Ed Pendergast has served on numerous boards – public, private, and nonprofits – for more than 40 years. Very few people have had the opportunity to serve on such a broad range of boards over such a long period of time as Ed, and for good reason. He is the consummate board member. Armed with a deep understanding of business finance and operations, and what it takes to be an effective board member, Ed exemplifies the qualities that every company seeks on its board.
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Quotes
Impact of the pandemic:
“Well, it’s varied pretty dramatically. I sit on five boards…and some of them have been hit very hard, some are booming. It seems to depend upon the industry they’re in or the impact that coronavirus has had on the business.”
“You probably have heard more talk in the last few months about supply chain than you have in the rest of your life.”
“In our investment bank, we are advising companies generally not to sell the business right now because valuations are so strange.”
Question: If you’re advising a family owned, operated business, and they’re thinking about forming a board for the first time, but they’re hesitating and there are several reasons why they do. What advice do you give them?
Answer: Well, I advise them not to start out with their uncle’s lawyer and their brother’s banker, but that they try to think about “why are we having this board?” What type of skill sets do we need that would be helpful to this business and try not to pack it with all people you’ve known for a long time? It’s okay to have a couple of people that you’ve known a long time, but it’s very helpful to think outside of the box.
Question: When people say “we don’t have time of the money for a board, what kind of advice to give them? What do you tell them?
Answer: Well, what’s the return on the investment? If we can bring together five people with great talent, some of which you don’t have in your business who can help in business development and it costs you $50,000 and it generates a strategy that builds the business from $50 million to $250 million, pretty cheap. On the other hand, if you don’t put it together properly, it can be a pain in the ass and not be successful.
When there’s a crisis is when the private company board is really helpful to calm things down. How are we going to get through this? How are we going to work our way out of it?
Big Ideas/Thoughts
Board meeting haven’t changed much – we’ve had a focus on coronavirus that we didn’t have before , but board meetings always have talked about risks and how do we deal with risk and what are the risks we haven’t foreseen? And how do we think through that process?
One difference is that when you’re in person, you have some casual time, you usually have a meal. Something when you’re off the topic. When you’re on a zoom board meeting, you’re on topic, the fraternization, the getting together, the personal aspect of it is missing and so it’s harder to gauge how people really feeling or what’s going on. When you’re sitting across from somebody at dinner, you really get a different approach. And that’s particularly true in boards where we have traditionally had the senior leadership team present at the dinners.
And that’s key because one of the major parts of being a board member is to make sure that the people are the right people. That they’re performing properly, that motivated properly, and develop properly. And that’s harder to do through video conferencing.
Going forward, I think you’re going to see a lot of closings, a lot of bankruptcies, particularly companies relying on disposable income: airlines, restaurants, hotels, casinos, even clothing. I think it was Bloomingdale’s that said they’re only selling tops.
On why more private companies are forming boards
Well, part of it is that the visibility of governance has expanded dramatically. I think a good deal of it as to what the National Association of Corporate Directors has done, to raise the visibility, the standards of sitting on a board have clarified over the years and, many people who have started their own business had worked for a larger company and have seen that there was some efficacy to the board in family businesses. Particularly when family members say we need somebody outside of the family to have a role here so that we can listen to people who have had outside experiences.
Question: One thing that seems to be a constant challenge for many companies is refreshing the composition of their boards. The board that may have been right five years ago is not necessarily the right board today. What is the best approach of reviewing the composition of the board and offboarding when necessary?
Answer: Refreshing the composition of a board is probably one of the thorniest issues any board faces. One way to address it is to have a regular evaluation process. How is the board going? How are individual board members are doing? How committees are being operated? It’s a tough process. I have some ex-friends that I have counseled off boards and, as I sometimes say, it’s not who got you here it’s who is going to get you there.
Transcript
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: [00:00:32] Joe and I speak with a wide range of guests and talk about what makes great boards great or makes a board unsuccessful, what it takes to be a valuable board member and how to make your board one of the most valuable assets of your company.
Joe: [00:00:50] Our guest today is Ed Pendergast who has served on numerous boards, public, private, and nonprofits for more than 40 years. For [00:01:00] more than 25 years, Ed has served as President of Pendergast and Company, the corporate financial consulting firm, which has advised a wide variety of companies on corporate financial strategy.
