48. Bridget Ross: CEO and board member for the first time, at the same time

In this episode, Bridget Ross talks about her career in life sciences and her most recent roles: CEO of a medical device startup, and independent board member of a medical device company; the difference between her private and public company board experience; and the challenge of growing into two new roles during the pandemic. 

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Links

Bridget Ross LinkedIn

ChroniSense

LeMaitre

Quotes

Separating serving as CEO from Board chair – ChroniSense Medical

I felt that the separation of the CEO and Board Chair role would diversify responsibility. It’s a good check and balance for the CEO to have a separate board chair to oversee, to challenge, to support, to help ignite things that are important and help move us forward, break down barriers and support me on those things, or to help put the brakes on if they think I’m going too fast on something.

Big Ideas/Thoughts

Independent Board member as Board Chair of startup company

The intention originally was to find the right independent board member, who would be a good fit for our board, help us build our company culture, and who would have a strong background to support me during this early stage of company growth.

We found a really strong individual who we believed would be a terrific addition to our board. Then I proposed to my two current investors/board directors – We’ve got a really unique person with terrific experience who’s an MD, holds an MBA and MPH, has raised capital as an entrepreneur, sits on other boards, is local, with impeccable education, and is a terrific person!  She also happens to be female.  I think she’d make an excellent board chair for us and that we should seriously consider naming her so.

We were looking for a great independent director and found an amazing board chair!

ChroniSense Medical  

“ChroniSense is a company I joined at the beginning of the pandemic. I signed on and started in February 2020, flew to Israel, met with the group and I was… really impressed with the investors I’d be working with and the leadership team … . Just great people [and] great talent; smart, creative, great problem solvers, and meaningful technology…”

…”the opportunity for ChroniSense … how to support transition from the acute care settings into the community-type care, remote care, and how can we help with chronic care support /  the variety of conditions that need to have ongoing management…”

“… this is not a consumer device, it’s not a health and wellness device, it’s a medical-grade monitoring device that we will put through the FDA offering medical-grade, on-demand, in-the-moment detailed information.”

LeMaitre

“I met the LeMaitre team right around the time I joined ChroniSense Medical as CEO in the late winter of 2020, and when this opportunity came about, I wanted to make sure that I could tackle both my first board role and my first CEO role which were happening at the same time.  Luckily, my main investors appreciated the value of their CEO having other responsibilities like this, building other networks, so they very much supported the opportunity for me to join the LeMaitre board.”

Fuqua School of Business

I was at Fuqua recently; I’d been asked to guest lecture the second-year students of the life science sector at Duke. The last question I was asked was: What were you most surprised about when you took on these two roles, as CEO of ChroniSense and joined the board at LeMaitre?

And I said, “…I was…surprised at how much fun it is to learn these two different things I’d never done before, how much I’m enjoying it, how much I’m looking at it as… another chapter, and how you can have so much joy in every chapter of your professional life – whether it’s being a second year student as an MBA here at Fuqua School of Business at Duke, or whether it’s… carrying a bag for the first time, managing people for the first time, moving to a bigger country or a bigger role or global role, leaving a company, going to another company. I guess what I found so amazing is how much I’ve learned and how much I’ve enjoyed the different opportunities I have been afforded.”

Transcript

Joe: [00:00:00] Hello and welcome to On Boards, a deep dive at what drives business success. 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 governance. Twice a month, this is the place to hear about one of the most critically important aspects of any company or organization; its board of directors or advisors, as well as 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, what challenges boards are facing and how they’re addressing those challenges, and how to make your board one of the most valuable assets of your organization.

Joe: Our guest today is Bridget Ross. Bridget is CEO of ChroniSense Medical, an Israel-based early-stage digital health startup focused on [00:01:00] remote patient monitoring, and she serves as Board Director and Chair of the nominating and governance committee of LeMaitre Vascular, a medical technology company.

Raza: Bridget previously served as a Global President at Johnson & Johnson and President of Henry Schein’s Global Medical Group. Bridget leads the Innovation Investing Council at the Committee of 200.

Joe: She also serves as mentor for the Ignite Accelerator, a MassMEDIC initiative, and for the Canadian Technology Accelerator via the consulate in Boston. In addition, she has served as an advisor to Duke’s Fuqua School of Business. Welcome, Bridget. Thank you so much for joining us today on On Boards.

Bridget: Thank you so much. It’s great to be here with both of you.

Joe: Let’s start with your time at Johnson & Johnson. What brought you to Johnson & Johnson? And talk a little about how you progressed while [00:02:00] you were there and what you learned.

Bridget: Sure, absolutely. Again, thanks for having me. I joined J&J almost right out of university, out of college in Canada. I had a Bachelor of Business degree, a Commerce degree from a western university called University of Alberta, and I joined as a sales rep so I carried the bag and for 29 years worked my way up from a sales rep to a variety of roles in sales management, product management, business unit director in global strategic roles.

Halfway through my career at, at J&J, I moved from Canada to the US so I left the role in Canada as a business unit director for a large group of a team there, and then moved to the US for a global role and held a number of roles in the pharmaceutical and med tech sectors at Johnson & Johnson.

My last couple of roles were two global presidents, one for the women’s health group and one for the otolaryngology, ear, nose, and throat group, and the final position before I left was head of commercial operations [00:03:00] for the North America Medical Group. It was a very large responsibility because we were supporting a number of businesses in the med tech sector from the commercial operations aspect, so there were about 5,000 employees in that group that we were supporting so it was quite an interesting role across the whole sector. I really enjoyed that.

Joe: You started with a business and commerce background that ended up in life science. What drew you to the life science piece?

Bridget: That’s so interesting because, it’s been a while now, when I interviewed for jobs, looking to get into sales and marketing, really, I guess I would say marketing, because that’s what I wanted to do was get into the business side of things, a lot of those roles where people would say, “Really, you should start off in sales, carry a bag, meet with the customer, that kind of thing.” 

I fell into a role as a medical sales rep. I wasn’t seeking it out necessarily, but I thought Johnson & Johnson, at the time, Janssen Pharmaceutical, seemed like a great company to be part of, so I thought, “Yeah, I’ll do that. I’ll work in sales and meet doctors and have a territory,” and [00:04:00] I so enjoyed it. It was in Western Canada and they have a very large territory there, and then eventually I moved to Ontario near Toronto and had a territory there and moved into the office to become a marketer. 

Then I would say one of the most interesting jobs I had, in fact, I just did a talk at Duke on Friday with the second year MBA students, and one of the questions was, what was your most interesting job? And I have to say the first time I managed people as a sales manager at J&J in Canada was probably one of the biggest growth opportunities where you’re learning to get results through others; hire, develop, reassign, sometimes let go of team members, watching as they were promoted and so on, so it was really, really interesting. 

The whole sales side of things and life sciences was something I fell into early on with J&J and thought the opportunity to get into marketing seemed good, and I just did that shift that pivoted into life science and learned the therapeutic areas, and maybe more than others, I had to spend more time on science and biology than other people who might have gotten into those [00:05:00] jobs at the beginning.

Joe: Did meeting with the customers for those years really prepare you to take a more active kind of strategic role in any way? In other words, did you have a sense of who they were and did that help you as you grew into bigger and bigger roles at J&J?

Bridget: I think so. I think it’s a great way to start for a lot of people’s careers, you are spending time with the end user, the customer. In our case, it was the physicians on the pharmaceutical side of the business. I think you also hone your communication and influencing skills, your understanding, and your listening skills. What are they looking for? What kind of patient panel do they have? Is it a rural doctor? Is it someone who’s in a city center with lots of specialists to call on? What are their needs? And you have to really pick up your listening skills and your ability to have a strong pregnant pause so you can ask a question and not answer it. Wait till they kind of jump in, and learn that. 

I think that’s really important. So some of the things you learn as a sales rep in a sales job, [00:06:00]and it could be in anything, it could be retail, it could be door-to-door vacuums, whatever it could be, I think getting that face time with the customer is really important and it sets you apart as you go along in your business career. I think a lot of people who have been successful have had that same start in business.

Joe: Yeah. At some point you moved to Henry Schein’s Global Medical. How long were you there, and what did you learn there that was different from maybe what you were doing at Johnson & Johnson?

Bridget: Yeah, that’s a great question. I had spent almost 30 years at J&J on the R&D side of things, innovation side of things, and really, really enjoyed that, and this is an opportunity to move into another kind of industry, distribution of healthcare, distribution of these sorts of products, which was a really interesting role with great people. 

It’s just another side of the business I hadn’t spent as much time on in the commercial operations roles and things like that. At J&J, it was much more internally focused on those sorts of roles and this is much more about getting the products out to the customer so I really enjoyed that. I led the medical group, and it was just great, great talented people and a [00:07:00] wonderful experience.

Raza: Bridget, let’s talk a little bit about ChroniSense. Introduce us to the company. What is the company? What is the medical device? What does it do, and what are you guys trying to accomplish?

Bridget: I’m so happy to do that. ChroniSense is a company that I joined at the beginning of the pandemic, so right before everything changed for all of us. And in the ensuing time from leaving Henry Schein to joining ChroniSense, I had done some work with the MassMEDIC Association, as you both mentioned at the beginning, and the Canadian Consulate working with small startup businesses and CEOs in their early stages with their strategy and preparing to go to market, and I thought that seemed awfully interesting. 

As I began to think about what is it I wanted to do next, I thought maybe I would try my hand at that sort of a thing. I chose this company to take on that first CEO role at ChroniSense at the beginning of the pandemic, and our company is very much focused, as you mentioned at the beginning, on remote patient monitoring [00:08:00] and how to really provide those insights to clinicians, what they’re looking for, to truly manage and monitor their chronic care patients, so whether they’re focusing on hypertension or other sorts of conditions, how can we help support that?

Raza: What measures in particular is this company focused on? Because the general trend of kind of healthcare and maybe the hospital coming to you now, and the pandemic accelerated this, there’s a huge tailwind to that trend. What are the particular areas or indications that this company is focusing on? 

Bridget: You’re right, tailwind is exactly how I would describe it, and not knowing that when I took the role in how much healthcare has changed, from us all wanting to avoid being in acute care settings to being at home as much as possible. My own mother, who’s turning 85 in November, does so much of her medicine on telehealth now, and much more than you could ever have imagined she would be doing and all people are looking at care differently [00:09:00] now. 

I think the opportunity for ChroniSense, and for other companies who are trying to do the same thing, is How to support that out of the acute care settings into the community-type care, remote care, and how can we help with chronic care support, as I mentioned, in terms of the variety of conditions that need to have ongoing management, which is so important. 

For ChroniSense, we’re focusing on things like blood pressure, SpO2, which is oxygen saturation, pulse rate, respiration rate, other sorts of metrics you can glean from a worn device, a wrist-worn device, that allows you to understand what’s happening with your vital signs using an app and a cloud to communicate to your clinician so they can better manage your condition. 

I think what sets us apart, which is important, because there’s a lot of wrist real estate out there right now, a lot of people are wearing watches and bands and rings and all kinds of little things around their digits and so on, which is great, finger rings and ear devices – a lot of these [00:10:00] tools are very helpful, they’re health and wellness devices. They’re giving people a lot of understanding for how their trends may be looking for the day or how they’re performing, if they’re exercising and that kind of thing, and all that has some merit and some value for sure. 

But this is not a consumer device, it’s not a health and wellness device, it’s a medical-grade monitoring device that we will put through the FDA as a med tech device, so it’s a little different and we believe we’re unique in that regard to offer that medical-grade, on-demand, in-the-moment detailed information.

Raza: Maybe talk a little bit about that. This device doesn’t look like that it only measures from the back of the wrist, but it has additional wrist real estate sensor. We can’t show it on the podcast, but we can describe it. But it also uses a very unique breakthrough technology to make those measurements. Talk a little bit about those.

Bridget: Yeah, absolutely. Yeah, it’s great. Many of the devices we’re using now for wellness devices are taking information from the back of the wrist. [00:11:00] Capillaries there that can tend to be impacted by temperature changes if you’re too cold and so on, and are just not as elastic in terms of the way they operate in your body.

What the early inventors and founders of our business did was to begin taking measurements off the inside of the wrist – on the radial artery – on the inside of your wrist rather than the outside, giving you a really robust signal quality and a good reference for those measurements, and so that is unique and patented and our signal acquisition, our algorithms, are depending on that rich signal from that radial artery from which to draw the measurements, which we believe will give us those can-be-counted-on measurements.

Raza: That’s really why you would be able to measure blood pressure which normally one associates with actual mechanically sensing the pressure on an arm cuff or something, but you will be able to use this technology to measure blood pressure.

Bridget: Yeah, that’s right. Raza. Blood pressure is really difficult to measure. It’s usually done with a cuff on your upper arm, maybe on a cuff-type device [00:12:00] on your wrist. We’re looking to get a device out into the marketplace that is comfortable and easy to wear, sort of like a watch, but it will still give you that medical-grade measurement from the optical sensor on the inside of the wrist.

Raza: What’s the regulatory way for this product to come into the market?

Bridget: We’ll be filing through the 510(k) pathway for some of the parameters we have, which would be things like pulse rate, and respiration rate, SpO2. 

Raza: Talk a little bit about the fundraising for ChroniSense, how much has the company raised and are you guys looking to raise more to get this through to the FDA?

Bridget: Yeah, absolutely, and I know this is not meant to be a commercial for my fundraising, but we are beginning that process as we get into Q4 here of 2022. The company has up until now deployed about $20 million very efficiently to create the [00:13:00] first version of our technology; the algorithms, the signal quality and so on that I’ve spoken about as well as the app and the supporting cloud, and we’re looking to raise about $20 million to help complete much of the clinical work and prepare us for launch. 

We are set for FDA submission for our first three indications, which are for SpO2, pulse rate and respiration rate, and we’re doing our clinical work now for blood pressure, which we will file next year, so this next $20 million that we’re bringing in will really support us for an early alpha launch and market readiness shortly thereafter.

Raza: Well, that’s incredible and very exciting. Maybe talk a little bit about how the CEO role for ChroniSense came about and how you connected with this company.

Bridget: Yeah, for sure. As I mentioned, we were living in Boston and I had been helping with some mentoring through the MassMEDIC Ignite Accelerator and the CTA at the Canadian Consulate, and it is such a refreshing experience [00:14:00] working with these sorts of small businesses. It reminded me of one of the businesses I ran for J&J, which was an acquisition that we brought in and some of the early experiences of working with companies at those early stages is really invigorating. 

I had been looking at two or three different companies who were looking for a CEO that I thought might be interesting for me to consider when I was approached by a recruiter that I had spoken to a year earlier, and he reached out again to see what I was up to and mentioned there was this company that was looking for a US-based CEO. As Joe said, it was an Israeli startup and they had gotten to the point where they felt they were ready for a US market entry, let’s find a US-based CEO who’s got a commercial background who can help bring the products to market here. 

I met with the group and I was just really impressed with the investors I’d be working with and the leadership team I would be taking over from, and just great people, great talent, smart, creative, great problem solvers, and a really meaningful technology because I think if we look [00:15:00] at chronic conditions now and how they’re managed, look just at hypertension alone, there’s like a third of the country dealing with something related to hypertension and they probably doesn’t even know they have high blood pressure, and so the opportunity to make an impact there and to do it swiftly was really interesting.

I met them here in Boston. I met them in Israel because I wanted to meet the team and see what was going on there and what they were all about. I signed on and I started in February,2020… and I flew over and had a great 10-day trip and then didn’t go again for two years because of the pandemic. 

We managed everything via Zoom four days a week for two years because of course our weekends don’t overlap so we spent Monday to Thursday, most of my mornings, talking to folks in Israel and making progress on things, so it’s really interesting in a kind of a cool way.

Raza: Bridget, that’s great. It often is about finding a match when finding a CEO and we’re so glad that you found ChroniSense to be a good match for leading the company.

Bridget: Yes, thank you. It really was, yeah.[00:16:00]

Joe: Let’s talk about your board. How many members are there? 

Bridget: We have five positions on the board; four are filled, myself, two representatives from Rainbow Medical who are our main investors, and we recently, this spring, added on an independent board member who’s taken on the chair role at our board, and there’s one opening depending on fundraising. 

Joe: Let’s talk about the fact that the investors were wildly supportive of bringing in an independent to chair the board. I think that’s somewhat unusual, but I think it’s a terrific way to go if you have the right person. How did it come about and what were those conversations like?

Bridget: I think you nailed it when you said the right person, so the intention originally was to find the right independent, so let’s bring someone on who’s going to be a good fit for our board and help build our culture, who would have the right background to support me in terms of a good medical understanding, not necessarily to be a doctor, although this person is a [00:17:00] doctor, but a good medical understanding. Ideally, someone who’s been an entrepreneur, raised money, advised… so we were looking for a lot in one person, and we found this really strong individual who we thought would be terrific, and when we approached her to join the board as an independent, she was excited, so that was great. We had her on the board which was fantastic.

Then I spoke to the two Rainbow investors and said, “We’ve got a really unique person here – a terrific woman who’s an MD, holds an MBA and MPH, who’s raised money, been an entrepreneur, is on other boards, is an advisor from the local area – easier for me to get to and talk to for different things. We’re meeting tomorrow for coffee on a few things. She went to Harvard, and is a terrific person.” And I said, “She’s a woman. Obviously, I am. Wouldn’t it be great to lean into that a little bit and name her as the board chair? I think it would be terrific. I think she’s already going to add value for sure in her independent role, but making her board chair [00:18:00] I think could be really terrific for our business.”

I didn’t even have to get all the pieces out when they were nodding their head and basically saying they were in full support of me, which I’ve always appreciated. If you think that’s right thing for the business, Bridget, then that’s what we’ll do –  that’s how they’ve approached it. We’ve had lots of good dialogue and debate. We do debate, trust me, and we do dialogue and lots of challenge back and forth, but in many ways, if they think I’m steering us down the right path, then they’ll go along with it, which has been great.

Joe: Great relationship to have with the investors. In terms of having an independent board chair separate from you, we’ve talked a lot on this show about the growing trend to have the CEO and chair separate for a whole bunch of reasons, but I’d like you to talk about what advantages it has proven to have for you.

Bridget: That’s great, and it’s funny you say that because when I was asking these two board members from Rainbow Medical to consider [00:19:00] this concept, they thought I was leading up to that I wanted to be the CEO and the board chair, because that’s often something that’s been done, and I said, “No, that’s absolutely not what I want to do.” 

I do want to do what you said, Joe, and that sort of separate the board chair from the CEO, and I felt that it would just sort of… just diversify responsibility. It’s a good check for me. It’s a good check and balance to have the CEO have a separate board chair to oversee, to challenge, to support, to help ignite things that are important and help move us…break down barriers and support me on those things, or to help put the brakes on if they think I’m going too fast on something. 

I think that’s really an important element of this split out between the CEO and the board chair. Without necessarily having delved into some of those newer trends, I sort of learned that as we were going through this, I believe that’s what’s happening more and more, and I have a couple of advisors I brought on board – who are not on the board – but [00:20:00] advisors to me as a first time CEO, woman raising money in a challenging market. I wanted to have good advisors around me who’ve done it before and can help me skip through some of the pitfalls that could occur and they really applauded it and encouraged this approach to having this separation of the board chair and the CEO and felt that when it comes to VCs looking in at what we’re doing, they would also appreciate that kind of governance and that check. So it just worked out really well all around and I think it’s been well received and the new person coming in has also really embraced her responsibilities. It’s been great. 

Joe: When the chair and CEO are separate and they are great partners, it can really work, so what makes your board chair a great partner? 

Bridget: That’s really a good question. When we met at the beginning of the year – it sort of started I think in the January timeframe shortly after the holidays – we were [00:21:00] introduced by another advisor that we both know and worked with. This individual was trying to help me find the right independent board person, and I described what I was looking for and I said that at the end of the day, all those skills and experiences and life events are important, but the person has to be someone I can connect with and work with and be a true partner with, Joe, like you said, and so this person who connected us said, “I think I’ve got a person in mind who would be terrific for this, but let me think about it.”

 He decided to introduce us with an eight-paragraph note. Four paragraphs, there’s a lot of thought put into this, four paragraphs for why I needed this person on the board very much for the skillset that they had, but also four paragraphs on why this person would benefit from the opportunity and role to work with someone like me at the stage the company that we’re dealing with and so on, and so forth.

 He set up a bit of a [00:22:00] match made in heaven with our different skill sets, what we both benefit from with this, and then sort of threw us together on a couple of calls and quickly we realized it was a good fit from a personality perspective. We both wanted to learn and grow in our roles and see the success of the company together.

From the very get-go, it was with a shared common goal that she took on this role and that I welcomed her to the position, and I think if we didn’t click, that would’ve been challenging because I think it’s important in a role like this – a small board…there are four active people, but two in Israel, two here, fundraising, lots of work, a small business, lots of things to consider – you want to make sure you can have someone to turn to who is in your corner, and that was really important for me.

