other sorts of folks, because every director has one vote and every director has [00:27:00] equal liability. So, I want an AI expert running my AI group at the company on the management team working 2,000 hours a year, not just an expert on my board working 150 hours a year. If that AI expert is a broad-based business person who fits in well with our board on where we’re trying to go, that’s great.
Joe, as to your point, I don’t think AI is going away, but you know what, cyber’s not going away and climate’s not going away and ESG is not going away. So, if you think they’re similar, if you think AI is a bigger issue, sure. But again, we can’t oversee it until we at least get a B or B-minus in the topic, that we should be working towards, not overwhelming ourselves with data, using it where we think it’s useful.
Joe: Jon, this has been a fascinating conversation. I really look forward to reading your book. Thank you for joining us today on On Boards.
Jonathan: My pleasure. Great questions. [00:28:00] Always great to be with you guys.
Joe: And thank you all for listening to On Boards with our guest, Jonathan Foster.
Raza: Please visit our website at OnBoardsPodcast.com. That’s OnBoardsPodcast.com. We would love to hear your comments, suggestions, and feedback. If you’re not already a subscriber, please be sure to subscribe to Apple Podcast, Spotify, or wherever you get your podcast. And remember to leave us a five-star review.
Joe: And please tune in for the next episode of On Boards. Thanks.