Raza: [00:01:13] He has also been a Managing Director of investment bankers Dunn Rush and Company since the firm’s inception in 2009. He works across several industries helping owner-managers increase their company’s value. He has been President of the New England chapter of National Association of Corporate Directors, Massachusetts Society of CPAs and Small Business Association of New England.
He also served as Vice Chair of Greater Boston Chamber of Commerce. We’re excited to have Ed Pendergast as our special guest today.
Ed: [00:01:47] Great to be here.
Joe: [00:01:49] Welcome Ed. It’s a pleasure to have you On Boards.
Ed, can you let us know on the boards on which you’re currently serving, what has been the [00:02:00] impact of the pandemic environment on those companies?
Ed: [00:02:03] Well, it’s varied pretty dramatically. I sit on five boards, actually, and a nonprofit board. And, some of them have been hit very hard. Some of them are booming. It seems to depend upon the industry they’re in or the impact that coronavirus has had on the business.
For instance, one of them, DeMoulas Supermarkets, when they were first in the pandemic they were at a point where they could only be open for 50% of the time that 50% of the capacity that they had before, but people are buying more because they don’t want to go to the groceries more often. So DeMoulas has really been impacted with employees more than they have anything else.
One of the companies that is a supply chain consulting firm, called Maine Point, [00:03:00] that has been a period of time when people were so distracted by the coronavirus, that they weren’t doing anything about supply chain, but that’s changing pretty rapidly. You probably have heard on television in the last few months more talk about supply chain than you had in the whole rest of your life.
One of the companies is a software service company and they are it’s called Fonative, and they, are connected to call centers and for awhile, the volume on call centers was somewhat diminished, but that has resurged.
Another company is called Tikus Cranberry and we are having trouble finding enough product to satisfy the demand.
The last private company is called Municipal Headquarters. We upfit police cars [00:04:00] and, while the demand for police cars hasn’t changed, the uncertainty of budgeting in the municipalities has made it difficult for us to be the predictable. We’ve done well and continue to do well, but there are real challenges because police departments have been very distracted by the coronavirus in particularly, most recently.
The last board that I sit on is the Old North Foundation, which is a organization that supports and maintains the Old North Church and provides education and tours and a lot of items around trying to have people understand the history of the formation of this country. The coronavirus has been a disaster because we couldn’t open up. and traffic is what makes major part of our revenue. We tried to [00:05:00] open a couple of weeks ago and the timing right now is the first part of August, and, the traffic was so low that we had to close down for the rest of it.
Joe: [00:05:10] Boy, that’s too bad.
Ed: [00:05:12] So many of the foundations that I know about are in survival mode now. So you can say it is very different across the board.
In our, investment bank, we are advising companies generally not to sell the business right now because valuations are so strange. Although there is one company where the buyer says I will pay pre-COVID prices. We’ll see if that’s true, but generally the M&A businesses been quite a bit slower because of that. Although it looks like it’s picking up also, but it’s a very strange time.
Joe: [00:05:51] You know, it’s not surprising that companies have been impacted what surprises me is sometimes you don’t see what the impact [00:06:00] would be. You know, when you talked about, for example, the police cars. Well, the fact that budgets are questionable, people don’t know what resources are going to be allocated and how, that’s not necessarily something that anyone would have foreseen, even if you had a great risk strategy in place.
Ed: [00:06:20] Yes, the disruption in so many industries is way beyond what you thought about. I’ve had associations with a couple of universities around here, Bentley and Northeastern, and they both are struggling to try to figure out, can we do it in person? Can we do it remotely? Can we alternate? How do we do that? So there’s a, a lot of disruption.
Joe: [00:06:46] Yeah, that is going to be a difficult question for every educational institution.
Looking at boards, so all of the boards now of course, we’re meeting in some kind of virtual format. I’m interested: other [00:07:00] than saving time and expense, we all have experienced the fact that it’s, you know, we’re saving some time and we’re saving some money. What’s been the general reaction to meeting in this format?
Ed: [00:07:11] Well, I think it’s been more positive than otherwise because you can have a meeting pretty quickly. For instance, in one of the boards we have a board member who lives in London, one lives in Florida, one lives in Kansas City. And if you wanted to have an in-person board meeting, there’s a lot of time and energy to get it going. We have an issue that we, as we did today, we had a board meeting, and, we were able to put it together in no time. So that’s a big change. And the teleconferences we used to have in the past were not as near as satisfying as video conferencing. Video conferencing is much more satisfying. You can see people, you can get their reactions, you can get a feel for them. I still would [00:08:00] love to be in person, but, as a practical matter, I’m not sure at least for the next maybe year, certainly next six months, that we’re going to have any in person meetings.