Joe: It’s great that you had someone that really had the insight to match the CEO and the board chair, and it really has come together.

Bridget: That was incredible, and when we think about giving back in ways to make connections on other people, he could have just said, “Here, people, meet each other. [00:23:00] Here’s an email, you’re connected. Here’s each other’s LinkedIn profiles, good luck to you.” But no, he took some time. I literally counted the paragraphs because that was a very long effort, and it was quite an impressive effort on his part, for sure. 

Joe: Are you letting him buy stock in the company or something like that?

Bridget: Yeah. Yeah. We’ll think about it, right?

Raza: You are also a board director at LeMaitre Vascular. Tell us about that company and how that role came about. It’s a publicly traded company, but what is LeMaitre working on?

Bridget: LeMaitre is a vascular surgery company. They are in the Boston area –  originally, a family company that has now, as you said, been public on NASDAQ. A great company, executive team with strong financial acumen across all the key leadership positions, with good controls of their business, great commercial mindset, in particular, great on strategic acquisitions for growth – and they’ve done a lot of that over the years very successfully, tucking businesses in and bringing them in to their own [00:24:00] manufacturing and so on. 

It’s been really a pleasure meeting this group. I met them right around the time I joined ChroniSense in the late winter of 2020, and when this opportunity came about, I wanted to make sure that I could tackle both my first board role and my first CEO role because it was sort of happening at the same time, and luckily, my main investors appreciated the value of their CEO having other responsibilities like this, other networks, other learnings and so on, so they very much supported the opportunity for me to join LeMaitre. 

In meeting with the LeMaitre team, I was very impressed with their professionalism, their board, how efficient and how well they run things. It’s a really fine tuned machine in terms of how they work, and it was a real privilege to be asked to join.

Raza: It is often wonderful if both parties or both companies benefit from [00:25:00] having on one side you have the CEO perspective that you’re bringing to that board and on the other side, you’re getting benefit from the perspective of the board.

Bridget: Right, I mean, at the time when I joined LeMaitre, everyone in the world was dealing with this pandemic, what to do, what’s going on? And I had a bit of a unique perspective to be managing a new company out of Israel, and they were, as you remember, kind of cutting edge in terms of what’s happening with vaccinations and how they were managing controls with their employees there, so there was a lot of shared learning at that time during the pandemic. My background was steeped in med tech and some of their board members have different backgrounds, so I was able to offer some of that on that board (LeMaitre) and have enjoyed that opportunity.

Raza: Perfect.

Joe: So tell us a little bit more about the board. How many members and what does the board look like, if you will 

Bridget: Sure, absolutely. There are three internal members of the board. There’s the CEO / chairman of the board. There’s the CFO and the president of LeMaitre, all on the board, and [00:26:00] then there were three independent Board directors. I’m the fourth of the independents, so there are seven of us when I joined and a board secretary who’s incredible.

We met over the course of the pandemic all virtually, of course, until I guess it was last summer… I met people for the first time in person shaking hands carefully outside with masks and so on in the summer of 2021, and we actually have just recently increased our board, so we’ve just added a new board member. Her first meeting will be in a couple of weeks, in middle of October, and yes, I said her, – we’ve added another female to the board, so the first six individuals on the board are men, I was the only woman, and we’re adding a second woman now.

We made a position. We didn’t have someone leave or change seats as it was in my case, where I replaced somebody who was on the board who had unfortunately passed away. I joined that seat. In this case, we’re actually making a board position for this new person to come on, so I’m [00:27:00]really excited to welcome her, and as you mentioned, I’m chair of the nom and governance committee, so it was really wonderful to be part of that whole process, a great learning, and really wonderful.

Joe: Terrific experience. Did you add the seat to add diversity or was there some other reason?

Bridget: Yeah, a combination. We really looked in the last year or so what our near and longer-term goals are for the company and our board skillset and thought we could probably do with looking at our skillset, and are there some areas maybe to shore up here and there that might warrant us looking at another individual who had some background on the commercial side, med tech side, some good quality and regulatory experience, and that sort of thing. And yeah, in terms of diversity…diversity of thought, and skillset, and background, and so on, was also important and a big consideration for us to look at welcoming someone new on the board and everyone embraced it and it was really a priority for all of us.

Joe: You are the CEO of a small, obviously private [00:28:00] company or very early stage, but you’re on the board of a publicly-traded company. What kinds of issues are discussed in the boardroom of this public company that you don’t really encounter at the company for which you’re the CEO? 

Bridget: Right. That’s a great question. When I think about the agendas for both meetings, much of it is the same in terms of the formalities of resolutions and things like that, the financial summaries that are going on, how we’re tracking the budget and all those things, are you meeting your goals and so on. 

The bigger difference, of course, with LeMaitre is focusing on the communication outside of the company as it’s a public company, and for us it’s obviously a little bit different. We’re still trying to make sure we’re managing and having good financial controls. It’s just a different audience for that, and that probably is one of the…the bigger things to think about. 

Then of course, as you can imagine for a public company, there’s more of the bigger board conversations, whether it’s around ESG and other sorts of things that are trending, or diversity, or larger acquisition [00:29:00] – things that can take on a whole life of their own in terms of a greater conversation – whereas in my organization, we might go deep on the clinical trial, and we get a little more tactical on my board, so we all have objectives…financials to meet…goals, but we’ll go a little more tactical on my private company board than we will obviously at the public company. 

Joe: Why did they decide to make a relatively new board member the chair of their nom-gov committee?

Bridget: That’s a good question. I started in April 2020 and at that time I was part of the committee. And at that time, one of the other independent board directors was chairing that committee on an interim basis. The person I replaced had been the chair before, and I was there for about…I want say six, seven months or so, which would’ve taken us into the end of 2020, and looking at just how things were going, they probably thought, Well, this is working out pretty well. She’s a good addition to the board and has [00:30:00] a lot of energy around how we do things, are we functioning well? Are we checking what we’re doing?

I ask a lot of questions, but not an inordinate number of questions, but I’m interested and I’m bringing some new thinking, a new perspective, and I was the first diverse candidate that they brought in, and assuming of course, that that had worked out well, they may have thought, Let’s see if we can add to that.

I think it’s just really about assessing my performance on the board and my fit with the board and my willingness and want to see the company grow that made them enthusiastic to make that decision and everyone had to vote on it, of course, so we have all the normal procedures to do so, and I was delighted to be asked and accepted the opportunity.

Joe: Sounds like it’s been a pretty wild couple of years in your professional life, and really good ones.

Bridget: Yeah. They really are. It’s funny because when you mention Fuqua in my introduction – I was there last week I’d been asked to guest lecture their second year students of the Life [00:31:00] Science [MBA] sector at Duke, and the last question I was asked by the last person… before it’s over, the person said, “What were you most surprised about when you took on these two roles, as CEO of ChroniSense and joined the board at LeMaitre?” And I said, “I guess I was just really surprised at how much fun it is to learn these two different things I’d never done before…how much I’m enjoying it, how much I’m looking at it as yet another chapter, and how you can have so much joy in every chapter of our professional life, whether it’s being a second year student as an MBA here at Fuqua School of Business at Duke, or whether it’s… carrying a bag for the first time, managing people for the first time, moving to a bigger country or a bigger role as a global role, leaving a company, going to another company, all these things can be so interesting, but they are just other chapters in your career and I guess what I found so amazing is how much I’ve learned and how much I’ve enjoyed the different opportunities I have been [00:32:00] afforded.”

Joe: Fantastic. Bridget, it’s been great speaking with you today. Thanks so much for joining us.

Bridget: It’s been a real pleasure. Thank you both for welcoming me.

Joe: And thank you all for listening to On Boards with our guest, Bridget Ross.

Raza: Please visit our website at OnBoardsPodcast.com. That’s OnBoardsPodcast.com. We’d love to hear your comments, suggestions, and feedback. 

Joe: Please stay safe and take care of yourselves, your families, and your communities as best you can. And we hope you’ll tune in for the next episode of On Boards. Thanks.

47. Coretha Rushing: companies are well-advised to act as if “human capital” really matters

Coretha Rushing talks about the important role a Chief People Officer plays in management and on the board.  Many companies say people are their most important asset, in this episode we talk about what an organization should do to reflect that priority. 

Thanks for listening!

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Links

Coretha Rushing Bio

Quotes

I haven’t worked at any company where they don’t say people are our most important asset. I’ve not worked at any company where they say they want to operate in an ethical way and that people should be respected in the workplace. But we hear, unfortunately, every day, both in the news and personal engagements with friends and family members, that there are things that happen in the workplace every day that should not be happening, and that must be impacting how people are showing at work and their effectiveness when they are there.   

I think what has changed dramatically with the pandemic and the lack of talent in the marketplace is that smart companies are looking at their talent very differently. The role [of CPO) becomes critical, and they’re sitting there with the CFO talking about the other major assets of the company. When I left Coca-Cola and people contacted me about opportunities, I wasn’t interested if it didn’t report to the CEO.

I was very fortunate to work for CEOs who felt it was important I attend the strategy sessions, to ensure I was aware and informed on real-time basis those things impacting our business

The reason I’ve had the benefit of being contacted about so many board opportunities is because so many boards have lack focus on their people assets and  are deficient in the area of human capital.

It’s amazing to me when I’m sitting on a board among former and current CEOs and COOs and CFOs, how little they understand about the basics in managing, engaging and retaining talent.

Productivity is not “I’m sitting at my desk all day long.” Productivity is you ask me to deliver X by X date with these performance parameters, and I’ve checked the box on each one.

Big Ideas/Thoughts

For the majority of time when I grew up in HR, the majority of employees in the human resource function were women. But when I reflected on my own career, most of the time, the most senior people tended to be men.

Most companies spend a lot of time, effort, and money on the acquisition of their human capital, but like people who save their whole life for something like a brand-new car and then later you see it and it’s got dents in it and it’s not clean, and you’re thinking, “I remember this guy wanted this car, and now look at it.” Sometimes I feel like companies acquire people and then they don’t take the time to understand what the asset is that they have.

All of my boards have been very, very different, but they all have a common thread, which is the expectation is not that you run the company, but that you weigh in on the runnings of the company; that you hold the CEO and the leadership team’s feet to the fire around what they espouse as the strategy and whether or not they’re staying on track to the strategy that they’ve communicated.

When I was at the Coca-Cola Company and Equifax and things happened around the world, it had an impact to us in the US.  Even though we may want to believe that we’re the dog wagging the tail when it comes to talent, I’m not always sure that that’s the case.

In my mind, companies are better, and our country is better when we have people from all over working and making us a better place. I’m hoping the pendulum will swing back to the middle because I think there are many organizations that know they have benefited from having diversity of talent in their talent base.

I think this whole focus on employee engagement is trying to find that happy medium.  I do believe that people want to come into the office, but I also believe that people don’t think they have to come in every day.  Management believes some employees are not productive and they’re using “productivity tools” to test, but employees believe that they are hugely productive.  I think what we are missing here is productivity should be based on outcome, not just physically being at a particular place, at a certain time.

Transcript

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. On Boards is about boards of directors and advisors and all aspects of governance. Twice a month this is the place to hear about one of the most important aspects of any company or organization, its board of directors or advisors, as well as 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, the challenges boards are facing and how they’re addressing these challenges, and how to make your board one of the most valuable assets for your organization.

Joe: Our guest today is Coretha Rushing. Coretha has over 30 years of corporate business and leadership [00:01:00] experience. In 2000, she became the first woman and black EVP and Chief People Officer for the Coca-Cola Company, and she also served as the Senior Vice President and Chief People Officer for Equifax, a $3 billion global credit and data analytics organization based in 24 countries.

Raza: Coretha has served as President of her own human resource strategy and executive coaching firm, CR Consulting Alliance. She is also a Managing Director of the ExCo Leadership Group, a board member of several companies including 2U Inc. Benefitfocus, Plastique and ThredUp and served as external board advisor for Spencer Stuart.

Joe: Coretha has been active in several professional and community organizations, including the Society for Human Resource Management, and has continued to serve as a panelist and keynote speaker [00:02:00] at various business, university, women and human resource conferences. Welcome, Coretha, its have you here today.

Coretha: I’m glad to be here.

Joe: Thanks. Let’s start with your background as a Chief People Officer first at Coca-Cola. Tell us a little bit about that experience.

Coretha: Well, obviously, it’s a great company and I always say to people, the gift that keeps on giving is the fact that it’s such a global company and it’s so ubiquitous, so there’s no place in the world literally you wouldn’t go where you wouldn’t see a Coca-Cola sign. And as a lifelong avid traveler, one of the perks of being in that opportunity was that I actually can say I probably have friends everywhere, and any time I travel, I reach out to a former colleague and say, “Hey, I’ll be in Madrid,” and they’re like, “Oh, absolutely. Make sure we connect and have a Coke.” It was a great experience and I have a lot of lifelong friends from that time at the company.

Joe: How was it to be the first woman and [00:03:00] black EVP?

Coretha: Well, I was the first woman and black EVP to lead HR. Luckily when I came into that role, there were other black women who were in executive positions, so that was a good thing. In fact, one of my first clients when I joined the organization, Ingrid Saunders Jones, ran the foundation for the company.

I think what was probably unique about it was, one, that I was the first woman. I was really surprised for the longest, I didn’t know that. Only because, as you know, for the majority of time when I grew up in HR, the majority of employees in the human resource function were women. But when I reflected on my own career, most of the time, the most senior people tended to be men.

If anything, I think it helped me form an opinion and a thought around what kind of leader I wanted to be as a Chief People Officer of a company. I mean, it was things that were little, like I can remember getting in the elevator, I worked at IBM, I worked at Pepsi. First, I worked at Macy’s as a corporate recruiter when I first graduated from grad school, [00:04:00] and I can remember getting in the elevator with the very senior leaders of those organizations in HR and they would not speak to employees. They would just get in the elevator and they would just not say anything. 

I remember saying, ” If I ever get a job like that,” not that I actually aspire to that job, but early on in my career I kept saying, “if I ever get a job like that, every morning when I get in the elevator, no matter how I feel, I’m going to start the conversation,” because the more senior you are, if you don’t talk, no one is going to talk. 

Joe: Yeah, 

Coretha: And so I would always get in the elevator and say, “Good morning, how are you?” And interestingly enough, but not surprisingly, they know who you are. You may not know who they are.

Joe: Mm.

Coretha: But once you do that, I literally remember having somebody say when I was retiring from Equifax, “I think you were the only executive that day in and day out, I remember seeing you, we had a big data breach and this guy kept saying, ‘I thought we were going to be okay,’ because every day you come in, you’d go to the cafeteria and you talk to people and he would say to me we had millions of [00:05:00] attorneys running around doing the breach,” and we were all holed up in these meetings, and I made a point every day, no matter what, to go down to the cafeteria and have my lunch in the cafeteria, not in my office because I know how I felt when I thought my company was in crisis if I didn’t see the executives. I just thought they were up there planning something awful,

Joe: I think from a leadership point of view for the director of HR, or actually in this case, Chief People Officer. Boy, great way to lead by example.

Coretha: I didn’t think about it. It’s a no brainer, and it didn’t cost you anything.

Joe: While you were a chief people officer there, you played a significant role in the resolution of the largest US racial discrimination lawsuit. Just tell us a little bit about that and what your role was in helping resolve it.

Coretha: Well, it was a very painful process, to say the least. I would say my role was to be the connection between the company’s board, and one of the things that we did as an aftermath as part of the settlement was we created, if you will, another [00:06:00] board that oversaw any people and process and organizational changes that we made as a result of the lawsuit.

The class was never settled, but the company was committed to making positive changes, and I would say those changes are reflected even today at the company, and so we had to meet with the plaintiffs and their lawyers, and we had to identify a person who would lead that panel. It ended up being the former Secretary of Labor, Alexis Herman, and they could put three people on this panel. The company could put three people on the panel, and I was kind of the connection between the two to make sure that what we were doing in terms of process, programmatic changes, that our board understood and supported it, and that this board supported as well, so that was probably the biggest role that I played, making sure that these two parties understood that we had a common goal and in the end, it all worked out because Alexis Herman then joined the Coca-Cola board of directors, seeing how effective it was, I think.

Joe: You said you created a second board just to oversee [00:07:00] this aspect of the culture, so to speak.

Coretha: That was one of the agreements that we struck with the plaintiffs, that we would create it. Again, obviously if someone is alleging discrimination and you say, “Okay, we’re going to settle and we’re going to do better,” that doesn’t sit well, right? We want to have an independent body overseeing what you’re doing, and like a regular board, we met on a regular basis quarterly to apprise Alexis Herman and that board of the changes that we made. We shared data, the same thing we were sharing with our own board.

Joe: Were any members of your board on that board?

Coretha: No it was a separate body and we had a lawyer from the EEOC. We had a person who was a subject matter expert in this in terms of adverse impact. Each person on that board brought a certain capability and experience that when looking at our programs, they were not just looking to say, “Oh, I think it’s good,” but they could look at it from a technical perspective in terms of whether or not they felt like it was addressing the issues that had [00:08:00] been raised.

Joe: Years later you became Chief People Officer at Equifax. In what ways was that different? What was your experience out there? You served for a pretty long time, I believe.

Coretha: Yeah, I was there for 13 years and I tell you the most interesting thing is, first, my decision to look for a mid-cap. When I left Coca-Cola, I really was burned out and I took a break, and when I decided to go back into working full time in a corporate environment, I was very purposeful about what I wanted to do. I’d only worked at basically Fortune 50 companies; IBM, Pepsi, Coca-Cola and I wanted to be in a company where I felt like each person kind of matters. When you start on a project and it end on a project, you know what it looks like. The bigger the company, the more things kind of morph as they move around the organization.

But what was probably different is I joined Equifax in 2006 at the beginning of the big recession at that time, and going into a credit bureau and data analytics company, it was mind boggling, the information the company [00:09:00] had and the trends and data that it was showing, and I never forget one of my first meetings, some data and analytics people came in and they had these charts and they were saying at the very beginning of 2006, because of the many mortgage tools and products in the market, that they were predicting a major mortgage meltdown.

This is the first time we had all these special mortgages where you could basically use your mortgage at an ATM machine and take money out, and I remember sitting there going, “I’m not sure that makes sense. I think these guys are just kind of overreaching, overreacting,” and sure enough, a couple of years later, those charts, the lines on their charts showing the defaults and mortgages, particularly in certain parts of the US was spot on.

The data told the story, and so it was really interesting being in a company that was more of a B2B company after coming out of a B2C, a large consumer company. It was also very different going to a company where people were very clear, or at least they thought, they were clear around what [00:10:00] IBM delivers, what Coca-Cola delivers, although there are so many different jobs in those companies. People would say to me, “Where do you work?” “I work at IBM.” “Oh,” like they knew what you did, right? But they knew work at computers.

Joe: Yeah.

Coretha: When I worked at Equifax, people would say, “Oh, is that the the credit bureau?” And what I would say to people is usually if people say to you, ” Oh, is Equifax a credit bureau?” They have good credit and they’ve never even thought about it. If they had bad credit, they know exactly who you are because often when credit is denied, the vendor will say, you know. I was at Hertz one time at the counter and a woman in front of me was denied access to rent a car, and the guy told her that the credit thing came back and he said, “Equifax said we can’t give you a car,” so I’m kind of like, “It’s not us.”

Joe: Yeah, you didn’t mention that you worked there. 

Coretha: Yeah, that’s not totally right. Yeah. It’s a very different industry and a different awareness that the marketplace has of the company. 

Joe: One of the things we talked about a few weeks ago that really [00:11:00] stuck with me is something you’ve said, many companies say people are our most important asset, but they don’t act that way. I really thought about that and there were a number of examples, so one of the things was, who does your chief people officer, or if you still call it Director of HR, who do they report to? Talk about the importance of having that person in a place where they can have a real impact on the people, “the most important asset of the company.”

Coretha: Well, if you think about it, people are probably, if not the greatest hard asset a company has in terms of where they spend their money. It is probably the second or third. It’s pretty high up there, so even if you’re a large technology company, like an Equifax where you’re buying lots of data, the three things we spent the most money on was data, people and the analytics, the technology to massage and come up with something from that data, to have that data tell a story. 

Most companies spend a [00:12:00] lot of time, effort, and money on the acquisition of their human capital, but like people who save their whole life for something like a brand new car and then later on you see it and it’s got dents in it and it’s not clean, and you’re thinking, “I remember this guy wanted this car, and now look at it.” Sometimes I feel like companies acquire people and then they don’t take the time to understand what the asset is that they have. 

Now, I think what has changed dramatically is with the pandemic and the lack of talent in the marketplace, smart companies are looking at their talent very differently, and where that role reports becomes critical because you’re sitting there with the CFO talking about the other major assets of the company. When I left Coca-Cola and people would contact me about opportunities, if it didn’t report to the CEO, I wasn’t interested.

Joe: I understand it.

Coretha: If I need someone to filter what I’m trying to get to the top leader in the company, which is a major [00:13:00] component of the company, I don’t think I’m the right person for that job.

Joe: Should the chief people officer be attending board meetings? Should they have people with that background on boards? And how often do you see that?

Coretha: Well, like I said, I was very fortunate. I’ve never worked at any company where I wasn’t involved. One, you’re talking about executive compensation. At a minimum, you are in those meetings, because you are the one explaining that the company’s philosophy and strategy around pay, which is tied to your strategy around growing the business.

Again, I was very fortunate to work for CEOs who felt it was important that I’d be a participant in those meetings, that I attend the strategy sessions, that I’m aware of what’s going on, and I get to hear it firsthand. And when I talk to my colleagues that work in the profession of HR, the majority of them that I respect have that role. They play a critical role as a member of their leadership team. As a member of the management team, you are not a member of the board. You are not. Usually it is a CEO who’s the only [00:14:00] member of the board if or she is a chairman or a member of the board. 

But again, you play a role and especially now, what I’m finding is the reason I’ve had the benefit of being contacted about so many board opportunities is because so many boards have been staffed and they’re deficient in the area of human capital. There’s a lot of people in finance with strong financial back, a lot of people, technical backgrounds, 

Joe: What role do you play when you’re in that seat on the board as a chief people officer?

Coretha: I feel like I’m very similar to the other board members, in that every board member is supposed to bring a unique capability and experience. My capability happens to be in the human capital space, but I’m still required to speak to and opine on all the other components from a strategy perspective for the company. As I say to people all the time, even if you are the chief people officer, when you’re in your executive leadership meetings, you should not be the only ones talking [00:15:00]about human capital. You should care about the operations of the business. You should care about the financials of the business and be able to understand what’s happening and speak to those as well.

But I would say what I bring as a former chief people officer to the boards that I sit on, generally speaking, I’m always a member of the comp committee. In a couple of cases, I chair the comp committee. I’m a member of the audit committee at one organization, and often what happens is when the leadership team comes in and they talk about turnover and they talk about their efforts in DE&I and they talk about the appeal process and the grievance process, and they talk about lawsuits that may be of interest to the board. Often, obviously, they involve the workforce, and at that point, having someone who may have experienced that or even knows what the process ought to be becomes really helpful. 

It’s amazing to me when I’m sitting on a board among former and current CEOs and COOs, and CFOs, [00:16:00] how little they understand about the basics in those areas. They’ve left it up to their HR people and they really haven’t taken the time to understand, as an example, what are the real metrics. Like when you look at turnover, can you make the numbers say what you want? You absolutely can.

Joe: Well, that’s really helpful. Thanks.

Raza: Coretha, maybe then let’s talk a little bit about your board work. Can you tell us about the 2U board and what the company does and a little bit about the composition and how is that board coming together?

Coretha: That board I’ve been on the longest, and it is an educational technology platform company so if you are a university and you want to have an online degree program, you want to offer a degree program, we provide the technology and the support to the degree program the organization decides. What we do is we identify those degrees that there is a lack of capability in the marketplace.

A perfect example, one of the very first programs that 2U launched was with Georgetown [00:17:00]University and it was the nursing program, a Master’s in nursing, and you might ask, how do you do an online program for nursing? Well, you actually dial in and you have your classes online, but we also assist in helping you identify hospitals to do a practicum.

Again, the university identifies the criteria necessary, so for example, in Atlanta, if someone were getting a Master’s degree from Georgetown University through 2U, with the support of 2U, their practicum more than likely would be at Northside Hospital here in Atlanta, which is one of the biggest hospitals and has one of the largest delivery practices the area, and the program also has a special in OB-GYN, and one of the things that we talk about is in order to graduate with a Master’s from that program, you have to assist in the delivery of real babies, not virtual babies, right, so not babies online, but real babies. 

One of the things I would say that 2U does the most from a purpose perspective is it brings higher level education [00:18:00] to parts of the world and parts of our country where access to top education would not be available, and so every year when we would have our annual meeting, our all-employee meeting, we would bring in graduates from those programs. 

I remember being struck by two women who worked and lived on a reservation in New Mexico and they talked about the fact that they had a top tier university degree and they were able to help support the people in their community because they were highly educated and attuned to what the needs of their community were, and they never would’ve been able to go to Georgetown if they had to up and move and leave their families.

Raza: Tremendous impact for a platform that enables that education. 

Coretha: Absolutely.

Raza: Talk about the board, how big is the board and maybe the diversity on the board, and I’m guessing not a super large company like Coca-Cola. Is the board more hands on than…

Coretha: No, I would say it’s a public company and in a public company [00:19:00] board, the role of the board is not to be hands on. The role of the board is to be at the strategic level. I was really blessed because as my first board, it happens to be a very diverse board. At the time that I joined the board, one, that was a woman, Sallie Krawcheck, who runs Ellevest which is a platform to encourage and support women investing. She was on the board and was the only woman and insisted that when an opportunity opened up, that they add another woman to the board.

As a result of Sallie’s efforts on the board at the time that I joined, there were three women on the board. It was Sallie, myself, there was Valerie Jarrett from the Obama administration. We had three black board members; myself, Valerie and Earl Lewis, who is a distinguished professor at Michigan State in their African-American studies program. We had a person of Latin descent, and I want to say there were maybe about 10 people on the board.

It was a unique company in the sense that it is a company that the majority of the workforce is millennials, and so the issues that have [00:20:00] come up, the George Floyd issue, all of the issues around the pandemic, you get to see up close and personal the new expectations that workers have because, by and large, many of them are what I would call new workers.

The workforce has begun to increase in age as the scale of the company and the tenure of the company has grown. But in the early years, I mean, it was a very young workforce, and their expectations of what their CEO should speak to, their access to board members and their view of who should be on the board, not that they run the company, but they have a role, and the role of culture and understanding what the culture is and how the culture interacts with how effective the company is, becomes an issue for the board. It was a really great opportunity to see up close and in person what a contemporary board looks like, how it operates and the challenges that it has.

Raza: Yeah, Sounds incredible. What about the Plastique board?

Coretha: That’s one of my fairly new boards and let me tell you their major [00:21:00] product; they help small- and medium-sized businesses basically have access to funds so that they can manage their cash flow. If I had a small business and you were providing me support as a vendor, let’s say as a lawyer, I would have to pay you cash and then that may impact my cash flow. What happens is there’s a credit card that I can use and I can charge your services, and so they play that role.

Again, it’s a very different company. It’s a tech-based company. They’re in a space that is continuing to grow. More and more companies, I think, are looking to see how they can innovate and support small- and medium-sized businesses because that’s the growth in terms of the workforce in the US and around the world.

Again, being in a technology company and being in more of a startup mode has also been a very different kind of experience, so I would say that all of my boards have been very, very different, but they all have a common thread, which is the expectation is not that you run the company, but that you weigh in on the [00:22:00] runnings of the company and that you hold the CEO and the leadership team’s feet to the fire around what they espouse as the strategy and whether or not they’re staying on track to the strategy that they’ve communicated.

Raza: Let’s switch to another area about talent, the role of immigration. The US has been always a big attractor of talent via immigration for a really long time, yet legal immigration has actually been going down a lot and declining in recent times. In the bigger picture talent wars, how do you see that playing out in the future for the US maintaining its competitiveness and its being just able to fill its talent needs?

Coretha: It’s problematic. It’s problematic on a number of fronts. I can remember employees who were in process of getting their green card. Many of them I’m sure were very distracted and had difficulty focusing on the day-to-day responsibilities of their jobs because they’re so worried about the possibility that the [00:23:00] green card process would not go all the way through. 

I was in London at a board meeting in Dublin with Spencer Stuart, and one of the issues that London is experiencing in all of the UK because of Brexit, they’re losing talent. Meanwhile, when we were in Dublin, Dublin is flushed with talent. Everyone is moving to Dublin and it’s becoming this real epicenter of technology. 

I think it has implications around whether you can stay current. We know that our workforce is aging and many of the countries where highly-trained technologists exist tend to have younger workforces, and so it’s a problem now. It will continue to be a problem, and I also think the world is getting smaller and having a diverse workforce on every spectrum makes the company more competitive. 

ThredUp, as an example, had workers that were in the Ukraine, and so the world becomes very, very small, very, very quickly when we have these civil unrests around the world, and obviously I experienced that when I was at the Coca-Cola Company and Equifax, that when things happen around the [00:24:00] world, it has an impact to us in the US even though we may want to believe that we’re the dog wagging the tail when it comes to talent. I’m not always sure that that’s the case.

Raza: Yeah.

Joe: Yeah. Great point.

Raza: You’re right about that nervousness. I was personally in that situation as an immigrant coming here and I distinctly remember moments when I maybe had three months or leave the country, so I’m totally with you on that. I think I’m also always struck that computer science enrollment, for example, in US university and colleges have been steadily declining, and on the other hand, software eats the world and you know that you need that talent so we hope that the US will rationalize immigration policies in line with the talent needs of the future that the country needs.

Coretha: In my mind, companies are better and our country is better when we have people from all over working and making us a better place and I’m hoping the pendulum will swing back in the middle because I [00:25:00] think there are many organizations that know they have benefited from having that diversity of talent in their talent base.

Joe: Yeah, no question about that. 

Raza: Maybe talk about the ExCo Group, what is it about, and what is it bringing for executive coaching?

Coretha: I joined the ExCo Group in January of ’20 when I retired, and I think there are about 70 to 75 former C-Suite executives. I think there’s only a couple of us who are actually former chief people officers, but I would say the secret sauce that the ExCo Group brings is that we are coaches/mentors, and when we are assigned to a client, it isn’t based on our functional expertise as much as it’s based on our experiential knowledge. 

I may be assigned to someone who’s going through a lot of integration because when I was at Equifax, we probably had 150 techs in acquisitions. If an executive is going through a transformation at their organization, a huge step change, I may be assigned to that individual. We [00:26:00] typically are engaged through board members, usually the board chair or the nominating governance chair when they’re either bringing in a new C-suite executive or they’re moving someone who’s already a C-suite executive to a different role, and the person is transferring from maybe a functional area into a business area. 

Then more recently what we’ve been doing is a lot of cohorts where companies are trying to accelerate the development of women and people of color and other high potentials that they believe have a really short runway to become potential C-suite executives.

It’s been fun. It’s been great to have a bird’s eye view. When you’re actually coaching someone, you get to learn a lot about the company. Our framework of coaching is really, we’re coaching the individual to better effectively meet their organizational goals, and so it really is a business-focused coaching, but in doing that, you get into some of the softer, more [00:27:00] critical skills, like their communication style, their ability to build, key shareholders and stakeholders in their organization. 

I’ve had the opportunity to work with people in Pfizer, in Intel, in McDonald’s and IBM and so you see different companies and you see that as different as these companies are, they’re all kind of going through the same thing, which is a whole generation of new leaders who up until the pandemic had never really seen anything but a growing market and a group of executives who also have built their strategies on, “We made X percent revenue the prior year. Our strategy is just to make more money the next year and using the demographics and the data and the analytics from the prior year.” 

Well, guess what, the last four years, every year has been different, and you had two years doing the pandemic. I don’t know that you want to use that data. Look at Peloton, they were killing [00:28:00] it. Now, they came out of that really struggling, and so using historical data to make a case for what you’re going to do going forward has been more difficult and so you have a bunch of new leaders that are really having to be innovative in terms of viewing their business, maybe possibly changing their business models. It’s been really interesting serving as a coach and then going into the boardroom and seeing in some cases how all these companies are having very similar experiences. They’re all having experiences around employee engagement and this whole hybrid model. They’re all experiencing that.

Raza: It sounds obvious, but coaches should be people that have real world experience, so that’s something really spectacular about the ExCo Group.

Coretha: Yeah, we think that’s a secret sauce.

Joe: Sounds like it probably is. 

What I wanted to talk a little bit about is culture, which has kind of come up several times in this conversation. I think you saying hello to people in the elevator as the chief people [00:29:00] officer, that’s leadership in culture, and it’s so important. This expression, I think, it’s one of Raza’s favorite expressions is “culture eats strategy for breakfast.” We all know what’s important, just like we all know that people are important. Who has the responsibility for setting that tone in a company?

Coretha: You know, it’s funny because I would tell you historically people would say management has the responsibility for establishing the culture. I think we’re going through a very interesting time where it is the workforce that is taking what is on paper and what management is espousing, and they’re saying. “Yes, that’s what it is. No, that’s not what it is. This is what we want, and if we don’t have what we want, we’ll walk or we will just continue to stay this whole quiet quitting and kind of just come in and do our peace and leave.” 

I haven’t worked at any company or heard of any company where they don’t say people are our most important asset. I’ve not worked at any company where they say [00:30:00] they want to operate in an ethical way and that people should be respected in the workplace. But we hear, unfortunately, every day, both in the news and personal engagements with friends and family members, that there are things that happen every day in the workplace that should not be happening, and they have to be impacting how effective people are coming to work and how they’re showing up. 

I think this whole idea of working full time and being in the office every day is a challenge because the great experiment of the pandemic where we all worked remote opened the eyes to tons of people that they didn’t have to go in every day. But here’s what we do know, work is very social. Most of us when we list our friends, I would say if you’ve ever worked, very few people would say, “Here’s a list of friends,” and not have someone on that list who they worked with, who they met at work, and so I think the challenge now is how do you speak to what the new employee wants in the context of the culture that you’ve communicated and get the job [00:31:00] done. 

I think this whole focus on employee engagement is trying to find that happy medium. I do believe that people want to come into the office, but I also believe that people don’t think they have to come in every day.

I think Fast Company just published an article about one of the big issues that’s happening. Management believes employees are not productive and they’re using productivity tools to test, and employees believe that they are hugely productive, and I think what we are missing here is productivity should be based on outcome, not me just being at a certain place, being in a meeting at a certain time.

Raza: Measuring heat. Yeah. 

Coretha: It’s forcing us to kind of get really clear what is productivity. Productivity is not “I’m sitting at my desk all day long.” Productivity is you ask me to, to deliver X by X date with these performance parameters, and I’ve checked the box on every one. I cannot tell you over the course of my career how many times I’ve had to fight, particularly as a [00:32:00] junior manager ,for an employee who worked for me who was very productive, but was not a person that was in the hallway.

A single mother who comes in, she gets to her desk, she does her job, she gets her lunch, she comes back to her desk, and at four o’clock she has to leave to pick up her baby. She is productive versus the person who gets there at 7:30. They’re in the cafeteria, they grab a cup of coffee, they’re talking to the boss, they’re walking down the halls, they go out for lunch, they know everybody, they’re standing by the water cooler, they may be productive, but hour for hour, minute for minute, that woman may be more productive.

Joe: Yeah, that is a great observation.

Coretha: That’s the issue, that’s the reason why I think so many people are pushing back on wanting to be in the office. I think they believe that working remote to some degree or working a hybrid schedule becomes in some way the great equalizer. It’s not face time now, it’s [00:33:00] just I’m delivering what you told me to deliver.

Joe: Exactly.

Coretha: So, the biggest challenge in my mind is not the employees. The bigger challenge is leadership and management, do you know what the outcomes are that you want? Because if I know what I want from you, I don’t have to see you every day. I want to see you, but I don’t have to see you every day.

Joe: What is the role that the board should play?

Coretha: The role the board plays, I think, is, first of all, and most importantly, understanding what is the culture that the leadership team and the company is espousing. What are the words in your mouth? What are you telling people? And then based on what you’re telling people, ask for the data that basically verifies that that in fact is exactly the workplace that exists. 

Joe: For example.

Coretha: For example, when you look at turnover, most boards get access to turnover data. Have you asked to see the data, not an aggregate, because, again, if I roll it all in, I could have a department, a [00:34:00] major department, where people are spinning out like crazy, but if I roll it all together, it doesn’t look that bad. Asking for the data and then specifically asking questions, where is our churn high? Asking about churn in terms of what is our churn as it relates to gender, as it relates to age, as it relates to tenure in the organization, who’s leaving? What’s the profile of the people that are leaving and then more importantly, who’s coming back? There is a boomerang effect, and if you are the culture that you said you were, often people are going over and they’re finding out the grass isn’t greener on the other side. They might not even have grass and decide you want to come back. 

If you are a certain kind of company when you go in, I would say it’s red carpet in, and my tagline used to be red carpet in red carpet out, so that if you get there and you are a critical loss to us, you may say, “You know what, this is not what they told [00:35:00] me it was going to be,” and you call back and say, “Is there an opportunity for me to come back?” There may not be one, but if there is, the fact that you want to come back speaks volumes about the kind of culture that we have.

Joe: Absolutely. That is just right on the money. Thank you for that.

Coretha. It’s been great speaking with you today. Thank you so much for joining us.

Coretha: Thank you guys. Thanks for having me.

Joe: you all for listening to On Boards with our guest, Coretha Rushing.

Raza: Please visit our website at OnBoardsPodcast.com. That’s OnBoardsPodcast.com. We’d love to hear your comments, suggestions, and feedback.

Joe: Please stay safe and take care of yourselves, your families, and your communities as best you can. We hope you’ll tune in for the next episode of On Boards. Thanks.

46. Shaz Kahng – changing the stereotype of women in business

Shaz Kahng is a serial CEO and Board Director and with a wealth of experience running companies and businesses and is also an award-winning author of two novels, with a third underway.  In this episode she talks about the power of diverse perspectives on management teams and boards, and the tremendous impact it can have. 

Thanks for listening!

We love our listeners! Drop us a line or give us guest suggestions here.

Links

Shaz’s website 

https://www.ceilingsmashers.com/

Amazon for The Closer

Talks at Google

LinkedIn

https://www.linkedin.com/in/shazkahng/

Quotes

The Closer [First Novel]

I noticed in reading a lot of fiction novels was that if there was a male character who was a business leader, he was allowed to be attractive and smart and successful and athletic and had lots of friends. 

But whenever there was a female business leader, she was allowed to be competent at her job, but the rest of her life was really negative: for example, she was trying to quash the careers of other women, or she had 13 cats or she was desperate to get married. 

I thought that these fiction books were not reflecting reality.  I’ve worked with and know so many incredible women who are leading businesses, leading companies who are very inspirational, very positive, who are really focused on helping other women, like Lisa Shalett [co-founder of EWOB]

I thought there was just a void in the fiction marketplace. I wanted to address that and write a fresh novel that had a more modern and accurate take on women in business.

Some publishers were a little concerned about the theme of the book.

I was really surprised [at the reaction by some publishers] because I thought I was offering a very distinct and unique product and one that women would want to read, and I was surprised when I heard from some publishers that they didn’t think women wanted to read about other smart women. They didn’t want to read about successful women. They didn’t want to read about women helping other women, and I just thought they were wrong.

I pushed ahead and published the book, and it’s gotten a great reception from women leaders and male leaders as well. I’ve heard some men who are CEOs say, “When I’m faced with a challenge, I think what would the main character Vivien Lee do in this situation,” and then they make a decision that way. So, that’s been very gratifying to hear.

Big Ideas/Thoughts

Extraordinary Women on Boards

EWOB is really focused on educating current board members. In order to be on EWOB, you have to be currently on a board or previously on a board so it’s for people who really are experienced board directors, but the focus is on continuing education, discussing topics that are top of mind for boards and just really expanding board members’ capabilities and understanding of different issues.

It is a really helpful resource to have such qualified women who are experienced on different boards to be able to share their experiences, share their perspectives, network, and also let each other know of opportunities. 

Strategic war games [at OMSignal, a biometric apparel startup]

I suggested to the board and to the founders that we do a strategic war game, which is type of simulation game that you play, that helps you build a very forward-looking strategy. 

It helps you figure out what the holes are in your business strategy, what the opportunities are, where the industry sector is going. As a result of that strategic war game, we ended up focusing a little bit more on women and I had been asking the founders, “Why are you just focused on men’s compression and introducing a smart sports shirt? Why not women’s compression?” And they said, “Well, what product would that be?” And I said, “Well, women wear a compression product every day, which is a bra, so why don’t we do a smart sports bra?”

I think that’s why populating your board with people of different backgrounds, different ways of thinking, differentexperiences are so critical to ensuring a successful future for your company.

Onboarding: Private vs Public Boards

It was a vastly different experience. With the private company boards, basically on my first day they said, “Okay, can you help us figure out our revenue projections? Do we do it the right way? We need help with marketing. What do you think about this copy? Or should we be spending more money doing these different things with our marketing budget?” it was very hands on, very deep.

With the public company board, it was much more of a formal process. There were certain pieces of information that I needed to review, SEC documents that I had to fill out, and then I also had interviews with, I think, three or four members of the board before I was nominated, and I also asked to meet with all of the board members individually before I actually joined the board

Science Background

I think a science background was a great foundation for a business career, and one of the reasons is that it helps you really approach problems from a holistic point of view. I think it gives you an ability to develop hypotheses on how to solve problems, to experiment with different results that might work and to ultimately pick the right solution.

LiveGirl

LiveGirl was started by Sheri West. She was a former GE executive and she noticed that there weren’t enough opportunities careerwise for women from diverse backgrounds and she wanted to do something about it and she’s doing a terrific job with it.