Joe: [00:08:14] Yeah, I think you’re right about that. The meetings themselves, how have they changed , how are they different other than the fact that they’re virtual?
Ed: [00:08:23] They haven’t changed much. I would say that because we have a focus on coronavirus that we didn’t have before , but the board meetings always have talked about risks and how do we deal with risk and what are the risks we haven’t foreseen? And how do we think through that process? But I would say generally, I wouldn’t think there’s been any real difference in the board meetings. The material comes through the internet, through email. The meetings tend to be about the same length, although people find after two hours [00:09:00] on zoom, they have to take a rest, bio or otherwise, and then we come back and so I wouldn’t say that it hasn’t been a significant change in how the boards are operating. The committees are a little bit more of a challenge, but I think it’s, it really hasn’t impacted it in a major way.
Joe: [00:09:22] Are there sensitive issues that you find more difficult to address virtually than you would in person, and I’ll just take one for instance. There’s one board that I’m on, and I find that when we’re talking about, kind of an assessment of board members or, you know, who we might invite off the board or invite on the board, that kind of conversation, I have to say, feels a little bit difficult when it’s virtual. Somehow it seems more comfortable when it’s in person. Have you experienced any issues that just didn’t seem quite as comfortable because you’re not in person with other board members?
Ed: [00:09:59] I [00:10:00] would say no. I think that all you see as the top half of people. Oh yeah. I don’t know what’s going on with the rest of them. In fact, that the Old North Foundation, we hired an Executive Director that we never saw outside of zoom. It was weird. So we never saw her and never actually shook a hand.
I think the, difference is that when you’re in person, you have some casual time, you usually have a meal. Something when you’re off the topic. When you’re on a zoom board meeting, you’re on topic, pretty much. The fraternization, the getting together , the personal aspect of it is missing and so it’s harder to gauge how people really feeling or what’s going on. When you’re sitting across from somebody at dinner, you really get a different approach. And that’s particularly true in boards where we have traditionally had the senior leadership team present at the dinners. So we’re not getting that. [00:11:00] And that’s key because one of the major parts of being a board member is to make sure that the people are the right people. That they’re performing properly, that ther’re motivated properly, and develop properly. And that’s harder to do through video conferencing.
Joe: [00:11:20] That social tim – with fellow board members and with senior management, that really is missing, there’s no real substitute for that.
Raza: [00:11:30] Joe and Ed, I’ve seen groups basically add those times, like water cooler meetings or, you know, other off meetings, although it’s still in virtual format, but an attempt to approximate or recreate a little bit of that.
But yeah, it is challenging. New relationships are challenging.
Ed: [00:11:47] And you can’t make the asides that you might make in an in-person board meeting where you’ve missed something person next to you. What was that? You really can’t say that [00:12:00] in the videoconference. Yeah. Right.
Joe: [00:12:03] It’s just different.
Ed: [00:12:04] I guess, in some ways I misspoke initially, because as we talked about it, I realize the differences, maybe deeper than I had thought beforehand, because I’ve been pretty happy that I’ve been able to keep track of what’s going on in our boards, and in our companies, but as you talk about it, it kind of feels a little bit more…
Raza: [00:12:25] Some people have commented that making new relationships is much harder. Ed as you mentioned, like, you have hired somebody that you’ve never met and we have invested in companies that we’ve physically not met the entrepreneur, but that part is much harder.
It is a huge benefit that if you knew the people going into the video format, that you were still able to kind of say kind of roughly work the same.
Ed: [00:12:51] I think hiring and onboarding is much different and, bringing on new board members, I like to put them [00:13:00] through the paces as much as possible so that they understand all the vagaries of the business and we understand all the bumps in the road that we might face with a new board member. And that’s true of employees as well, it is frustrating.
Joe: [00:13:17] Yeah, it really, it’s funny. It permeates so many aspects of what we take for granted.
Raza: [00:13:24] And just to add to that, I would say at least in the last five years, there have been plenty of successful companies that are remote only. People did figure out how to create a culture, how to know each other, despite being remote. I think with time all the folks that are now forced to be in virtual will also find ways and figure it out.