LiveGirl helps to provide girls, middle school and up, with the skills that they need to be able to succeed in the workplace, like better communication skills, negotiation skills, interviewing skills and things like that. They also help set up girls in the program with summer internships with different companies.

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. On Boards is about boards of directors and advisors and all aspects of governance. Twice a month this is the place to hear about one of the most critically important aspects of any company or organization; its board of directors or advisors, as well as 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, the challenges boards are facing and how they’re addressing those challenges, and how to make your board one of the most valuable assets of your organization.

Joe: Our guest today is Shaz Kahng. Shaz is a serial CEO and board director and [00:01:00] excels in devising unique strategies, building brand equity and delivering outstanding results. She brings a wealth of experience running companies and businesses, including Gymboree, Lucy Activewear and Nike, and she has worked with many brands, Staples, Carter’s, Sephora, Tiffany, Levi Strauss, Macy’s, Quaker Oats, Kraft, and P&G, to name a few.

Raza: As the first female to hold a global business P&L at Nike, Shaz led a turnaround of the Nike cycling business, making it profitable for the first time in history. As CEO of Lucy Activewear, Shaz and her team reinvented the company and achieved profitability in 13 months, nearly two years ahead of the corporate expectations. Shaz serves as a board director for GoPro, a publicly-traded company where she is an audit committee member. [00:02:00] She also serves on the investor advisory council of AVG Funds, a venture capital firm, and advises PE- and VC-backed startups.

Joe: Finally, Shaz is also an award-winning author of two books, both fiction, with a third book in process, and she is a golfer who dreams of having a single-digit handicap. Welcome, Shaz. It is terrific to have you today with us on On Boards.

Shaz: Thanks, Joe and Raza. I’m happy to be here.

Joe: One of the most impactful and impressive board groups that we have encountered over the past few years is Extraordinary Women on Boards. It would be great to hear a little bit about how you became a member of EWOB as it is known. Tell us a little bit about how that happened and then I have some questions about your experience with the group.

Shaz: Sure, I was actually at my Wharton reunion and a few classmates of mine, and I realized that there were not a lot of boards with diverse board members, [00:03:00] so we started a group called Wharton Alumni for Boards to try to improve that, and then throughout that process, another classmate of mine let me know about this group, Extraordinary Women on Boards or EWOB and she said, “You should really join this organization.” 

I was lucky enough to meet Lisa Shallet and then get involved in the group, and it’s really been just such an impressive group of women who have accomplished much and who have a lot of valuable advice to share with one another.

Joe: How do their missions differ, EWOB and the Wharton alumni group?

Shaz: Well, EWOB is really focused on educating current board members, so in order to be on EWOB, you have to be currently on a board or previously on a board so it’s for people who really are experienced board directors, but the focus really is on continuing education, discussing topics that are top of mind for boards and just really expanding board members’ capabilities and understanding [00:04:00] of different issues. 

The Wharton Alumni for Boards is just focused on matching talented, diverse Wharton alums with board opportunities, and I think it’s quite a bit smaller than EWOB is.

Joe: What in your view makes EWOB valuable to you?

Shaz: I think it’s just a really helpful resource to have such qualified women who are experienced on different boards to be able to share their experiences, share their perspectives, network, and also let each other know of opportunities, so I think those are the key things, but it’s just been so inspiring to meet so many amazing women who are serving on boards. 

Joe: Yeah, we’ve met a few and not anywhere near the number you have, and we agree, it’s really quite impressive in terms of the women who are members. 

There are a lot of really interesting things in your background, but one thing that really struck me was that you’ve been the author of two books of fiction. The [00:05:00] first one was The Closer, which I read just a few weeks ago and really, really enjoyed. Tell me a little bit about how that came into being and why the theme of the book is what it is.

Shaz: Well, something that I noticed in reading a lot of fiction novels was that if there was a male character who was a business leader, he was allowed to be attractive and smart and successful and athletic and had lots of friends. 

But whenever there was a female business leader, she was allowed to be competent at her job, but the rest of her life was really negative so she was trying to quash the careers of other women, or she had 13 cats or she was desperate to get married. 

What I thought was these fiction books are not reflecting reality. I’ve worked with and know so many incredible women who are leading businesses, leading companies who are very inspirational, very positive, who are really focused on helping [00:06:00] other women, just like Lisa Shallet.

I think there was just a void in the fiction marketplace, and I wanted to address that and wanted to just write a fresh novel that had a more modern take on women in business.

Joe: How did you find the time to write the book given all your activities?

Shaz: I have no idea.

Actually, I started writing the book while I had infant twin daughters, and what I did was I outlined the book and then I would print out the chapter outline and I would put it in my pocket so when I was with the girls at the park and I had a couple of minutes, I would look at the outline and I’d start writing the book in my head, and then when they were taking a nap, I knew I had about an hour and a half to write so I’d pull out my laptop and just be very efficient with my time. I ended up writing the book in 10 months, which I’m told is relatively quick, but then the editing process took a lot longer than that.[00:07:00]

Joe: Sure. I understand that some publishers were a little concerned about the theme of the book.

Shaz: Yes. I was really surprised because I thought I was offering a very distinct and unique product and one that women would want to read, and I was surprised when I heard from some publishers that they didn’t think women wanted to read about other smart women. They didn’t want to read about successful women. They didn’t want to read about women helping other women, and I just thought they were wrong. 

I pushed ahead and published the book, and it’s gotten a great reception from women leaders and male leaders as well. I’ve heard some men who are CEOs say, “When I’m faced with a challenge, I think what would the main character Vivien Lee do in this situation,” and then they make a decision that way. So, that’s been very gratifying to hear.

Joe: That’s pretty high praise. Well, it obviously went well enough and was interesting enough that you wrote a second and now a third. The series is called The Ceiling Smashers Series. Is that [00:08:00] right? 

Where does that title come from or where does that name come from?

Shaz: Well, there’s always been a discussion about women being able to or not being able to smash the glass ceiling, and what I wanted to show in my books was that you could achieve great success and smash glass ceilings, but do so with your integrity and your own approach intact that you don’t have to change yourself to achieve success.

That was the real message of the book is, you can be positive, inspirational, do things the right way and use your brains and creativity to get out of tough situations, but ultimately you can be successful.

Joe: Women can be smart, successful, good looking, have a great family, athletic and all of the things that all those men were portrayed as having.

Shaz: Yes. all those qualities that were missing in the other books, I put them in my book.

Joe: Yeah, I thought it was great. I love Vivien, and as I said to you earlier, I was rooting for her from the very beginning so thanks for doing that. I [00:09:00] look forward to reading the next one and to the one that’s coming.

Shaz: Thanks a lot, Joe. I appreciate it. 

Joe: I did see that recently you’ve done something called Talks at Google, a speech entitled The Superpowers of Ceiling Smashers. Could you just tell us a little about that and how it relates to the books?

Shaz: Sure, so that talk was about what I call the Superpowers of Ceiling Smashers, which are what are the key skills that you really need to succeed, and basically the premise of that talk was that over a series of different career disappointments or disasters, I learned to develop these skills and they ultimately helped make me successful in those venues or in other opportunities.

Joe: Where is it available to listen to?

Shaz: It’s available on YouTube if you look for Talks at Google, and it’s also available on the podcast, it’s a Google podcast, so Talks at Google podcast. If you search for that, it’ll come up.

Raza: Shaz, you had an early career as a food scientist. Can you talk a little bit about that background and [00:10:00] maybe relate it to how that helped you in decision making and in business in the future?

Shaz: Sure. I think actually a science background was a great foundation for a business career, and one of the reasons is that it helps you really approach problems from a holistic point of view. I think it gives you an ability to develop hypotheses on how to solve problems, to experiment with different results that might work and to ultimately pick the right solution.

But when I started my career, I was a food scientist working for Kraft, and my first project was inventing synthetic blueberries, very exciting. and they’re actually used in like blueberry muffin mixes and dried cereals today, but I don’t get any royalty, sadly.

Joe: That’s too bad.

Shaz: Yes, I wish. But one of the things that I noticed was that in the group that I was working with, we would invent new prototypes or [00:11:00] new products, and we would present those ideas to marketing who would then fund the ideas that they thought were the best, and I thought that they were not always picking the products that were the most consumer focused or most easy to produce and distribute. 

I thought, “I think I can make better decisions, and I think I want to run a business someday.” That kind of started me on the path of wanting to become a business leader and CEO.

Raza: I think that’s a great foundation. I’ve also noticed in the current environment that there is a little bit of an upswing for science founder-led companies, especially in life sciences and biotech around us in the area. I think that’s a great thing. Usually science folks are not associated with business skills and investors are looking at that gap, but I think increasingly that actually provides a wonderful foundation and we hope to see more and more of that.

Shaz: I agree. And at the time when I was in my career as a scientist, I [00:12:00] didn’t see any scientists as CEOs, so I really didn’t have an option to become a CEO through the science path. That’s why I ended up going to Wharton to get my MBA and it really changed my career path, but it’s great to see that there are opportunities today.

I think actually, once you have the science background, that’s the tough part, and adding on the business knowledge on top of that is a little easier.

Raza: I think that’s a really important point, that you can teach a scientist business, but it’s really hard to go back and teach somebody in business the science part, so it’s truly valuable. 

Maybe talk about your board work now and how did you end up finding your first board opportunity, and what was it?

Shaz: Sure. I was doing a lot of advisory work for different primary research firms and giving talks to different investors and hedge fund managers on retail or apparel or footwear, and one of the firms that I worked with had a board search [00:13:00] practice so they said, “We have a company that’s actually looking for somebody who’s got sports product and retail expertise, and we think you’d be a great fit.”

I ended up meeting the two founders and I really liked the guys. I thought they had a really interesting technology and interesting product and I joined the board, and I was the only woman. I was the only non-financial person so all the other board members were investors and also I was the only person who had experience actually running a business. It was a great platform to be able to leverage my skillset.

Raza: What was the company and what were they building as a startup?

Shaz: The company was called OMsignal. It was a biometric apparel company so a smart apparel company, and their only product at the time that they were creating and wanted to launch was a men’s smart sports shirt, it was a compression shirt, so it was very tight fitting to the body and I helped them launch a joint venture with Ralph [00:14:00] Lauren and we ended up launching Polo Tech, which was the first men’s smart sports shirt. 

It could read your heart rate as accurately as an EKG. It could tell you your calories burned, it could measure your breathing rate, steps. I mean, it was really amazing technology and all the sensors in the shirt would read out and you’d be able to look at the app on your phone while you were working out or after your workout and see all the data there, so it was a really unique product. 

Raza: Sounds futuristic and maybe even ahead of its time.

Shaz: Yes, probably, so we launched it and I don’t think that the sales were what they expected them to be, and I had actually suggested to the board and to the founders that we do a strategic war game, which is kind of a simulation game that you play, and from that, it helps you build a very forward-looking strategy. 

It helps you figure out what the holes are in your business strategy, what the opportunities are, where the industry sector is going, so that was really helpful. As a result of that strategic war [00:15:00]game, we ended up focusing a little bit more on women and I had been asking the founders, “Why are you just focused on men’s compression? Why not women’s compression?” And they said, “Well, what product would that be?” And I said, “Well, women wear a compression product every day, which is a bra, so why don’t we do a smart sports bra?” 

I brought in a designer that I had worked with and we ended up designing the product, getting it launched and at CES we launched the product and I think immediately we had something like almost 7,000 people on the waiting list to buy the product.

Raza: Well, it shows that it does take a different perspective to come up with new insights. The men wouldn’t have thought that they could think about a women’s product in that space.

Shaz: Yes. I don’t think any of the folks on the board would have considered doing a bra.

Joe: Yeah. Or that it was a compression product, that it really actually fit the model of what they had already designed, which is part of what makes it interesting and part of why you need different perspectives on a [00:16:00] board, because there are just things people are gonna miss no matter how smart they are, if they’re from the same gender, background, all of the things that make perspectives different so I think it’s a great illustration.

Shaz: That’s true. And I think that’s why populating your board with people of different backgrounds, different ways of thinking, different experiences is so critical to ensuring a successful future for your company.

Joe: Well, especially when you’re looking at risk. We’ve talked a lot on this show about the importance of board members helping management identify and manage risk, and I can’t think of anything that would make a group more powerful than having a real diverse perspective on it, because the likelihood is that between management and a diverse board, you’ll probably catch most of it. You might not catch everything, but you have increased the likelihood that you will reduce risk or take more risk when you need to, if you have that kind of a board.

Shaz: That’s [00:17:00] true. I totally agree.

Joe: You joined your first public board, GoPro, in October last year, almost a year ago. Tell us about how you came to join that board and a little bit about the board itself.

Shaz: Sure. Well, it’s something that I’m sure you know and the people who are listening to your podcast know is that 90-plus percent of all board roles have gotten through networking, and I was on the investment advisory committee for Alumni Ventures Group which is a VC fund and I met one of the women on the investment committee. I thought she asked really great questions and seemed really smart and I just thought this is the kind of person I’d like to get to know.

Whenever I see people that I really respect and admire, I just always try to get to know them. I reached out to her, we started a conversation and then I just learned this a couple weeks ago, she knew another classmate of mine from Cornell and she mentioned that GoPro was looking for board members. She was the chief legal counsel and my friend from Cornell said, “Oh, well, you [00:18:00] have to talk to Shaz.” All of the components kind of came together at the right time, because I mentioned to her I was looking for a board role, so I entered the interview process and got the board role.

Joe: Fantastic. What does the board look like? I want to ask you a few questions about onboarding, but what does the board look like?

Shaz: It’s actually a really interesting board. It’s a 10-person board, three women, seven men. There is one African-American person, myself, and then one LGBTQ person. As far as boards go, I think it’s very diverse, but more importantly, I think the diversity of thought is really there and I think when we have discussions, we really get just a rich discussion because people come from so many different perspectives. 

We have a lot of people on the board who have a great deal of expertise in the media business so I think that’s been helpful, but everybody comes from a different company, different perspective, and they’re all just very sharp people who really contribute a lot to the [00:19:00] board discussions.

Joe: I think a vibrant conversation in the boardroom kind of ups everyone’s game. I mean, I think it’s just another added factor.

Shaz: It does. I learned something from all the different board members, so I’m enjoying it.

Joe: What was the onboarding like for this and how was it maybe different from the private company boards that you’d served on?

Shaz: It was a vastly different experience. With the private company boards, basically on my first day they said, “Okay, can you help us figure out our revenue projections? Do we do it the right way? We need help with marketing. What do you think about this copy? Or should we be spending more money doing these different things with our marketing budget?” it was very hands on, very deep.

With the public company board, it was much more of a formal process. There were certain pieces of information that I needed to review, some SEC documents that I had to fill out, and then I also had interviews with, I think, three or four members of the board before [00:20:00] I was nominated, but I also asked to meet with all of the board members individually before I actually joined the board, because I just wanted to get a sense of who the other board members were, what they were like, how they worked together, what were some of the main issues that they saw with the company? 

It was really helpful to be able to meet with each person, and I also met with, I think, about six of the key executives in the company as well.

Joe: Oh, that’s terrific. Did you feel that that process really helped you this first year on the board?

Shaz: I think so. I think what was great with GoPro. I think they have a very talented team, but they also are very hungry and they still are open to innovation. They still want to succeed in new and different ways. I think there’s an openness to new thinking and ideas, which I really appreciate, and there’s also definitely a sense of humility. Even though they’ve been successful, they are very humble about it. They’ll admit [00:21:00] when they’ve made mistakes and learn from them. I think those were all really important traits to ensuring that you have a bright future as a company.

Joe: It sounds like a terrific environment. You’ve served on a number of boards, you’re serving on a public company board, what are some of the top issues that you are seeing that boards are grappling with now?

Shaz: Well, it’s interesting because whenever I am talking to companies about what they are looking for in a board director, when I’m talking to other board directors, certainly the ability to create a compelling strategy is something that they need. There’s also a definite need for operational oversight, so if something goes awry with the supply chain, helping the company think through what are all of the different aspects that need to be addressed in order to ensure stability or as much stability as possible. 

ESG is a topic that has come up a lot and then also something that I’ve found with many companies is that they are [00:22:00] looking for more marketing and branding expertise, so for board members who bring that, I think that’s a definite advantage.

Joe: Yeah, that seems to have become higher on the scale of what boards are looking for. Another thing I’ve heard a lot lately is chief of human resource. Have you heard that much or seen that in any of the boards or in the folks that you know that are joining boards?

Shaz: Yeah. I think the chief human resource person is a little bit easier to find than the marketing person, and the reason why is you do have talented people in charge of people or HR in different companies and you know who they are. 

With marketing, the thing is it’s really tough to be a very effective chief marketing officer, you need to be able to not only create brand strategy and be able to create an emotional connection with consumers to your brand, but the other piece of it is also the ideas and the tactics and how do you allocate your marketing spend? What should your playbook look like? And it’s [00:23:00] very difficult to find somebody who has both the kind of creative and the tactical elements together. 

I think that’s why I’ve seen so many companies struggle with it. Usually, they’re finding people with the tactical capabilities or the analytical capabilities, but that’s not what helps to create really amazing brands.

Joe: Yeah, great point. Thanks. 

Raza: Shaz, maybe talk about some of the differences or even similarities between the private company boards and public company boards that you’ve noticed as you’ve seen both.

Shaz: Well, for me, I think the adjustment actually going from CEO first to then on a board, that was a big adjustment because I’m used to being more of an operator and jumping in and fixing problems or coming up with ideas, and I found that on private backed boards it’s easier to do that and they actually are looking for you to get more in the trenches, work alongside them, come up with ideas, help them execute, but on a public company board, it’s a lot more [00:24:00] arms length, I would say, and you are giving ideas and sharing your perspective, but it’s a little bit more of a formal process, I would say, where you’re discussing things at the board. There are certain elements on the agenda that are going to be discussed and if you have an idea about something else and it’s not on the agenda, you’ve got to figure out a different way to do that. 

It’s been a good learning experience and also I’ve joined the audit committee and this is my first time on an audit committee and I’m definitely using all of the finance skills that I picked up at Wharton. I haven’t used some of them for a while, but the audit committee, I would say, it’s a lot of work and you have to be very thorough and you have to really allocate the time to make sure you’re reviewing everything in detail. I feel like there’s a much bigger added responsibility on audit committee, but it’s really been a good experience.

Raza: I think on the slider of formality to informality, startup board is probably a little on one end and the public company board on [00:25:00] the other, and same for the hands-on mess of the slider one side or the other. 

Shaz, we also want to talk to you about the advisory board that you were on for a nonprofit called LiveGirl. Tell us about that.

Shaz: Sure, it’s actually LiveGirl, so LiveGirl was started by Sheri West. She was a former GE executive and she noticed that there weren’t enough opportunities careerwise for women from diverse backgrounds and she wanted to do something about it, which I think was really admirable and she’s doing a terrific job with it.

LiveGirl helps to provide girls, middle school and up, with the skills that they need to be able to succeed in the workplace, like better communication skills, negotiation skills, interviewing skills and things like that, and they also help set up girls in the program with summer internships with different companies.

They were focused mainly in Connecticut, [00:26:00] but they’ve expanded over the last couple of years so they have they some people and some companies that are involved outside of Connecticut across the US, but I think it’s a great organization and it’ll continue grow.

Joe: Shaz, it has been great speaking with you today. Thank you so much for joining us.

Shaz: Thanks. It’s been my pleasure, Joe and Raza, and I’ll see you soon.

Joe: And thank you all for listening to On Boards with our guest, Shaz Kahng.

Raza: Please visit our website at OnBoardsPodcast.com. That’s OnBoardsPodcast.com. We’d love to hear your comments, suggestions, and feedback.

Joe: Please stay safe and take care of yourselves, your families, and your communities as best you can. And we hope you’ll tune in for the next episode of OnBoards. Thanks. 

45. Jane Chwick – Culture may eat strategy for breakfast, but technology eats the world!

Jane Chwick, the former Co-Chief Operating Officer of Goldman’s technology division, and a seasoned board member, talks about the critical impact of having a technologist on a board.

Thanks for listening!

We love our listeners! Drop us a line or give us guest suggestions here.

Links

ThoughtWorks – Technology Primer

Quotes

Getting my first board seat. The simplest way to say this, I followed the advice I had given to more junior people in my organization for years. I let people know what I wanted, I told everybody who asked me what I wanted to do or where I was going, that I wanted to sit on boards, and somehow it made its way through the grapevine

Importance of a technologist on the board. If you have even one technologist in the board room pushing back, and if it’s the right technologist, they’re pushing back in English to the right point, and it will inform the entire board. 

Big Ideas/Thoughts 

Extraordinary Women on Boards (EWOB). One of the things that Lisa Shalett has created that’s unbelievable about EWOB is on a monthly basis there’s a list of board seats that she puts out. She’s not a recruiting firm; recruiting firms, will talk to you about the one possible position that might be appropriate for you. Lisa sends out the email of all of the possible board seats, and it’s up to you to decide what you’re interested in and what you might want to view yourself as a fit for that you can apply to. That’s a very different model in the job search world or the board search world, and that’s been very valuable

Preparing for an IPO.  the IPO process was very interesting because the other boards I had joined were already public, and so this was bringing this company to an IPO and being part of it as a board member was very interesting.

The board met with all the big name investment bankers that you could possibly think of and interviewed them all and then we had board sessions around ranking them and deciding which ones would work the best for us and would meet our needs.

There were a lot of meetings along the way in terms of creating the right governance structure; we didn’t have a compensation committee, a nomination and governance committee, an audit committee and we had to make sure we had the right people on the board for those committees.

Don’t lose the secret sauce.  Sir Ian Davis was the managing director of McKinsey and is a very impressive person. With all of his background at McKinsey that’s helpful in learning how to scale, but he is very conscious to not break what ThoughtWorks is.  

Raza.  I love to tell everybody famous Agile seminal joke of the Pig and the Chicken.

A pig and a chicken get together and the chicken asks the pig, “Hey, should we open a restaurant?” And the pig says, “Hey, what are we going to call it?” And the chicken responds by saying “ham and eggs.”  The pig thinks for a little bit, and then says, “No, thank you. You’ll only be involved, but I’ll be committed.” 

This is the principle of committed versus involved in a stand-up meeting where people that are merely involved are not allowed to speak in a stand-up meeting. As one of the really important original works for Agile development that Martin Fowler and others did, I may not know ThoughtWorks, but as a recovering technologist I know Martin Fowler.

Voya Culture. We announced the new CEO of Voya in the summer and her name is Heather Lavallee and it’s very exciting because when I joined the board of Voya another woman and I were the first two women on the board. There were hardly any women in the senior, senior leadership team, and roll the clock forward, not only are there women in the senior leadership team, but the new CEO is a woman.  I think 50% or more of the board are female. It’s an amazing story

Transcript

Joe: [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 co-host, Raza Shaikh. On Boards is about boards of directors and advisors and all aspects of governance. Twice a month, this is the place to hear about one of the most critically important aspects of any company or organization; its board of directors or advisors as well as 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, the challenges boards are facing and how they’re addressing these challenges, and how to make your board one of the most valuable assets of your organization.

Joe: Our guest today is Jane Chwick. Jane was a partner Goldman Sachs, where she had [00:01:00] a 30-year career in technology, most recently as the co-chief operating officer of the technology division. Jane was also the co-founder and co-CEO of Trewtec, providing corporate directors, CEOs, and chief technology officers with the information they need to improve their oversight of a company’s technical function.

Raza: Jane has served on a number of public, private and not-for-profit boards. She currently is a director for M&T Bank, Voya Financial, MarketAccess and Thoughtworks. She’s the Chair of the Technology Innovation and Operations committee at Voya Financial and Chair of the risk committee at MarketAccess.

Joe: In addition, Jane has previously served on the board of Essent Insurance and was a member of the board of directors of Queens College Foundation, Girls Who Code and the Berkshire School. Welcome, [00:02:00] Jane. Thank you so much for joining us today on On Boards.

Jane: Thank you so much. I am honored to be here today. I’m looking forward to this discussion.

Joe: Thank you. One of the most impactful and impressive board groups that we’ve come to know is Extraordinary Women on Boards co-founded by one of our very favorite guests, Lisa Shalett. Tell us about how you came to join this extraordinary group.

Jane: Well, I actually joined it before it was an official EWOB group. Lisa was a fellow partner of mine at Goldman Sachs and we were friends. I retired a couple of years before she did and she lives right in my neighborhood, and so as soon as she was ready for what we call at Goldman Sachs “retirement,” which is really just a part two of life, she reached out to me and we started spending time together, but she started talking to me about bringing women together that were all in this similar transition phase of life and a part two, and she would organize events often sponsored by law firms and other [00:03:00] such companies in the city and bring in really amazing speakers. 

The group grew and everybody would bring in a couple more people they knew who were at our level and the group grew and grew and grew. At one point she decided it was time to make it an official group, EWOB, and it’s been amazing. 

Lisa has an incredible ability of bringing like-minded people together and not like-minded people as well, who have different ideas, different thoughts, and are all facing the same challenges of this part two of life and need to stay knowledgeable on various aspects.

Joe: What do you think is the most impressive feature about this group?

Jane: There are a number of them. One is the women themselves. These are women who have had successful careers, want to continue to give back and be part of society and be successful, but also want to help each other. I think that’s really, really critical. I think one of the [00:04:00] things that Lisa has created that’s unbelievable about this group is on about a monthly basis, there’s a list of board seats that she puts out, and she’s not a recruiting firm. Recruiting firms, when you talk to them and you talk to them about your interests, they’ll talk to you about the one possible position that might be appropriate for you. Lisa sends out the email of all of the possible board seats, and it’s up to you to decide what you’re interested in and what you might want to view yourself as a fit for that you can apply to. That’s a very different model in the job search world or the board search world, and that’s been very valuable. 

The other thing is she tries to find the holes. For example, I don’t use this because I’m still on the Goldman medical benefits, but she gives an alternative for people who no longer have medical insurance benefits. She tries to find those places that when we’re at this point, this stage in our lives, that are very useful. 

I think the other thing that is very important here that Lisa has [00:05:00] created for all of us is most of us, not all of us are moms, but those of us that were working moms, we didn’t get to become friends with the women in our neighborhoods in the same way. We didn’t create this social network of people that were like us because we were working, we’ve created networks of people in the companies that we were in or the direct circle, but it’s not like we went on Saturdays in general to play golf, because we had our kids at home, there are exceptions and I loved to play golf, but I didn’t start until my kids were grown up and gone.

 This was a way of creating that network of people for women who are now no longer in the workforce and no longer surrounded by the people that they were working with all the time, and I think it’s just a different twist.

Joe: Yeah, that’s great, and yet another layer that I had not even considered, what a terrific thing that is. How did you hear about, and ultimately join, your first board?

Jane: I would say the simplest way to say this, I followed the advice I had given to more [00:06:00]junior people in my organization for years. I let people know what I wanted. Goldman Sachs doesn’t allow people to sit on public company boards, and so when I made my decision to retire and I announced my retirement, I had put together a plan for myself as to what I wanted, and sitting on boards was one part of that plan.

 I told everybody who asked me what I wanted to do or where I was going, that I wanted to sit on boards, and somehow, it made its way through the grapevine, to an old manager of mine who had retired a few years back who had gotten a call for himself to be on the board of MarketAccess, and he was on the board of Dell. He didn’t have capacity and he recommended me, and it started from there and then it just went. I was in the right place at a right time. I was a technologist and I’m a woman. Eventually the other boards came along because they really needed to put women on their boards and being a technologist again was a very helpful attribute.

Joe: Yeah, no kidding. I think it’s probably one of [00:07:00] the most highly desirable areas of skills and expertise that boards are now seeking. One of the boards I wanted to talk about was ThoughtWorks. Tell us a little about ThoughtWorks and your role with them, and particularly some of the things that occurred prior to taking it public.

Jane: ThoughtWorks in 2017, a private equity company bought ThoughtWorks, Apax Partners, and they bought it from the founder and the founder was no longer involved at all. He didn’t even stay on through the transition, that wasn’t of the deal. ThoughtWorks is a premier technology company. It really is. The technologists are all elite. It’s not that other places don’t have great technologists, but at ThoughtWorks, everybody is a great technologist, and they really take tremendous pride on that. They cost a little bit more because of it, because you don’t get things for free, but at the end you have a cheaper technology platform to maintain if it’s built correctly so in the long run it’s a lot cheaper to use ThoughtWorks.[00:08:00]

Apax bought this private equity firm who you would think would try to squeeze and take every dollar out of the ThoughtWorks model, but they haven’t. They’ve done an amazing job at keeping what was very special about ThoughtWorks and trying to find the efficiencies in the other places within the company.

 Even to the point we went public in 2021, September, but when we were trying to decide what the liquidity moment would be or the exit strategy would be for Apax Partners, and by the way, Apax is still very much involved, we took a look and said we could sell to another private equity company who would highly likely break the spirit of ThoughtWorks or we could IPO and continue to operate in the same way and keep what makes ThoughtWorks special, which is the route we went. 

For me personally, though, just the IPO process was very interesting because the other boards I had joined were already public, and so this was bringing this company to an [00:09:00] IPO and being part of it as a board member was very interesting.

Joe: What are the things you did to prepare for the IPO from a board perspective?

Jane: I did some reading. The board itself, we met with all the big name investment bankers that you could possibly think of and interviewed them all and then we had board sessions around ranking them and deciding which ones would work the best for us and would meet our needs. There was a lot of meetings along the way in terms of creating the right governance structure, because a private company board, I don’t think typically has committees and we didn’t have any, and so we had to create a compensation committee, a nomination and governance committee, an audit committee. We had to make sure we had the right people. 

We were a very small board before that. It was really the Apax Partners, plus three independent directors and we needed to round it out so we brought two more directors, both of them, by the way, we found on EWOB, and was fantastic and we really rounded it out and now we have all the things in place. That doesn’t mean [00:10:00] we’re done. It’s an evolution and your improvements on governance never end.

Joe: Then you also brought in a new chair, as I recall.

Jane: We brought in Sir Ian Davis. He was the managing director of McKinsey. He’s a very impressive person. And again, with all of his background at McKinsey, that’s helpful in learning how to scale and so forth, but he is very conscious and it is an important topic, even in the boardroom, to not break what ThoughtWorks is.

Joe: To not… I’m sorry.

Jane: Not break what ThoughtWorks is, to not hurt, to not drive away those elite technologists that make us special.

Joe: That’s an interesting thing to think about. What are the things that the board would be concerned about, that someone coming from the outside from a place like McKinsey might do that could change things in a way that would make it something other than it is?

Jane: There’s a lot of ways to build technology, and there’s a lot of different concepts and a lot of different ideas, and there were moments in time where you can take [00:11:00] shortcuts and do things tactically and there’s moments in time where you build things in a more rigorous way. Depending on how you build that back to the cost of maintaining that platform in the future and evolving it and continuing to grow it, if you don’t build that properly, it will be much more expensive to maintain. These elite technologists are very focused on building things properly. 

The other thing that they do differently is most technology companies believe in specialists. You can become a specialist in some data space. You can become a specialist in building games. You can become a specialist in kind of the graphical user interface. At ThoughtWorks, they believe that once you are a technologist, you should be equally great at understanding and building the technology in all aspects, and they ensure that their technologists have the full foundation of what is needed.

At an in-depth level, it’s quite incredible. It goes back [00:12:00] to they view that they need the brightest and the smartest to be able to learn all of these parts, and so they can throw their great technologists at a myriad of problems, so you don’t go in there and all you’re doing is the screen. You’re doing the whole thing.

Joe: What is it that has allowed them to attract such terrific talent, both in the management side and on the board side?

Jane: It starts from the start of ThoughtWorks. In ThoughtWorks, the chief scientist at ThoughtWorks, a guy named Martin Fowler, he was part of the group that actually created Agile, and if you talk to technologists, many, many of them, they know Martin Fowler, he’s a hero to them and it just expands and expands and expands. ThoughtWorks talks at a lot of deep technical technology conferences. They’re viewed as thought leaders in so many spaces in technology.

Raza: Jane, I must bring in that I’m one of those fanboys for Martin Fowler. I still to date send out the link of how to run a good [00:13:00] stand-up meeting from Martin Fowler, and I love to tell everybody famous Agile seminal joke of the Pig and the Chicken, where a pig and a chicken get together and the chicken asked the pig, “Hey, should we open a restaurant?” And the pig says, “Hey, what are we going to call it?” And the chicken responds by saying “ham and eggs” and the pig thinks for a little bit, and then says, “No, thank you. You’ll only be involved, but I’ll be committed.” This is the principle of committed versus involved in a stand-up meeting where people that are merely involved are not allowed to speak in a stand-up meeting. As one of the really important original works for Agile development that Martin Fowler and others did, I may not know ThoughtWorks, but I knew Martin Fowler as a recovering technologist

Joe: I want to say that’s one of the best jokes you’ve told in the six seasons we’ve been doing this. 

Raza: Jane. Maybe talk about the M&T Bank. What kind of, or what size of bank it is, or what’s the [00:14:00] character of the bank, the culture, and talk a little bit about the board for the bank and how it’s kind of maybe a little different than regular boards?

Jane: Okay. Sure. I’m happy to. First of all, I’ve only been on the M&T Bank board for about six months now, maybe not even, four or five months, so I don’t have a lot of experience and history. I’m still learning. I was on the board of People’s United Bank for about three, four years and M&T acquired People’s. It took a long time to get the Fed to approve it, but we finally closed and I think it was April of this past year. M&T is now with post-acquisition. It’s the 11th largest bank in the country. It’s very impressive. 

The Chairman/CEO is Rene Jones. I’m very lucky. all my boards, I’m very impressed with all the CEOs. He’s very innovative and he also knows where M&T should fit in the landscape of banks. He’s not competing with JP Morgan. He really wants to be a community bank, and so they try to find the balance of operating at scale, but [00:15:00] getting into the communities where they operate and being a real part of the worlds that they live in, as opposed to the big, big macro world.

He’s very focused on innovation. He has a huge technology strategy. He and the CIO, Mike Wisler, who came from Capital Bank, have created an innovation lab in Buffalo and they’re hiring about a thousand technologists. They’ve built a technology office building, they’ve taken over a building and refurbished it, and I had a tour of it back in August. It’s very impressive what they’re doing and they’re working with the incubators and trying to find the right possible software ideas to bring into M&T Bank.

Raza: Wow. It is very impressive and it also aligns very well with the saying that software eats the world, every company is a technology company or a software company in the end. Jane, as you mentioned, you recently joined the board. How was the onboarding process [00:16:00] for you? A lot of the times boards may or may not have a great process or a formal process. For a bank,

I presume it included that, or it was just a carry over from the People’s Bank.

Jane: Nope. There was a formal onboarding process. We’re in a COVID world. We are still somewhat in a COVID world so it was a virtual process, and I, along with three other board members, the four of us, came over from People’s United, the Chair/CEO of People’s United, President of People’s United and another board member and myself, and we all did the onboarding together, and there was a video call with the heads of all of the major areas that did a walkthrough of their areas. 

Raza: Jane, maybe we can then switch to talking about the Voya Financial board that you’re on. Talk about the background for Voya Financial. I didn’t know where they came from and what they do, and then again, maybe describe the board and what the board is thinking [00:17:00] about in that organization.

Jane: Sure. One of the things I love about what I do is every board, every company where I’m on the board is in a different place in its life cycle and has faced very different challenges. I joined the board of Voya Financial in 2014, April or may around there, and Voya was a brand new company and it had come from ING.

Back in 2008 during the crisis, ING was going to go under. The Netherlands bailed them out but said, “You need to split. You’re too big. We’re not telling you how you have to split, but you need to split up.” And so they separated out the asset management and retirement and insurance businesses in the US split them out and created Voya.

When I joined Voya, it was at the time where it wasn’t an on-off switch. They were selling off little by little and they got to a certain percentage. It might have been 50%, I’m not quite sure, but that’s when I joined the board, and I was, along with another woman, [00:18:00] the first two board members who joined once ING no longer control like it, it had turned the corner. 

The CEO, so back up one more thing, Voya, at that point, had been created by the collection of acquisitions in the US, and so step one was really to create one Voya; one Voya brand, one Voya platform, one Voya, so that all the Voya employees around the country really felt like they were part of the company.

He did that unbelievably well. At the same time it was about transforming and figuring out how to rationalize the platforms, because if you imagine it’s come from all these acquisitions and the inefficiencies was tremendously around that, then it was figuring out what businesses we wanted to be in, so we spent a couple of years divesting from businesses that weren’t where or what we wanted to be in the future. 

All that is done, Voya is a company that is so focused on helping society. It’s got such an amazing culture [00:19:00] from that perspective, and they even created an organization called Voya Cares that focuses on people with disabilities, it’s amazing. 

All of this has happened and we’re at a place now where, “Okay, now we have a strategy of where we want to go and the Chairman/CEO has been there for a long time so we spent over a year trying to identify who the new CEO would be, and we announced the new CEO in the summer and her name is Heather Lavallee and it’s very exciting because when I joined the board of Voya, and like I said, another woman and I joined at the same time, we were the first two women on the board. There was hardly any women in the senior, senior leadership team, and roll the clock forward, not only are there women in the senior leadership team, but the new CEO is a woman. It’s an amazing story. I think 50% or more of the board are female.

Joe: I love the story you told. I think you said that you went to the CEO at one point and said, ” You’ve done a great job in [00:20:00] diversifying your board, but what are you doing with leadership?” And I thought his response was really interesting.

Jane: Yeah. He said, “Be patient. I’m getting there.” And he did. He’s quite amazing. Listen, I said I’m very lucky because the four public company boards that I’m on, they’re all outstanding Chairmen/CEOs.

Joe: One follow up is you said that Voya is invested in helping society. Could you let us know a little bit about what that means?

Jane: I told you a little bit about Voya Cares. I’ll focus a little bit on it internally for their employees because that’s part of it all. They are all a hundred percent hybrid, and there’s no mandate that says you have to be in three days a week. Let me say it differently, not a hundred percent hybrid. They’re a hundred percent remote, but if you want to come into the office, you can.

They have invested heavily on platforms that help employees to work effectively and efficiently at home, but also to reserve space when they want to go into an office. They care deeply about diversity. They care deeply about all types of [00:21:00] people and they practice what they preach.

Joe: Has that led to benefits in terms of the company’s performance?

Jane: I think so. You should look at the stock price. I think we’ve done well, but we’re not driven on a short-term basis by the stock price but the company has done very well.

Joe: That’s great. Yeah, I didn’t think it was short term. Based on the story you’ve told us about them, it sounds quite the opposite.

Jane: It’s been the recipient of many awards and I wish I had the list in front of me of the years in a row of most ethical company, and there’s a long list of them.

Joe: One of the things that I found most interesting about your background, and it’s a very interesting background, is that you are a co-founder of Trewtec. Talk about how that came into being, who you founded it with and what its purpose was, and then I have some questions to follow that up with.

Jane: Well, I like the fact that you say was because it is past tense. Trewtec lived for a number of years, but we closed it down. Beth Stewart who runs a search firm for women [00:22:00] board members called Trewstar. she’s done a really great job, placed so many women on boards and she started it before she came to me, and she had been a board member herself, by the way. She came to me with this premise that people get on boards and they’re accountable for ensuring, from a technology point of view, things are going okay, but they really don’t understand technology.

This was from a few years ago when there weren’t many technologists on boards It was rare. Her view was just like there’s independent auditors, there should be independent technology reviewers hired by the board to come in and do a very high-level assessment of the technology strategy, platforms and so forth of a company, not deep cyber reviews or anything like that. It is just an across the board. Do you have the right leadership? Are you on the right path? Will you be able to implement the right technologies, and so forth, and I thought it was a great idea and she asked me if I wanted to do it with her. I said, “Sure, but I’m not a salesperson. I don’t want to be a [00:23:00] salesperson and I don’t want to sell.” 

We agreed to do it. We put it together. We built the platform. I had a network of retired CIOs to tap on the shoulder and we sent out teams. We had approaches that kept our data confidential, and so everything was all set and she got us our first pilot client and it went well, we learned a lot. 

Then I used my old network to find us another four or five, because one of the things we learned in the process is for companies to sign up to this, you really have to have the CIO-level person do the sale because that’s really the whole point here. As I started, I don’t like to sell. I mentioned it, and one of the things in this part two of my life is I am not going to do the things that don’t make me happy, and selling doesn’t make me happy. Once we realized that for this to be successful, I would need to be the salesperson in this initiative. I said, “I’m sorry, Beth. [00:24:00] I can’t do this.” The good news is we closed down the company. The company did very well, but we closed it down, and she’s still a good friend of mine. 

Joe: That is great news. One of the questions I have is what Trewtec did, or my understanding of what Trewtec did was that it helped explain in a simple way, for the uninitiated, very complicated technology, and I’ve sat on a number of boards and I’ve sat in on board meetings and I think it is absolutely true. Even if you have a technologist on the board, the rest of the board still needs to understand it too. It’s great to have an expert on the board, but that isn’t enough, so who is out there that’s doing what Trewtec did?

Jane: I don’t think anybody is out there doing what Trewtec did, and I do think there is a need for Trewtec, but what’s been done instead is ensuring there is a technologist on every board who can act as the translator. Because when you think of a lawyer, a lawyer has a specialty, has an expertise. They’re not gonna be an expert at everything, but if [00:25:00] another lawyer comes in to talk about a legal topic, even if it’s not their legal expertise, they can push back with confidence, and that’s what happens in the boardroom. If you have the one technologist in the room pushing back, and if it’s the right technologist, they’re pushing back in English to the right point.