Ed: [00:13:51] Except for I think a lot of the companies that were almost completely virtual, they did have in person interviews of people, they were hiring, which they [00:14:00] can’t have now. Some of them didn’t did it without that, but pressing the flesh, as they say, shaking hands, having a drink with somebody, having a meal with somebody, you got an entirely different picture of the person than you do when you’re on stage in the interview process.
Joe: [00:14:16] Agreed. Absolutely.
Ed, let me ask you this: if the pandemic continues for many more months, as unfortunately many people believe it will, and it has a continuing impact on the revenue of the companies that are in a difficult situation, what do you foresee? Will those companies whose businesses are being impacted in a negative way be able to ride this out? Or are we going to see a lot of closings and bankruptcies down the road?
Ed: [00:14:46] Well, I think you’re going to see a lot of closings, a lot of bankruptcies, particularly companies relying on disposable income: airlines, restaurants, hotels, casinos, even clothing. I think it was [00:15:00] Bloomingdale’s that said they’re only selling tops.
Raza: [00:15:05] There’s another category of companies. There are ones that are clearly directly impacted, but I think, but Joe is also kind of thinking about is the, the companies that were just maybe not doing as well already. Do you feel that with the availability of cheaper credit and debt from the government and all the things that we will actually see, maybe zombie companies that are able to kind of carrying on?
Ed: [00:15:31] It’s going to make a big difference is how the credit markets are willing to lend. I think that when the interest rates go low, the company sales is great for us. Banks aren’t as enthusiastic about it because their margins tend to get narrowed, so I am not sure that the lending will be as aggressive as it was before the pandemic.
On the other hand, [00:16:00] if you think about it, there are Venture Capital funds, and Private Equity firms and Mezzanine Funds that have money they need to get rid of.
Raza: [00:16:08] A lot of dry powder.
Ed: [00:16:10] They need to invest. So there may be some risks taken, but I think that it will be focused in on industries where people think there’s a real opportunity to grow.
I think the restaurant industry, I just don’t know. They always have thin margins. Now they having trouble getting their product and customers are leery about going in. Right now, we’re down on the Cape in Harwichport and we’re not going into restaurants. If the restaurant doesn’t have curbside or delivery, we’re just not patronizing. I found on the other hand that, if you say by the way, I’m I can come in, but I’ll give you $20, somebody comes running out with the food.
Joe: [00:16:55] Yeah. Most places are able to do that now.
Raza: [00:16:57] Ed, what was your early board [00:17:00] work? You’ve been doing this longer than I have been alive!
Ed: [00:17:03] Well, probably the most people been alive.
Well, I started out really working with associations. When I became a CPA, I felt that getting active in the society, Massachusetts Society of CPA’s, was important. So I donated a fair amount of time to it. And in time they decided that maybe I should become President. At that time, they used to alternate between a big national firm and a local firm for presidents. I was a local firm so working on that board was the, probably the first real board work I did.
I got active in the Small Business Association of New England, sometimes called SBANE, in the same way . I felt that it was a great vehicle to develop my practice. The contacts also, I could make contributions with my expertise [00:18:00] to the association. So I worked with that for a long period of time and I became President of that sitting on the board and then became President.
I got very interested in governance because I started sitting on boards and starting to go to the National Association of Corporate Directors meetings, and eventually became a board member and then become Chair of the New England chapter.
And the same thing a little bit with the Greater Boston Chamber of Commerce. So the word got out that I had sat on a few boards, had some financial expertise, and those were characteristics that many boards were interested in.
Raza: [00:18:34] Ed, you recently spoke about that a number of years ago, you decided not to be as interested in sitting on public company boards. What led you to that decision?
Ed: [00:18:47] Well, the public company boards I sat on were frequently what we called Reg. A offerings, which no longer exists, small offerings and the more I got [00:19:00] involved with them, the more I realized that as I got a little older, that the fiduciary responsibility of being a public company board member was weighed fairly heavily on me.
And, I was chair of the board of public company, a medical device company, where the CFO quit and then the CEO quit. I became CEO and doing all those road shows with small public companies got to me to the point where I realized that the difficulty and small public company had to stay public and to grow was pretty strong. The risks were high and the fiduciary responsibility weighed heavily on me.