You can’t bring the conversation to a level where the other board members glaze over. You need to learn as a board member when is the right time to say, “Why don’t we take this one offline,” but you can ask the right questions at a level that the other directors can understand and over time they’ll get it.

It’s the same thing as I’m not a financial expert, but I can ask questions and I’ve learned enough because I’ve heard the experts in the room ask enough questions. I’ll never be as good as them, and that’s not my role in that boardroom, but over time I’ve gotten better at it and I’ve learned more, but I’m not going to be the big pusher backer.

Joe: I think that is an excellent explanation of the power of diversity of [00:26:00] perspective and skills on a board, because being able to ask, we like to say the third question or the fourth, not the first question, which is, how are you doing today? But the real questions that matter, the third and the fourth question, which most board members, if you get too technical, or as you said, if it’s a legal issue or whatever it may be, that is the reason you do this, and I think you’re right about that. I still think that the idea of having a company that does what Trewtec did would be a great idea. 

Raza: I think one question to ask was like, how does one become a technologist? Can this be done top down as well where a non-technologist board member can learn a lot about these things? Or do you have to have that perspective come from bottom up by doing it by being a technologist all those years, and then being able to bring that? Maybe advice for training board members on how to be the technologist on the board.

Jane: You just asked [00:27:00] two different questions. To be the technologist on the board, you really need to have deep and very broad expertise, and that was like back to the lawyer example or the finance expert example, it’s very hard without significant studying, but that doesn’t mean you can’t add value in that space. 

And that does mean reading, it does mean educating yourself, it does mean not being afraid to ask questions. I’ll bring you back to ThoughtWorks. ThoughtWorks has almost a technology for dummies publication, which is quite amazing where they’ve taken a lot of the technology words, technology segments and sectors and synthesized it in business words, and you should go on their website and go find this document because it’s quite amazing. It makes you a little bit less afraid, and the more you read and you can read it, and you can’t have a bar for yourself that you’re going to be an expert, but you’ll get more confidence around pushing back and asking [00:28:00] question.

Raza: Maybe yoi read the book called the Phoenix Project or other books that are written that explain technology and other paradigms in more English language. The Phoenix Project is written as a novel. It comes as a story, but it’s about a technologist and the opening scene is where he’s brought into the CEO’s office and told that his boss and his boss has been fired, and he’s now in charge for running technology in the company.

Joe: How does it go? I mean, how does come out in the end?

Raza: That’s actually also a really seminal book behind the DevOps movement, for example, and a lot of the concepts. There is usually a wall between, let’s say, dev and business and dev and deployment and production and how the principles of continuous integration, bring all of that together in real world, large software solutions. It’s a really good, easy read. 

Jane: Started out as a developer or have you just become a [00:29:00] very knowledgeable person?

Raza: I did start as a developer. I’m recovering, I haven’t coded in the last 20 years. I’m not counting the Excel macros that I did, but it kind of stays with you.

Jane: It does stay with you.

Joe: Well, I’m glad we brought you two together. Jane, thank you so much for joining us today on On Boards. It’s been a pleasure having you.

Jane: Thank you. Thank you so much for having me. It’s a great conversation.

Joe: And thank you all for listening to On Boards with our guest, Jane Chwick.

Raza: Please Please visit our website at OnBoardsPodcast.com. That’s OnBoardsPodcast.com. We’d love to hear your comments, suggestions, and feedback.

Joe: And please stay safe and take care of yourselves, your families, and your communities as best you can. We hope you’ll tune in for the next episode of On Boards. Thanks.

44. Sylvia Acevedo: Rocket Scientist, to CEO and beyond!

From living on a dirt street in rural new Mexico living in poverty as her parents struggled paycheck to paycheck, to rocket scientist, CEO, board member extraordinaire and bestselling author, Sylvia Acevedo’s story is an inspiring story of transformation.

Thanks for listening!
We love our listeners! Drop us a line or give us guest suggestions here.
Links

Bridges Out of Poverty
“Path to The Stars:” My Journey From Girl Scout to Rocket Scientist. (A Middle School Memoir)

Sylvia Acevedo Speaker Contact Info

Quotes
On writing “Path to The Stars:” My Journey From Girl Scout to Rocket Scientist
“I chose middle school because the way the world is evolving, science and technology are embedded in everything that we’re doing, and you need to have at least a modicum of understanding about science and technology, and middle school is kind of that last time you can choose those electives and that really what is like an inflection point in your life.”
I was the beneficiary of some great programs like Head Start, obviously the Girl Scouts, but I also had really amazing teachers and mentors, and then I was able to develop skill sets that became extraordinary, that were able to give me opportunities like math, being able to have the kind of math skills to be able to re rocket scientist. It was a confluence of those things that I realized gave me this great opportunity to live a life of my dreams and my potential.
My Girl Scout troop leader taught me to never walk away from a sale until I’d heard “no” three times, and that was so transformational because I had been raised in a Spanish-speaking household and kids are not supposed to speak to adults until adults speak to them, that’s a really hard way to sell cookies. it taught me is persistence, resilience, and how do you get to the yes.

Big Ideas/Thoughts
My fourth grade teacher, Mrs. Baldwin, showed us pictures of universities in class one day, one of which was of Stanford. Remember I grew up in the desert Southwest, one of the most extreme deserts. There’s the Tundra, there’s the Sahara, and then there’s the Chihuahuan Desert, and that’s that part of New Mexico where I was raised. When I saw the green verdant hills and the red tiled roof and the limestone buildings, I just said, “I want to go there.” And I probably meant I just wanted to go there to see it, but she walked to my desk, and she said, “You know, Sylvia, it’s one of the best universities in the US and the world, and you’re a smart girl and you can go there.”
Impact of Girl Scouts
I had the goal and the dream, wanting to work in NASA, or be part of the space program, going to Stanford. I had those adult mentors. I had extraordinary skills and also I had that drive of wanting to leave that for something better.
As I mentioned, my family struggled with money and I was really fortunate that the troop leader that we had said I could be part and do everything, but I had to sell a lot of cookies and use my cookie funds for those programs, and that was so important because there were several things that I learned from that.
For people listening on the call, we all know how to do that, but for a kid who’s been raised in near poverty and the circumstances, I didn’t know how to do that, so that really was that light bulb moment that taught me that I could have my goals and dreams, which is also why in fourth grade, when that teacher showed me the picture of Stanford, I was able to say, “Okay, what do I need to do? I need to break it down into smaller steps.”

CEO of Girl Scouts of USA:
One of the Girl Scout mantras has always been leaving a campsite better than you found it. So, when I became the CEO I got to work!
We created 146 new merit badges during my four-years as CEO, more than at any other time in history, and we also grew the cookie program by about 80 million dollars as well. 126 of the new badges were STEM: coding, cyber. robotics, design thinking vehicles. We did a partnership with General Motors and some with NASA as well, 126 STEM badges that are just really great badges for girls to earn.

Competitiveness in the tech Job Market
When you think about semiconductors, you realize that they’re the brains and so much of what we’re using to drive and create and power our world.
If you think about the United States and you have a workforce of about a hundred million people, you think, “Okay, in our top 10% is 10 million. You now have a couple of countries; India and China, who can provide more than 10 million people who speak English fluently in our technology advance, and so there is a whole lot more competitiveness.
In addition, you have the dispersal of work, so work used to be done locally. For the United States, we had a lot of people who kind of figured, “Well, I just need to work near a certain location, and I’ll be able to have work, and not only that I speak English.”
Those two competitive advantages many ways have kind of gone away for many jobs, the competitive advantage of local proximity and the competitive advantage of English being a unique language. Yes, English is the language of business, but now there’s a lot more people speaking English so it’s just not a competitive advantage now.