And I was always amazed that and boards that would be a board member or two that would sit there and not participate at all. And I felt, [00:20:00] why am I sitting on this board when I got board members that should be working to help? So I decided that I didn’t really need to be on a public company. In the process, I started to serve on a number of private company boards, which I find more interesting because the impact you can have on a private company board, sometimes is much more significant than you can in a public company board.
Raza: [00:20:24] And Ed, we heard this statistic in our earlier podcast episodes that since 2000, I think the number of publicly traded companies is about half from what it was then. It also reflects what is going on generally in the public markets. By implication, there’s a lot more activity in the private markets and as you’ve mentioned, I think that’s probably a better place to contribute as board member.
Joe: [00:20:51] Ed, can you talk to us about your experience sitting on the board of family owned and operated companies. How does it differ from the non family-owned [00:21:00] private companies?
Ed: [00:21:01] Well, you get involved with the pathology of the family and, the family members have long history, many of them from birth and maybe multigenerational and when they go from generation to generation, it’s a trauma of what do you do with dear old dad who’s maybe not as effective as he used to be and the young daughter who really wants to run the business is more capable than dad. So no matter how you try to avoid it, you get into the family . And when I was doing consulting with family businesses, I used to joke that there were three outcomes. That I could help them really address the family issues that would be great, or they couldn’t and decided to sell. But then also the third thing if we weren’t making a lot of progress, the one thing they [00:22:00] could agree on was either to fire me or for me to fire them.
Joe: [00:22:03] Good to have a point of agreement.
Ed: [00:22:07] I had one family business where there were 14 cousins in the business. Three families, two of the families were fighting with the third family and the two families that were fighting came to me, they were I think nine cousins in that group. I persuaded eight of the nine on a plan of action, the ninth, who was the one that actually brought me into the process, was the only one that wouldn’t go along. So, the company is still around. It’s got a lot of visibility and if the world knows what I knew about the company, they would have a very different perspective.
Then the boards frequently are a mixed family, mixed independence. I sit on a family board where, or I did for quite a while, Legal Seafoods, where it was a complete independent board, [00:23:00] except for the CEO. And I I’ve sat on family boards where I was the only non-family member, and then you become the consigliere to the family.
I don’t know if you really are a board member or what you are, but, family business is a very different. I think you’re always kid that you have to be a little bit of a masochist to work with them, but I really enjoy it because they frequently, the culture of the family business is so much more caring about the employees because they look at them as part of their family.
Joe: [00:23:34] Right.
Ed: [00:23:34] And that that’s good or it’s bad because sometimes they keep people around a lot longer than they should. but, you know, the, DeMoulas family takes care of the employees. They really worry about the employees. They have many families who are, employees, uncles, cousins, and the like, and that atmosphere for the employees is a wonderful atmosphere.
[00:24:00] Joe: [00:24:00] You know, one really positive trend that I’ve noticed is that more family owned and operated businesses now have boards. In the past that wasn’t always true. I’m curious what you attribute this trend to – why have family-owned businesses really recognized that having a board might be helpful to them, what has changed?
Ed: [00:24:24] Well, I think part of it is that the visibility of governance has expanded dramatically. I think a good deal of it as to what the National Association of Corporate Directors has done to raise the visibility, the standards of sitting on a board have clarified over the years and, many people who have started their own business had worked for a larger company and have seen that there was some efficacy to the board and family businesses, particularly family members say, you know, we need somebody outside of just [00:25:00] the family to have a role here so that we can listen to people who have had outside experiences, sometimes as an advisory board, sometimes as a fiduciary board.
Joe: [00:25:12] If you’re advising a family-owned, operated business, and they’re thinking about forming a board for the first time, but they’re hesitating and there are several reasons why they do. What advice do you give them?
Ed: [00:25:28] Well, I think that I advise them not to start out with their uncle’s lawyer and their brother’s banker, but that they try to think about, well, why are we having this board? What type of skill sets that we need that would be helpful to this business and try not to pack it with all people you’ve known for a long time. It’s okay to have a couple of people that you’ve known a long time, but it’s very helpful to [00:26:00] think outside of the box. As a little example, I set an advisory board up for moving company. There’s the fellow that started with the moving company. Young man, was growing fast and he asked me to organize the board and that frequently, if you have somebody who knows how to organize a board, that’s helpful.
So I brought in a fellow who’d been very successful in a business, it was a tire business. So moving and tire, maybe they’re not the same, but they serve kind of the same types of employees and so it’s got some similarities. And I have another young man who’d grown his plumbing business significantly. Again, the types of employees are similar. And I brought in the banker that I knew who done a lot of work with small businesses, and it was very successful, because we’d figured out what are the skill sets we need? What would compliment this man? [00:27:00] He needed financial advice. He needed, organizational advice. He needed to have a, somebody who we viewed as a contemporary, the guy that had the plumbing business. We’ve been successful and so it really worked and to his advantage.
So it’s an art, and frequently people turn to their accountant or their lawyer. And sometimes that works. Sometimes it doesn’t. I’ve felt that the accountant may not have the understanding of what the skill sets are needed for a board. And the lawyer might not either, but it’s more likely a lawyer, and recruiting board members, depending only upon the size of the business, can be very different. That moving business was a relatively small business. And we’d paid pitilty. People were interested because they wanted to get board experience. They were willing to work for almost nothing. Now, some other boards, you’re going to have to pay [00:28:00] some money. And so you can attract different types of people.
Joe: [00:28:04] Yeah, you know, I was going to ask you sometimes, you know, one of the things I do is help, businesses form their first board. And one of the things I hear is, well, it’s a lot of time commitment and it’s going to cost us a lot of money. When people say that to you, what do you, what kind of advice to give them? What do you tell them?
Ed: [00:28:24] Well, what’s the return on the investment? If we can bring together five people with great talent, some of which you don’t have in your business who, can help in business development and it costs you $50,000 and it generates a strategy that builds the business from $50 million to $250 million, pretty cheap.
On the other hand, if you don’t put it together properly, it can be a pain in the ass and not be successful. And also private company boards [00:29:00] when there’s a crisis is when the private company board is really helpful to calm things down. How are we going to get through this? How are we going to work our way out of it? I think frequently I suggest that in order to put your foot in the water, you set up an advisory board and you say to the people, I want to try this out for a year and see if it’s what I want, because it may well turn out that some of those advisory board members are not people you’d really want on a fiduciary board and you don’t know that until you’ve gotten used to them for a period of time.
Raza: [00:29:35] In general, as a board member, what responsibilities does serving on a board include? What should every board member understand about his or her responsibilities?
Ed: [00:29:48] Well, I recommend everybody that’s interested in being on a board is the NACD, National Association of Corporate Directors, has a two day Director Professionalism course, [00:30:00] it’s something that I’ve taught in the past. And I’ve taught at both, to a group that were not in the same board. I’ve taught in board where we can do it in a day. And, it really outlines all the fiduciary responsibilities, but also how you need to think of yourself as a board member. Many people sit on boards with no training and I don’t think that’s a good idea.
NACD puts on, generally once a month, a program on different aspects of boards, some private company, some public company boards and so it’s education and I’m a lifelong learner, and I think that if you’re not a lifelong learner in this environment, you probably won’t even know how to handle your cell phone.
Raza: [00:30:49] One thing that seems to be a constant challenge for many companies is refreshing the composition of their boards. The board that may have been [00:31:00] right five years ago is not necessarily the right board today. The level of commitment, and the attention, you know, that’s needed by the board members to adapt to the change as well. What is the best approach of reviewing the composition of the board and offboarding when necessary that you would recommend?
Ed: [00:31:19] That is probably one of the thorniest issues any board faces. One way to address it is to have a regular evaluation process. How the board going, how individual board members are going, how committees are being operated.
It’s a tough process. I have some ex-friends that I have counseled off boards and, as I sometimes say, it’s not who got you here is going to get you there. And, just in line a little bit, with what you’re talking about, somebody [00:32:00] who was an A board member at a $50 million dollar company, board becomes a B member at a 200 million board and a C million and 500.
Some people can grow in it and one of the things I’ve been thinking about in preparation for this is about having three year renewable. The terms, because normally considered to be automatic and renewable. It doesn’t mean you’re going to go off, but that you are being looked at every three years rather than every year. And, a third of the board and is going to be doing is going to be being reviewed by the other two thirds. And at that point, if you get a self-evaluation, you sit down and say, well, this is what the other board members have said about you. They like you, they just think that your time has come to leave. It is a thorny issue.