Transcript

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. On Boards is about boards of directors and advisors and all aspects of governance. Twice a month, this is the place to hear about one of the most critically-important aspects of any company or organization; its board of directors or advisors, as well as 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, the challenges boards are facing and how they’re addressing those challenges, and how to make your board one of the most valuable assets of your organization.
Joe: Our guest today is Sylvia Acevedo. Sylvia has [00:01:00] served as a CEO for a number of organizations and as a board member of a number of organizations, including Qualcomm and Credo.
Raza: Sylvia started as a rocket scientist and worked for NASA and then worked in a variety of engineering, sales, and marketing roles at major tech companies, including IBM, Apple, as well as startups.
Joe: Sylvia was a girl scout and later joined the board of the Girl Scouts of the USA and ultimately served as its CEO.
She has also served as a Presidential Commissioner on a White House initiative organized by President Obama for educational excellence for Hispanics and early childhood leadership. Welcome, Sylvia. Thank you so much for joining us today.
Sylvia: It’s great to be here, Joe and Raza.
Joe: You have an amazing story that leads to an amazing career. Let’s start with your backstory. One of the first things you said to us when we talked to you a few [00:02:00] weeks ago was that you were a devout believer in the power of transformation and disruption to change and improve lives, communities and organizations in the world.
Given your background. I’m not surprised you believe this, but could you share a little bit of growing up and what the circumstances were that led you from your beginnings to attending and getting an advanced engineering degree at Stanford University.
Sylvia: Well, thanks a lot, Joe. Yeah, I think because my whole life is like this amazing transformation story, because there’s another way of introducing me, you really highlighted some of the achievements I’ve had, and I’m very proud of those. But if I introduced myself a different way, which is a girl from a Spanish-speaking household who has struggled with money.
In fact, sometimes we didn’t have enough money, had to live with other family members, live paycheck to paycheck, and sometimes there wasn’t even enough money between the paycheck periods, [00:03:00] and then the only place we could afford was a home on a dirt street, and that’s where the last meningitis epidemic happened, and my sister got sick with meningitis and it forever changed her brain.
If you think about it, okay, here’s a girl from a predominantly Spanish-speaking only household, family struggles with poverty, lives in a really difficult area, how did that girl become the person you’re talking to today?
And so that’s why I believe so much in the power of transformation. It’s kind of interesting. I didn’t understand how many factors had kind of come into play. It wasn’t just my DNA, like I’ve got the drive, but there were just so many interesting aspects of organizations, people who really made a difference in my life, but I didn’t know that until the mid-2000s when there was a researcher from Stanford who was calling.
And she wanted to know how come it was that I went to Stanford because she said at the time, Stanford wasn’t recruiting in rural New Mexico. She wanted to know how I even knew Stanford, how I was prepared, [00:04:00] especially at the graduate level. You’re competing with the best of the world, and not only did I end up graduating, I ended up having this great career, and I didn’t have an answer for her.
But the more she asked, she said, “Were your parents academics?” No. “Were your parents wealthy ranchers?” No. She’s like, “So what happened?” And the more she kept asking. the more I realized I was really a beneficiary of some great programs like Head Start, obviously the Girl Scouts, but I also had really amazing teachers and mentors, and then I was able to develop skill sets that became extraordinary, that were able to give me opportunities like math, being able to have the kind of math skills to be able to re rocket scientist. It was a confluence of those things that I realized gave me this great opportunity to live a life of my dreams and my potential.
Joe: One of the things you told us was that early in your academic career, I think very early, a teacher showed you a picture of Stanford. [00:05:00] Can you tell us about that?
Sylvia: Well, yeah, I remember that very vividly. It was Mrs. Baldwin in fourth grade and she was sort of a visionary of her time. She showed us pictures of universities, and remember I grew up in the desert Southwest. That desert is one of the most extreme deserts. There’s the Tundra, there’s the Sahara, and then there’s the Chihuahuan Desert, and that’s that part of New Mexico where I was raised. When I saw the green verdant hills and the red tiled roof and the limestone building, I just said, “I want to go there.” And I probably meant I just wanted to go there to see it, but she walked to my desk and she said, “You know, Sylvia, it’s one of the best universities in the US and the world, and you’re a smart girl and you can go there.”
That nine-year-old girl in fourth grade made that a goal, and once you decide in a goal, then you start figuring out how to achieve the goal, and obviously getting really good [00:06:00] grades and being involved in lots of after-school activities, that was what I decided I would be doing because I really wanted go to Stanford, so I was very proud of the fact that I ended up actually graduating from Stanford as well many years later.
Joe: Wonderful to have a teacher that believed in you. I mean, what a great factor to have.
Sylvia: You’re absolutely right, and part of those for me, trying to figure out the answer to that Stanford researcher’s question, which is like, how did this happen? And I was fortunate enough to read a book by Dr. Ruby Payne called “Bridges Out of Poverty,” and she writes about how you need to have at least one of these things.
One is you have to have a goal and a dream, and clearly I had that, that dream of going to Stanford, but you could also have a mentor or a guide, and the challenge is that when you’re raised in poverty or near poverty, that’s what your community knows so you don’t know how to get out, because if you did, you wouldn’t be there, right?
It’s really important that you have people who can help you out, [00:07:00] and so though I had so many great teachers, my troop leaders, people who could help and advise me.
Another thing you need to have is or can have to help you get out is an extraordinary skill, and I was really fortunate that I honed my math skills to that level, but I also was really good in percussion in music, and I actually had a four-year scholarship in music that I turned down to study engineering, and then I also played basketball for one year on the varsity team, but then I decided to really focus on study, so I had extraordinary skills that way.
But then the fourth thing was it’s too painful to stay, and that was an important lesson too because I realized it was so important for me to have that drive to get out of that community where I was living.
Those were the four things, and I was really fortunate that I had all four of them. I had the goal and the dream, wanting to work in NASA, or be part of the space program, going to Stanford. I had those adult mentors. I had extraordinary [00:08:00] skills and also I had that drive of wanting to leave that for something better.
Raza: Sylvia. I want to then mention the book that you have written called “Path to The Stars:” My Journey From Girl Scout to Rocket Scientist.” I just sent it to my niece. I gave it to my daughter. I think it’s a wonderful read and really highlights that journey to inspire our children and especially girls all around.
Sylvia: Well, thank you so much, Raza. Yeah, I wrote that book because one time I was talking at a school, and it was in a large auditorium, and then afterwards there was a really long line and I thought it was for lunch and the woman said, “No, that’s not for lunch. That’s for people who want to talk to you.”
Being an engineer, you want to scale and I realized, “Today, I have time to be able to talk to all these kids, but in the future, I’m not so sure that that really scales.” So, I decided to write that book and I’m really grateful that I did. It’s continuing to sell really well. Schools are adopting it into their curriculum and it’s very much a middle school [00:09:00] memoir.
I chose middle school because the way the world is evolving, science and technology are embedded in everything that we’re doing, and you need to have at least a modicum of understanding about science and technology, and middle school is kind of that last time you can choose those electives and that really what is like an inflection point in your life.
I think about an elevator door closing and my book is like stopping those elevator doors from closing and hopefully the kids will read it and get inspired to study more math, science, and just get involved in and just the wonder of how the world is being recreated around us.
Joe: Can you talk a little bit about the impact that the Girl Scouts had in your early life and ultimately in your career, of course.
Sylvia: Yeah. Sure. I’m very grateful for that experience. As I mentioned, my family struggled with money and I was really fortunate that the troop leader that we had said I could be part and do everything, but I had to sell a lot of cookies and use my cookie funds for those programs, and that was so [00:10:00] important because there were several things that I learned from that.
One, since I wanted to do everything I had to sell a lot of cookies and the numbers seemed really incomprehensible to me, but what she did is she said, “Whenever you have a goal or a dream, you set that goal and then you break it up into smaller parts,” and so we said, “Okay, we’re going to sell cookies for six weeks.” We divided the number by six, and then I said I was going to sell six days a week so we divided that number by six, and so the daily goal was very achievable and so that was really helpful, but she also said, “You could always ask for help.”
For people listening on the call, we all know how to do that, but for a kid who’s been raised in near poverty and the circumstances, I didn’t know how to do that, so that really was that light bulb moment that taught me that I could have my goals and dreams, which is also why in fourth grade, when that teacher showed me the picture of Stanford, I was able to say, “Okay, what do I need to do? I need to break it down into smaller steps.”
But the other thing that that troop leader taught [00:11:00] me was to never walk away from a sale until I’d heard no three times, and that was so transformational because I had been raised in a Spanish-speaking household and kids are not supposed to speak to adults until adults speak to them, that’s a really hard way to sell cookies.
The first time I’d gone up to somebody who I didn’t know, wasn’t a family member or somebody at church, would you like to buy some Girl Scout cookies, and she said no, and I stood there looking at her and she looked at me like, “I said no,” and so I asked again, “Is there anybody at your house that would like to buy some Girl Scout cookies?” And she said, no. And again, I just. stood there rooted in place thinking, “Troop leader said never walk away from a sale until you’ve heard no three times.” Then I said, “Is there anybody who I could meet?” And she bought a box of Girls Scout cookies, probably just to get rid of me.
But what it taught me is persistence, resilience, and how do you get to the yes, and I will tell you that that is a skill that has helped me in my [00:12:00] entire career, because I’m a trailblazer. I’m really fortunate to have been able to have a lot of doors of opportunity open for me, and I was the first one through those doors. As a trailblazer, sometimes it’s kind of tough and you hear no a lot, and so I’m trying to figure out how do I turn that no into a yes was a skill I began developing, creating opportunity and getting that no into a yes. I was working on that skill since I was seven years old.
Joe: It’s amazing and great advice and kudos to the Girl Scouts.
I will also add, though, you said very early on, it’s not a matter of DNA or something like that. I think it’s clearly a matter of DNA because a lot of people could have heard this “you have to ask three times before you give up” and and thought to themselves, as I think most kids probably do, “No, I don’t.” But you actually did it and I think it’s amazing, so it’s really everything coming together. I mean, there are obviously people in your [00:13:00] life and the Girls Scout organization that really, really not only taught you persistence, but one of the things that, as I recall, that you learned there was you deepened your interest in science. You wanted to get those science merit badges Talk about that for a minute.
Sylvia: You’re absolutely right. Yeah, I was still a girl and I earned the cooking badge just like all my friends, but my troop leader had remembered me looking at the stars when we went camping one night and she taught me about planets, that there was the constellations and there were planets and stars, and so later she encouraged me to earn a science badge and also incorporate space into that. So, amongst several of the things that I did to earn that badge was making an Estes rocket and having it successfully launched, and I tell you, I failed a lot of times, and that’s also kind of a benefit of an all-girls environment, which is if I had been, I think, in a coed environment and I had failed three times they would’ve probably said, “You know what? I [00:14:00] don’t think this is for you,” and then the fourth time I failed or the fifth time I failed. But the sixth time, I finally got that rocket going up into the sky and I had that sense of achievement, like I can do this, and it really filled me with this confidence that I had that I could then do science and math, and so I’m really grateful for that opportunity.
Joe: So, later, after being, I’m sure, a standout girl scout, you actually joined the board of the Girl Scouts. How long were you on the board, and then tell us what happened as you served on the board?
Sylvia: Yeah, I was on the board for eight years. I was very grateful, and actually the former Governor of Texas ,Anne Richards, I was on a board on a school that was named after her, the Anne Richards School for Young Women Leaders in Austin, Texas, and I had told her about my Girl Scout experience, and so she nominated me to be on the national board, that I was really grateful to serve. When I was on the board after my eighth year, the former CEO, she had gone to pursue other opportunities and the board asked me to step in.
Now I had [00:15:00] just moved to Santa Barbara from Austin, and so the national headquarters is in New York and I said, “Okay, I’ll just do this until we find somebody else.” But one of the Girl Scout mantras is always leave a campsite better than you found it. So, I got to work and I was there until I wasn’t there.
The other thing is I had been on the board for eight years and I wasn’t an operator then, but I was just the strategy and governance, but in my head, I would have this kind of exercise saying, “Well, if I was the operator, what would I do?” When I became CEO, I had had like eight years of like, “Here’s what I would do,” so I immediately started focusing on things like the cookie business and so we completely rearchitected the cookie program, and then also those badges. We hadn’t really been on a fast implementation level and we ended up adding 146 new badges in my four-year time, more than at any other time in history, and we also grew the cookie program by about 80 million dollars as well.
I was really [00:16:00] grateful for that experience, but I had gone one year and by the fourth year, it’s the time for the three-year trieannum, and so it was a good time to sort of hand the mantle over to the next leadership level, and now I’m focused very much on technology.
Joe: Just the Girl Scouts, the badges you added, were any of them science and math field?
Sylvia: Oh, my gosh, so many of them were, 146 were STEM. I’m really proud of that because we really wanted girls, not just to be users of technology, but creators, inventors, and designers, and so many of them have mobile devices, so they’re coding, cyber. robotics, design thinking vehicles. We did a partnership with General Motors, so just so many amazing and obviously some with NASA as well. Those were some of my favorite badges, so 126 STEM badges that are just really great badges for girls to earn.
The cybersecurity really surprised us of how popular they were. The first year we had cyber badges, a [00:17:00] 180,000 of them were earned in the first year, but then when we dug into that, it turns out girls were very concerned about their personal safety using mobile devices, and so really learning about how to protect themselves on cyber. In addition to that, we had badges in the great outdoors with the partnership with North Face, as well as civics.
Unfortunately, civics has been taken out of so many American classrooms and so we wanted to make sure that girls understood how our democracy and our Republic works, so I was very proud of those badges as well. But all the STEM badges, you bring up a really good point with that, is that we had to rewrite the curriculum because what we found was much of the STEM curriculum that has been written has been designed around what interest boys, and so we had to redesign the curriculums around what interested girls. It’s the same scientific principles, but just in a way that was much more engaging. And as a result of that in my last year, full year in 2019, over a million STEM badges were earned.
I have to say something that’s just so great.
[00:18:00] Just recently I was in San Diego and this young woman who, the maître d at the restaurant, she came up to me and she said, “I just want to thank you. I got my start in STEM with Girl Scouts, and now I’m studying to be a marine biologist. It just feels really wonderful to know that you’ve got that kind of impact.
Joe: Well, I think when we talked about this earlier, I had mentioned that my daughter had applied to school for engineering and when we looked at some of the schools, I was stunned. Now, this was in 2013. I was stunned at how few women or girls were applying for those classes, were sitting in those classes. She ended up going to the University of Colorado at Boulder for aerospace engineering. And that first year she was surprised, as was I, at how few women were in the class.
One of the things you touched upon when you talked about changing the curriculum for the Girl Scouts, which is there’s a cultural bias towards how science is taught. [00:19:00] Could you just talk about a little bit about that? Because I really had a hard time understanding. Are we still discouraging girls? But it’s a little more complex than that, I think.
Sylvia: Yeah. It is. I looked at it from three things. First, you have to have an interest and you’ve got to get the girl interested, and then you build the confidence, so you’re interested and you’re confident, then you work on the competence. A lot of people like to include Legos and think, “Okay, those blocks are gender neutral.” But I’ll give you a really great example because most boys of a certain socioeconomic level in the United States get Legos by the time they’re three years old, and so by the time they get to elementary school, they’re very confident with Legos. Girls don’t get Legos usually for gifts.
Let’s just say, there’s this incredibly well-meaning third grade teacher who wants to do STEM exercises. She says, “I’m going to use Legos because I want them to be gender neutral.” Well, the boys’ eyes light up because mostly in girls, especially in elementary school, they’re [00:20:00] outperforming the boys. Here, they’re going to use Legos. They’ve been doing Legos for many years, for five years now, so they immediately get to work with the Legos. The girls they’re thinking, “Okay, I’m not as familiar with Legos. What am I supposed to do? How am I supposed to do it?” And then they see the boys and they’re normally outperforming the boys, and the boys are like finished and doing more, and the girls are like, “Ugh.” So, they’re not really that interested, and then, because they’re not interested, they’re not that confident, and then they don’t really pursue it to be competent.
Now in Girl Scouts, we work with Legos but we did it in an all-girl environment so that everyone was starting at the same level, right?
But for other things like cybersecurity, like we taught about malware and networks, like how do you teach a seven- and eight-year-old to be interested, confident and competent on malware and networks? It’s like that’s crazy. Well, actually we were amazingly successful at that so when we get seven- and eight-year-old [00:21:00] girls to sit in a circle and talk it turns out they love to do that, and they’re talking with one another. Well, you get a ball of yarn and they pass the ball of yarn with one another as they talk with one another, so within a very short amount of time, the girls have created a physical network.
Then you also say one of the girls had a virus and they can immediately see how that virus spread through that network, so suddenly they’re interested. They’re confident and then they work on their competence, which is kind of back to that point when I said our first year, a 180,000 cyber badges were earned. Really designing things around how the girls are interested and then work on that for confidence and then build on the competence of it.
Joe: It suggests that a really significant and deep cultural change in [00:22:00] the way we educate is really what it’s going to take, because everything you said made perfect sense, but it isn’t necessarily intuitive so it’s going to require thought and deep change in how we teach in order to really find gender parity in STEM. I mean, that’s what we should be looking for, I think, right?
Sylvia: Well, we desperately need the talent workforce, that’s for sure, in the United States, and cyber in particular because we very much need to protect our assets and protect our democracy, our country, our communities, our homes, our institutions, and so you need talent at every level. You need them at the local level. You need them at the national level, at the state level. Hey, you need that kind of talent protecting our home computers and information at home. We need to have a lot of people that are very interested and aligned about what our national interests are to protect us.
Raza: Sylvia, you did your advanced engineering degree at Stanford, [00:23:00] and then you were looking for a job. Tell us how you ended up at IBM and then your journey from there among various well-known tech companies, and how did you find that environment for you and how you progressed through that?
Sylvia: Well, thanks. I have to say that was back in an era, technology has improved, maybe not as many of us thought it would’ve changed by that time. But back then, it was incredibly challenging. I graduated from Stanford seeing a lot of my classmates thinking the world is our oyster. Silicon Valley was just taking off. That was the ground zero. They were getting job offers left and right. And these are in the back in the days where you printed your resume, I kept printing and printing and handing out and networking, and I thought this is really tough, well over a hundred resumes.
I went to like every networking event and it was incredibly difficult. Some of my friends were just getting these amazing jobs and companies, and I just couldn’t break through. Fortunately I did finally get a job as a [00:24:00] facilities engineer at IBM and that wasn’t exactly what I thought, having worked at NASA as a rocket scientist, but it was the foot in the door I had and I was really grateful for that foot in the door. I took that approach and I thought, “How do I really make this opportunity work for me?” I really began thinking about how can I provide innovation?
In that facilities engineering role, especially in a manufacturing facility, they kind of just thought of facilities engineers as just moving the pieces and just making sure that it meets OSHA standards and there’s tolerances, people’s safety and all that stuff. But I took a different tact, I did do designs that fit that standard, but I also said, “How about if we tried some innovation?”
I actually went and worked and talked to the machine operators and the women who were actually assembling the parts and they had some really creative ideas. When I presented my idea, I presented what was the standard way of solving the manufacturing workflow, but then I also put in their innovative [00:25:00] way, and I remember the head of manufacturing, he looked at that and he goes, “looks really interesting. Let’s try that innovative approach,” and production shot up.
Well, lucky for me, IBM was then in the process of building a very large manufacturing facility there in San Jose, it’s 765,000 square feet. I still remember it to this day, and because of that experience, the big manufacturing boss asked for me to be the design engineer. I was able to do a standard approach, but then I also added a really new innovative approach, and that became such a showcase for IBM that actually they would bring the different stock analysts to see the big manufacturing plant. That was because it was really innovative back in the day.
That then got me to the IBM Charm School the marketing and sales program. I had talked to my boss about I wanted to be one of those big execs and he laughed. But remember, by this point, his laughter to me was just one of the first [00:26:00] nos. I’m like “Okay, how do I get to a yes here?” I said, “Well, imagine if it was a possibility, what skills would I need to have?” He mentioned sales, marketing, and all that.
Well, I did get into that marketing program. It took me a really long time to break through. I remember his first name, I don’t remember his last name, but I knew there was an opportunity in a Silicon Valley, in the Palo Alto office, and the guy George, who was the gatekeeper, I called him so many times. I met with him, and finally I broke through and got into one of those coveted spots. I did really well at IBM, a hundred percent club, got to ride the company jet, all sorts of great things.
Then I went to work at Apple and other places, but one of the things that you’re alluding to, which is really true, is that I was doing incredibly well and I wanted to change divisions and I wanted to move into the international field. I thought there’s great opportunities, and this international division also has Latin America as part of it and they speak Spanish and [00:27:00] I can speak Spanish, so I thought it was a good fit.
Well, I’ll tell you that nothing, crickets. I would apply for positions, nothing, and month after month after month, and I would see these positions and some of them would get filled, many would not get filled. I talked to the HR folks. I talked to people, nothing, so I thought about that and I thought, “Okay.”
This was back in the day before really advanced CRM analysis, but I pulled a Fortune of 500 Global. I think in the summer they always print this out and I looked at all these different accounts and then I saw that these global accounts, that we had global arrangements. They were underfunded and under penetrated in the sales in the global business or the Pacific region.
I did an analysis showing that if they had the same kind of penetration with these global accounts, like the Fords, the Proctor and Gambles, et cetera globally as they did domestically, it would be hundreds of millions of additional sales. I [00:28:00] did a PowerPoint presentation. I printed it out, and because I worked in the company, I was able to badge in and I waited for the head of sales, this gentleman named John and I got him right outside the elevator lobby and I said, “Hey, John, I’m Sylvia Acevedo and I can show you how you can increase sales by several hundred million dollars.”
He looked at me like, “Interesting.” He goes, “Okay, I’ll give you five in the team room,” so we got a team room and he flipped through the PowerPoint presentation and he was like, “Whoa.” He just had not considered that and so he goes, “This is great.” He went to take it and I put my hand on it. And he said, “Can’t I have it?” I said, “Well, it comes with me.” And that’s how I finally broke in.
I’m really grateful that I did. I had a really great experience in that working internationally, which then opened up for other opportunities, at Autodesk and other places where I can work in international markets.
Raza: Well, it looks like you became a well-rounded technologist but in all of these different instances, the [00:29:00] lesson of never go away from a sale until you hear no three times really paid off very well.
Sylvia: Yeah, it did. And by that time I’ve got that persistence, that resilience and trying to figure out, “Okay, this approach isn’t working. How am I trying this approach?” And having that goal and that drive to really want to have that experience was really important.
Raza: Sylvia. Now, you are a board member at Qualcomm and Credo. Could you talk about what these companies do and a little bit about the board and how it’s composed for each.
Sylvia: Sure. So, Qualcomm, I think a lot of people know because of the 5G, so think about wireless, so those chips that enable the mobile technology and communications, that’s Qualcomm, so wireless. Credo, it’s completely, technology semiconductor, but everything wired. When you think about server farms and you think very high density, server blades, they’ve got to be physically connected and so Credo has amazing technology that really speeds up [00:30:00] the rate of transmission, but not only that, it saves energy and produces less heat, which is really important when you’re thinking about server farms and the amount of heat and electricity that they consume. So, that’s Credo Technology and then Qualcomm.
Qualcomm is obviously a much bigger company, with over 35- to 40-billion global business. Credo is growing now, we just went public this year. One of the few technology companies who’ve gone public and whose stock is above water so that’s all really great. Credo has still some of the early investors and then has added some technologists and other independent board members like myself. The board chair, Lip-Bu Tan, formerly of Cadence and he’s kind of a legend in technology. I think he’s been part of like a hundred-plus startups himself and companies that have gone public, so a lot of great experience and the CEO, Bill Brennan, a real semiconductor superstar.
On the Qualcomm side, a very large company. We have a great CEO as well. Cristiano Amon, he’s [00:31:00] actually a Brazilian, and he has been in Qualcom for quite most of his career. The board has many former CEOs. It’s got a balance of global as well as domestic and across industries, which I think is very important because we’ve got technology embedded in cars now, in robots, on industrial floors and everything, so it’s really important to have a well-balanced board. And the board chair there is Mark McLaughlin who used to be in Palo Alto Networks, and he’s really an amazing and a great steward of that board as well.
Raza: It sounds like a really good diverse perspective board. How does the board see what’s top of mind today vis-a-vis, let’s say, competition with China or ESG? What are some of the things that keeps the board busy?
Sylvia: You’ve really hit on it quite a few. If you’re in technology and in semiconductors, China is clearly top of mind, and then following that very closely and very intertwined with that is also the global [00:32:00] supply chain, which has definitely been fragmented in how are you sourcing now so huge issues, and then that’s also tied into ESG as well, so all these things it’s like they’re all braided together.
When you think about semiconductors, you realize that they’re the brains and so much of what we’re using to drive and create and power our world. And in the US, we had outsourced so much of that technology and so now there’s a huge effort of bringing that back, especially with the government’s recent passage of the CHIPS Act, you really see that. When you’re on a board that has something to do with semiconductors, there’s always something about the news headlines that is impactful to what you’re doing.
The other aspect too is staffing. Again, when you think about the global supply chain, it wasn’t just in parts and supplies, it’s also with talent and it’s so important now to make sure that in the United States, we’re also sourcing local talent because the immigration laws have been [00:33:00] changing and so you’ve got to make sure that you’ve got your own home-grown talent as well, because for some of these positions you’re not going to be able to get talent from outside the United States. Talent is a big, big issue and then with the lasting impacts of the hybrid workforce, it’s like how do you restructure work? How do you think about work? Those are also things that at the board level, we’re thinking a lot about.
Raza: In terms of talent, is there a skill mismatch. I’m now talking at the national level. How are large companies such as Qualcomm finding that, and how are they grappling with that?
Sylvia: Yeah, it’s incredibly competitive. That’s certainly the case. It’s very, very, very competitive. And what you’re starting to see is more and more universities partnering with corporations so that you begin to develop that talent pipeline, and then you think about where can you outsource certain kinds of work. With semiconductors, you really need certain kind of talent because you are making a chip. I know people say, “Well, why can’t we just build a chip plant?” And I think it’s [00:34:00] like, “Well, it’s like planting at oak and saying, “Just produce acorns.” Now, it takes a lot of time, but it’s not just the time. It’s the expertise. It’s not just the machine quality and the machine accuracy that you need, but you also need people who really understand what it takes to make semiconductors, especially when you have such thin, thin, thin, extreme tolerances.
There’s that whole ecosystem, and you’re seeing more and more partnerships. Clearly like Intel going to Ohio and partnering with The Ohio State. You could see that there’s going to be a very close alignment there. They’ve also very much partnered with ASU in Arizona. There’s quite a few chip plants there as well.
You really do have to think about that talent, and I think that’s back to our earlier discussion about getting women in STEM that that’s so important that they see that they can have a career, that this is an environment for them. This is where they can live their life potential working in these companies, and that’s very important. You’ll see a renewed emphasis on that. [00:35:00] I think, with most technology companies, you’re going to see that, especially for the cutting skills.
Raza: But in terms of developing skill, one thing that you had mentioned earlier was the role of the English language. Talk about that a little bit.
Sylvia: Yeah. This is something that for the United States, we’re really proud of the fact that we can go around the world and people speak English, and it’s like great. But it wasn’t always that way, and English used to be that premier language, and so if you spoke English, it gave you a competitive advantage.
Well, several countries, back in the 20th century, went back and said, “Okay, we’re going to put a focus and make sure that we have top engineering schools, but not only that, that people speak fluent English as well.” And these are very large countries, so when they say 10% of their population is going to be speaking English fluently, you certainly have got tens of millions of people who can speak English fluently, and then [00:36:00] also graduate from engineering schools.
If you think about the United States and you have a workforce of about a hundred million people, you think, “Okay, in our top 10% is 10 million. You now have a couple of countries; India and China, who can provide more than 10 million people who speak English fluently in our technology advance, and so there is a whole lot more competitiveness.
In addition, you have the dispersal of work, so work used to be done locally. For the United States, we had a lot of people who kind of figured, “Well, I just need to work near a certain location and I’ll be able to have work, and not only that I speak English.”
Those two competitive advantages in a lot ways have kind of gone away for many jobs, the competitive advantage of local proximity and the competitive advantage of English being a unique language. Yes, English is the language of business, but now there’s a lot more people speaking [00:37:00] English so it’s not just a competitive advantage now.
If you turn that coin around on the flip side, sales and service are always done in the local language. Yes, somebody may speak English in another country, but sales and service is done in their home language, and so the United States not having that talent of having a very large bilingual population really puts you at a disadvantage when you’re saying, “Well, now, I’m going to take the great opportunity and go to those countries,” and you find that your English-speaking skills work really well in the business environment, but not in the sales and clearly the service area as well.
That has been a big change for lots of folks and they don’t realize that now there are tens of millions of people competing for their jobs, and especially if your job is not required to be geographically proximate anymore. That means it’s untethered and can go anywhere, and so that is a huge challenge for a lot of American workers, and I think that’s something that has to be addressed [00:38:00] educationally and also expanding on our ability to speak more than one language is also key.
Joe: Let’s go back for a moment just to the CHIPS bill, which really has got a lot of play lately. What role did the companies on whose boards you serve, what role did they play in trying to help get over the finish line, so to speak?
Sylvia: Well, I think every semiconductor company had a role. Every hand was on the boards. In fact, Pat Gelsinger was at the. State of the Union address with President Biden and he’s the CEO of Intel, so everyone was trying to get this across the finish line because it’s so important. It’s important from a military perspective, it’s important from an economic, it’s important from an industrial policy perspective. It’s also a great economic development boost for the different parts of the United States with the chip fabrication plants and the design.
I think that it’s incredibly beneficial. We have outsourced some of the leading edge chip capabilities and [00:39:00] trying to figure out how can we bring that back in, and when you talk to folks, it’s a 47-year timeframe that we’re looking at. It’s not immediate, but along with that is also the importance of cybersecurity. And the US, it turns out is really good at cyber offense. We’re extremely good at cyber offense, and I think that should make us feel definitely a lot more comfortable. However, we’re not as good at cyber defense, and that for all of us is a challenge.
We as Americans love our freedom and we love to have everything connected. Our microwaves are connected to, you know. Even our refrigerators tell us when we need additional milk and other products so we’ve got everything connected to our mobile devices. But that also means that those are all points that could be attacked by someone who wants to do us harm, especially for small- or medium-sized businesses that serve really large businesses.
The large businesses, large corporations, they really spend a [00:40:00] lot of effort focusing on cybersecurity, but think about the companies that are like the heating and air conditioners that come in to support you. You have to give them access to your building. They may have some of those codes on their computers back at work and not necessarily as protected so there’s lots of different ways of thinking about how do we protect ourselves here in the United States, and so that’s more of the cyber defense.
Of course, a lot of people don’t want to have government regulation and forcing us to have so many network protections, but you can see that’s all part of figuring out how do we protect ourselves in the United States. So, we’re great at cyber offense, it’s really working at how do we protect ourselves domestically on the defense side.
Joe: Sylvia. It’s been great speaking with you today. Thank you so much for joining us, and thank you all for listening to On Boards with our special guest, Sylvia Acevedo.
Raza: Please visit our website at OnBoardsPodcast.com. That’s [00:41:00] OnBoardsPodcast.com. We’d love to hear your comments, suggestions, and feedback.
Joe: Please stay safe and take care of yourselves, your families, and your communities as best you can. We hope you’ll tune in for the next episode of On Boards. Thanks.

43. Eric J. Dale – General Counsel, Board Advisor and Risk Manager

The role of legal counsel for organizations and boards varies wildly depending on the situation, but in all instances provides a valuable resource for companies at every stage of evolution. 

 In the episode, Eric Dale – who has served as a legal advisor in many capacities for a wide range of companies – discussed the important, often critical. Role that a company’s legal advisor can plan.

Thanks for listening!

We love our listeners! Drop us a line or give us guest suggestions here.

Links

Eric Dale Bio

Quotes

The General Counsel role, whether it’s as inside or outside counsel, can add a tremendous amount of value as a company is making the transition from founder-owned and operated to  founder significantly owned and operated, but having third-party capital and new partners in the business.

Nielsen is New York Stock Exchange company and while I was there while it operated in about 106 countries, had approximately 47,000 employees and its peak enterprise value was approximately $28 billion.  My role included making sure that items that fell into my purview – legal, risk, compliance etc. to the extent they were worthy of getting on the board agenda, got on the board agenda.

I don’t want your listeners to think that when a company is smaller, there is materially less formality. I would rather leave them with the idea that as companies get bigger, both the materiality of the issues, the magnitude of the issues, and often, although not always, the complexity of the issues are such that it just requires an additional layer of activity and oversight.

Board minutes like contracts will largely be reviewed with the benefit of hindsight, so no one is looking at them unless and until there’s a problem. And once there’s a problem, if they’re inconsistent or if they provide fodder for misinterpretation or multiple interpretations, you run litigation risk.  

Big Ideas/Thoughts

As companies scale, generally the role of the board becomes more formal. I think that’s actually a good word and a good concept to use. There is certainly regular communication with the board or individual board members between board meetings in all companies with which I’ve been involved. 

But when you’re dealing with a large multinational company, there are just a significant number of, not only issues, but things to consider whether it’s the global nature of the business, NASDAQ or New York Exchange rules, and a variety of other issues that can have a major impact.

For instance, one of the issues we were always focused on was antitrust. Nielsen was a very big player in the markets that it served. It was also a very transactionally oriented business, regularly buying and selling companies, and in doing that analysis there’s always an antitrust or a competition analysis that had to be undertaken. The board cared deeply about that, and some of those issues, if not existential, could certainly be very material to the ongoing business and operations.  The formality in terms of making sure every “t” was crossed and “i” was dotted was critical to make sure that the board got the best advice that it could in order to make the decisions that it ultimately needed to be made.

Outside GC

My own view, and again, listeners need to think about this through the lens through which I’m speaking – I don’t see a lot of downside to it having an attorney in the room who can call balls and strikes or make sure things stay within the appropriate lanes, and who can put minutes together that will reflect what minutes ought to reflect. 