I was on the Legal Seafood [00:33:00] probably for 25 years and I finally decided last year that, you know, that’s a long time. I know the family very well and how independent can you be when you’ve been there 25 years. I got so involved and I do this with most of my boards, I will talk about “we” rather than the company It becomes pretty important to you that the company is successful.
Joe: [00:33:27] Well, good for you that you actually were thoughtful enough to realize that at a certain point you get so close to the family or to the company that the notion of independence is really in question. I would suggest most board members are not that thoughtful about it. I mean, they don’t really. Think about their independence being potentially compromised.
Ed: [00:33:48] Many people, I’m afraid, sit on boards because it’s prestigious or maybe it’s the money but more often is prestigious and they feel that [00:34:00] it would be demeaning if they have to go off the board and that’s unfortunate, but that’s the way some people feel.
Joe: [00:34:08] You know, we talked a little bit earlier before we started the podcast about what’s going on in terms of diversity. Let’s talk a little bit about the importance of diversity, all types of course, there is skill set diversity and there other times, but specifically gender and racial diversity on boards has become, and appropriately so, it’s very important. Can you talk a little bit about how that has evolved and what impact it’s had on boards, that you’ve been able to observe?
Ed: [00:34:39] Well, here’s a lot of statistics about this. If you start with having women on the board, it’s clear that when you have two women on the board, they’re much more effective than when you have one because , the men on the board treat a single woman on the board differently than they do when there are two and I think it’s clear that [00:35:00] the discussion takes a different level when you have a woman on the board. And I said before the old boy network stuff doesn’t work quite as well. And that’s good. so I think that the increase in having women on the boards has been wonderful for board governance.
As far as people of color, it’s clear that this country’s population’s moving more and more toward having a majority of people of color and they should be represented.
Raza: [00:35:33] Ed, finally, we have a rapid fire set of questions for you.
What have been the two best boards in your board career and why?
Ed: [00:35:41] I had a sneaky suspicion you’re gonna ask me that. And I think that the best boards are the ones where I’ve learned the most. The company PLC Medical, which I was involved taking public, became Chair of the board, became acting CEO. It was just an amazing [00:36:00] experience, going on the road shows, I learned so much, so it’s the boards where I’ve learned. It’s more than whether this is a great board. It’s what, what have I learned in the process.
Raza: [00:36:12] What board best practice do you recommend that most boards should follow?
Ed: [00:36:17] Ethics.
Raza: [00:36:20] Number one rule you would implement for conducting board meetings if you were the board chair?
Ed: [00:36:26] Keeping to the subject and parking issues, if they got too complicated in the discussion.
Raza: [00:36:33] Favorite book or books?
Ed: [00:36:36] Well, I’m reading a lot of Scott Turow who is a wonderful author, but I’m also reading a book on The New Jim Crow, and it is just an amazing book of how do you start to learn and understand the level of how people of color have lived . And part of the [00:37:00] reason it’s so surprising is there are so many, well-placed very successful people of color professionals that are people I’ve known for a long time. And never really understood that they had to say to their kids, “Hey, you can’t go here. You have to carry your driver’s license with you wherever you go.” I understand that. So that’s, that’s kind of where I am right now.
Joe: [00:37:25] It’s something that a lot of us are learning
Raza: [00:37:27] Nonprofit or mission that matters the most to you?
Ed: [00:37:32] I think the one that was most edifying for me was called Crittendon Hastings House. when I became more on the board and then became chair, we were providing transitional housing for homeless mothers, mothers, children, and we merged it with a Women’s Industrial Union, now it’s called EMPath, Economic Mobility Path. And, it developed a program of [00:38:00] taking a poor person, working with them over a five year period, and at the end of that five years, 80% of those people are coming out of that program ,making $18 an hour or more and have saved $10,000. And many of them have gotten degrees in the process. and so being able to transform people’s lives from poverty to stability is just an incredible goal.
Joe: [00:38:28] Ed, it’s been great speaking with you today. Thank you for joining us on On Boards. I hope you and your family will continue to be well and stay safe.
And thank you all for listening today to On Boards with our special guest Ed Pendergast. Please stay safe, take care of yourselves, your families, and your communities as best you can.
Raza, you take care. I hope you and your family are well and staying safe also.
Raza: [00:38:57] Yeah. That’s Joe we’re staying well and safe. Thank you. [00:39:00] And I hope the same for your family as well.
Joe: [00:39:03] Thanks.