Bankwell Financial Group

When I got involved, it was a private $250 million bank, kind of a community bank. We’ve grown since I’ve served on the Board to about 10 or 11 times, or just under $3 billion now.

The banking business is a highly regulated, highly complex business. The fundamental business of taking in money at X and loaning money out at X plus it is not that complicated, but the machinations that go into that are very complicated.

For our bank there are two regulatory bodies. One is NASDAQ but in addition regulated businesses like banks are audited by their regulators very frequently, usually annually, sometimes every other year. There’s always an audit of some sort going on in addition to the traditional financial audits, and there are things that regulators want to see and expect to see on which we are focused.

Going Public

It’s important to recognize that a public company will have at least three committees: governance, compensation, and audit, all of which require appropriate expertise.  For example, Audit requires a financial expert, so you want to make sure you have at least one financial expert.  That’s a defined term within the SEC, but it’s basically someone who has been a financial executive, like a CFO, or has overseen financial executives like a CEO or someone who comes out of the financial industry, such as an auditor or someone with that type of background.

Separate Risk Committee

As we think about taking on more risk in particular at our bank, that usually is a full-board conversation, not just a committee conversation.

Risk is a very broad topic in every business and certainly in banks, and so we think about that in the context of where technology would then sit.  There are a number of factors to consider in determining whether there should be a separate board risk committee.

For example, is technology a proactive thing or is it a risk thing, other than cybersecurity and privacy, etc.?  We have established a separate a Technology Committee but have left non-technology risk within the domain of the Audit CommitteePerhaps as our bank and other institutions scale, then it could make sense at some point in time to break risk out. Right now, we’ve examined that, we’ve considered it, and we’ve concluded that risk sitting within audit works for us, and we feel like we’re managing it effectively.

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. 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 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, the challenges boards are facing and how they’re addressing those challenges, and, how to make your board one of the most valuable assets of your organization.

Joe: Our guest today is Eric Dale. Eric is Vice-chair of the Board of Directors of Bankwell Financial Group, [00:01:00] a publicly-traded company. He served as global Chief Legal Officer and Chief Risk Officer for the Nielsen Company, a publicly-traded company, which is an international leader in audience measurement, data and analytics, helping to shape the future of the media.

Raza: He’s also a former partner of Balance Point Capital Partners, a private equity firm, and served as General Counsel and SVP of Corporate Development for e-Media a PE-backed e-commerce streaming company.

Joe: And he was a longtime partner at the law firm of Robinson & Cole, where he chaired the Business Transaction Practice during which, for a few years, he was my law partner. Welcome, Eric, thanks so much for joining us today at On Boards.

Eric: Thank you very much. Great to be here. 

Joe: In addition to being my former partner, and one that I actually liked, you’ve served as general counsel and [00:02:00] outside general counsel to a wide variety of companies. 

Let’s dive in by talking a little bit about the roles in which you’ve served and what responsibilities you had, and then we’ll talk more generally about the role of legal counsel with respect to a company’s board of directors. 

Let’s start with e-Media, which I realized was a while back, but you were general counsel of a VC-backed tech company in the early 2000’s. What was that like? What was your role with them?

Eric: Yeah, I’m happy to talk about that, and again, thanks for having me and Raza, I wish you luck as a partner of Joe’s here and I know what it’s like.

Raza: Yeah, he is also a partner that I actually like.

Joe: Well, we’re not editing that out. I’m telling you right now

Eric: I was at e-Media in the late 90’s and early 2000’s, kind of the tail end of the dotcom bubble. I joined the company as its first and only general [00:03:00] counsel, and I was responsible for corporate development, which, in that context was primarily acquisitions and capital raising and ultimately disposition of the business.

 While I was there, I built a small legal department. I think we had four people in total, including myself, and we raised $27 million in our first round, which back then was a lot, it may not seem like a lot in today’s dollars, but back then that was a significant round with blue chip investors led by Summit Partners and with Goldman Sachs and Vulcan Ventures and EMC and Microsoft in that regard in addition to the kind of day-to-day responsibilities, certainly there was extensive board involvement. In fact, we went from being a founder-owned company to a venture-backed company at that point, which is when we essentially put together a real board for the first time, and so kind of helping the team understand that transition and getting into a company that had real third-party capital and real governance and reporting obligations were part of the role.

Joe: I assume you [00:04:00] attended all the board meetings. Is that right?

Eric: I did. I attended all the board meetings. That’s correct. 

Joe: When you attended the meetings, talk a little bit about in a company like this, what were the types of things that you might be responsible for addressing?

Eric: It was a pretty broad variety, from the most basic, meaning, how do you put together a board agenda? The founder and CEO also chaired the board back then and really had a board or a couple of partners and they worked in the business so they were engaging on a daily basis.

This was the transition to having that, but also having folks who came in and out of the business on a monthly or quarterly or periodic basis, and so it was everything from putting materials together, thinking about what the agenda should look, communicating with investors between board meetings to understand what was on their mind to make sure that that filtered into the agenda, coming up with the right construct of forms and models, so that financial package and the operating package had a look and feel that was [00:05:00] understandable, that was consistent with the materials that we showed to the investors as we were out raising capital making sure they were getting what they needed. 

Joe: Yeah, you know, it’s funny because you would think that a newly-formed company like that might not necessarily have as much for a general counsel to do, but in fact, there’s probably in some ways more to do because they’re just starting. As you pointed out, the CEO or chairman of the board had never really done this job before, so some of that responsibility fell on you Were they open to hearing from you and to following your advice?

Eric: Very open. Remember back in the dotcom days, founders and CEOs tended to have less experience than one might typically think of CEOs. They were younger folks. I had a handful of years of age and experience and certainly corporate governance experience on the founders. They had experiences that I didn’t have certainly, but in this regard, I was really able to bring some expertise and some perspective that they just hadn’t had an opportunity [00:06:00] to develop in their career. The general counsel role, whether it’s inside or outside, they can have tremendous amount of value as a company is making that transition from founder-owned and operated to founder significantly owned and operated, but having third-party capital and new partners in the business.

Joe: Good. Let’s jump to the other end of the spectrum, which is your role as general counsel at Nielsen Company. Tell us a little bit about Nielsen in terms of its scope and then some of what you were responsible for there.

Eric: Sure. You referenced it as the other end of the spectrum, so on one hand, you have a dotcom startup, which had, let’s say, low eight figures of revenue although much higher enterprise value at least at certain moments in time. 

Nielsen on the other hand, is more or less a household name. It’s kind of an iconic company. While I was there, it had two primary businesses within the Nielsen umbrella, one related to media and people are generally familiar with ratings, and the other related to consumer products where Nielsen essentially [00:07:00] invented the concept of market share and is engaged by clients around the world to go out and understand how they’re doing on an absolute and on a relative basis.

 Nielsen operated as a New York Stock Exchange company. While I was there, it operated in about 106 countries and had approximately 47,000 employees, a very mature company, had been private equity-backed most recently before it went public, and so it had that experience in the relatively recent past, and during my tenure there, it had peaked its enterprise value for approximately $28 billion. 

During my time there, it was only a few years ago, but the company has gone through massive transition. Since then, it has spun off into a separate private equity-backed company, the CPG business, the consumer products business that I referenced and the media business, the final chapter hasn’t yet been written on it, but it looks like that’s going to go private, at least it’s in the process of negotiating, potentially they’ll go private transaction. All of which is the public domain, of course. Now, it’s now two separate companies, one, the CPG, and [00:08:00] one, the media business.

From a governance perspective and a board perspective, I attended all the board meetings during my tenure there. I’m not a member of the board, of course, but I was part of a handful of senior management that attended board meetings, the CFO, the CEO, myself, and then other operators would come in and out depending on the agenda, and also helping set the agenda was part of my responsibility, although I’d say the CEO and CFO took much more active role in that in Nielsen as the chairman of the board, who is an outsider who is sophisticated person from a board governance point of view. 

My role included making sure that items that fell into my purview, legal, risk, compliance et cetera, to the extent they were worthy of getting on the board agenda, got on the board agenda. The general counsel of the company also generally represents the company, which usually includes the board. There can be [00:09:00] instances where the board requires its own counsel and its own advice, then the board will usually seek independent counsel in those contexts. But at a board meeting, the general counsel’s role includes advising the board. There are many instances where there is advice given there on fiduciary duty issues, which is always a big issue for boards of any size as well as other issues for sure.

Joe: One of the things we talked about when we spoke last week was preparation for the board and running the board was done with a lot more, I think the term you used, formality than with other companies that you’d worked with. Let’s talk a little bit about what that means and why that is.

Eric: Yeah. I think as companies scale, generally the role of the board becomes, I’d say, more formal. I think that’s actually a good word and a good concept to use. There is certainly regular communication with the board or individual board members between board meetings in all companies that I’ve been involved with. I think that’s part of a board’s role [00:10:00] and certainly committee chairs’ roles on boards. 

But when you’re dealing with – while I was there, Nielsen was an SP-500 company – a large multinational company, there are just a significant number of, not only issues, but things to consider whether it’s the global nature of the business, whether they’re NASDAQ or New York Exchange rules, other companies may have NASDAQ rules as well as all the kind of key business issues for Nielsen. 

For instance, one of the issues we were always focused on was antitrust. Neilsen was a very big player in the markets that it served. It was also very transactionally-oriented business, regularly buying and selling companies, and in doing that analysis, there’s always an antitrust or a competition analysis that had to be undertaken and the board cared deeply about that, and some of those, if not existential, could certainly be very material to the ongoing business and operations, and so the formality of it in terms of making sure every “t” was crossed and “i” was dotted [00:11:00] was critical to make sure that the board got the best advice that it could in order to make the decisions that it ultimately needed to make.

And often, these are judgment calls. It goes back to the business judgment rule. These are judgment calls that the boards need to make and boards are well served, of course, to be able to make those judgment calls with the best information available. That’s not to say that those rules don’t apply in smaller companies, but smaller companies generally have less of a breadth of issues that they need to contend with, and so kind of what I would say the formality is still often there, and I’m sure we’ll talk about it at some point during this call, but for instance, I’m on the board of Bankwell as you noted, I’d say our agendas and our board materials, they are very robust, and I know that management takes a lot of time putting those together with the input of the board.

 I don’t want your listeners to think that as a company is smaller, there is materially less formality. I would rather kind of leave them with the idea that as companies get bigger, [00:12:00] both the materiality of the issues, the magnitude of the issues, and often, although not always, the complexity of the issues are such that it just requires an additional layer of activity and oversight.

Joe: Well, it’s also true that the possibility of litigation is higher in a public company so that probably drives some of this as well. Am I right about that?

Eric: Yeah. If you think about where litigation comes from, I think the kind of litigation you’re referring to is shareholder litigation, and when you’re thinking about shareholder litigation in a public company, you don’t really know who your shareholders are. You may know one, two, or half dozen of the big institutions’ stakes in most companies, but you’ve got a lot of retail shareholders or small institutional shareholders that you have very little interaction with. Whereas in a private company, you know who your shareholders are. And frankly, most of them, at least if they have a significant stake in the business, will have representation on the board. While there’s a risk of shareholder litigation in private companies, it’s a much, much lower [00:13:00] risk, whereas in the public company environment, given the nature of these shareholder bases, certainly the risk of litigation is greater.

Joe: The last thing I want to touch upon is the role that you’ve played as outside general counsel when you were in private practice. That was a significant part of your practice, I think, for a long time. How many company board meetings did you attend? When did you attend them? What was your role like for those clients when you served as outside general counsel?

Eric: Typically when I would serve as outside general counsel, there’d be two contexts. One would be the company is usually a growing company. It might be in kind of a couple hundred million dollar revenue type business. They don’t have inside counsel and so they really relied on, I’ll say, me in this context or the firm that I was connected with to be their general counsel. 

The other is they may have inside counsel, but they’re not corporate governance types or corporate transactional types. Maybe they’re commercial lawyers because there’s a lot of [00:14:00] contract work that the company has, or maybe the company’s very IP oriented so they have patent lawyers but they’re specialists in an area that’s not necessarily applicable to corporate governance. 

Contextually that’s when I would typically get involved in the role that you’re describing as outside general counsel. Some of them were proactive in asking me to attend their board meetings. In other instances, I kind of would suggest to clients, particularly based on what might be going on in their business at any moment in time, that it would be in their interest to have me attend, and often when I started to, they just asked me to continue to come to attend their board meetings. 

That’s the context in which it would typically occur. My own view, and again, listeners need to think about this through the lens through which I’m speaking, but I don’t see a lot of downside to it having someone in the room who can call balls and strikes or make sure kind of things stay within the appropriate lanes, and frankly who can put minutes together that will reflect what minutes ought to reflect. It may not reflect what minutes [00:15:00] ought not reflect, I think, is valuable to companies and boards.

Often issues would come up, not always, but often issues would come up that aren’t necessarily on the agenda. Conversations are free forming. That could have a legal implication in having someone in there who’s able to either address it on the spot or be able to get back to them quickly, I think it adds value to companies, to the boards as they make decisions.

Raza: Eric, you’re vice-chair of the Board of Directors of Bankwell Financial Group. Tell us a little bit about the bank.

Eric: I’m happy to. I’m glad you raised it. I’ve been working for the bank and on the board for over a decade, upwards of 14 years at this point. When I got involved, it was a private $250 million bank, kind of a community bank. We’ve grown over the period I just described to about 10 or 11 times, or just under $3 billion now.

 We’ve gone public, we’ve done a couple of acquisitions. It’s been a really interesting run from a lot of perspectives. The banking business is a highly [00:16:00] regulated, highly complex business that the fundamental business of taking in money at X and loaning money out at X plus it is not that complicated, but the machinations that go into that are very complicated. It’s been a great learning experience for me and hopefully an opportunity to contribute to the bank given my background. 

Raza: That brings the question for highly regulated companies such as a bank. What are the differences in a board’s focus or the boards being operating as a bank board? What are some of the key differences that you’ve seen?

Eric: I think with any regulated business, there’s another set, there’s another constituency that the company needs to consider. Typically, the company considers your standard constituencies of your shareholders and your employees and the community you serve, your customers. Now you have the regulatory overlay here.

Really there are two regulatory bodies. One is the NASDAQ and then you have regulated businesses like banks are audited by their regulators very frequently, [00:17:00] usually annually, sometimes every other year, but there’s always an audit of some sort going on besides the traditional financial audits, and there are things that regulators want to see and expect to see that we are focused on not to the exclusion of the core business, which is management’s primary responsibility.

But regulators have expectations about kind of how a bank operates and what it shows to their board and what the board considers and much of which has to be reflected in minutes, and regulators will come and review the minutes. In addition to our regular board, what I’ll call our regular non-bank board, discussions were regularly considering items that we know are important for the bank to consider, but also important for the regulators to make sure that we’ve considered.

Frankly, those usually dovetail, there are often items that board would be addressing anyway and so part of that is making sure we’re addressing those items, but [00:18:00] another part is making sure we’re reflecting those in our minutes so that the regulators can see that we are, again, our fiduciary responsibilities.

Now, you took the bank public about eight years ago, you alluded in one way that became another subset of the constituents that you need to pay attention to as a board. What about the board composition before going public or after? Like what were the attributes that you wanted the board to have maybe right before going public or after going public in terms of the board’s composition?

That’s a great question and one that since I’ve been on the board, we continue to give a lot of thought to. We had the good fortune of having, I’ll say present company excluded, a very strong board, really, really smart, motivated, experienced people who had had and have a kind of interesting and diverse set of professional backgrounds, and that’s always been important to us. Bank boards have the standard committees of governance and governance laws and audit and compensation. We also have a series of [00:19:00] other. committees which include technology and ALCO, assets and liabilities. We have a loan committee. We have a CRA committee, which is a committee that’s unique to banks, and others.

In each case, we want to make sure that we’ve got people who have the right expertise in those areas, and frankly, the right amount of time to devote to the bank, which is important. Bank boards are very active. It’s not simply a quarterly meeting so we’ve always thought about those things.

We’ve also thought, since inception, certainly more and more in recent years, about diversity on the board, not just diversity of experience, which is something we’ve always considered, but also other forms of diversity, whether it’s racial diversity, ethnic diversity, gender diversity, etc. That’s something that the governance committee, which I’ve used to chair and I’m still a member of along with the chairman and, and the CEO, have spent a lot of time thinking about how to expand with some success, but we’re hoping our future success is even better than our past success.

Joe: If you were advising a board that was going to take its company [00:20:00] public, what things would you be specifically advising them to make sure they had on the board by way of skills or expertise or whatever other attributes you think would be important other than just the normal, of course, you want strong board members with a diverse perspective, but other than that, what specific things might be helpful?

Eric: Well, you’d need to recognize that a public company will have at least three committees and those three committees are going to be governance, compensation, and audit. Audit requires a financial expert, so you want to make sure you have at least one financial expert and that’s a defined term within the SEC, but it’s basically someone who has been a financial executive, like a CFO, or has overseen financial executives like a CEO or someone who comes out of the financial industry, such as an auditor or someone with that type of background.

There’s a specific definition, as I said, in the SEC, so you’re going to want a financial expert given that there’s a committee with someone who has got some compensation experience, designing plans, understanding what those plans look like I think adds value. [00:21:00]

Now, that’s a little less specific than the financial expert. There’s no stated defined requirement of that type of person, and a lot of executives have been around compensation plans, so I think that’s slightly easier to find, but someone who understands that will be important. 

Then on the governance side, same thing. You don’t need to be a governance expert, but someone who’s had some governance expertise and experience. That could be someone again who’s been a CEO, of course, or frankly lawyers do fit that box pretty well, although some boards think that that can be a hired skill as opposed to one that needs to be on the board. I’d say those are a few of the key things that a company ought to think about.

Now with that said, and again, diversity is a big issue these days. These days, I think people putting the board together should absolutely be considering diversity of the contributional kind, not just experience, but gender, ethnic, LGBTQ, et cetera, racial. I think having that on your board is, and it’s going to continue to be [00:22:00] important. 

I think CEOs benefit from having CEOs on boards. People will joke that the CEO job is a lonely job or it’s lonely at the top, however you want to think about it, so having other folks who have had similar lonesome experiences, I think can be helpful to CEOs.

And then lastly, there may be more if I thought about this longer, but some industry expertise is helpful. While it’s helpful to get some experience outside of the industry, having one or two people on the board or some number of people who understand your industry, I think, is useful.

I said that was lastly, but I’ll throw one more out there. It’s very difficult these days to find a company in any industry that’s not also a technology company. Technology is involved with every business. Banking is no exception, so having someone who understands technology and kind of how businesses use technology, how they can benefit from technology, how to assess vendors, how to understand what integrations look like and the implications of things that can go wrong when you switch vendors and things like that, I think are very important .

Raza: Eric, coming onto [00:23:00] the bank’s board, is there an onboarding process because it sounds like there’s more formality, more things to think about and more things to consider. Do new bank board members go through an onboarding process?

Eric: I think our onboarding process has continued to be enhanced over the years and I expect it will, and I’ve seen that in other companies, in other banks and non-banks. Yeah, there is an onboarding process, so we have a documentary element to it where they’ll see our policies and practices and manuals and things like that. There is a meeting with board members. Typically, the chairman, usually myself and the chair of the governance committee, will talk about the culture of the bank, the business of the bank, where it’s been, where it’s going, our vision, et cetera. 

Others may be involved in that conversation as well, and then there’ll be a series of meetings with the executive team, different team leaders who will describe what their roles are in the bank, essentially what they do and how it works.

At a high level I’d say those are the three prongs of the [00:24:00] onboarding, and then some directors are a little more proactive or have more questions and will get those answered, and then once one starts attending board meetings, reads the materials, sees the agendas, hears the discussion I think that frankly, like in some other parts in life, there’s nothing like actually rolling up your sleeves and just getting in there.

Raza: Another aspect to cover about, you mentioned a bunch of the committees that are in addition or extra in bank boards. How do you view a separate risk committee for a bank’s board? Or is that the norm or is it part of the audit? How have you guys seen it?

Eric: Yeah, it’s a great question, and it’s one that we’ve debated. At this point there is a chief risk officer on the operating side of the bank certainly, which is a standalone function. Risk currently reports to audit, so audit kind of has a traditional financial audit branch and then the risk branch. 

Risk is a very broad topic in every business and certainly in banks, and so we think about that in the context of where would [00:25:00] technology then sit. Is technology a proactive thing or is risk thing, other than cybersecurity and privacy, et cetera? Perhaps as our bank and other institutions scale, then it could make sense at some point in time to break risk out. Right now, we’ve examined that, we’ve considered it, and we’ve concluded that risk sitting within audit works for us, and we feel like we’re managing it effectively.

Raza: At the least, I think the way you described it, that the audit has the traditional function of looking backwards of what happened, what has happened, and risk has this notion of looking forward of what might happen and also in the positive context, what are the risks worth taking and is the organization taking enough risk for the shareholders to reap some benefits, or at least maybe there’s this mental separation of those two functions within the audit committee.

Eric: I think that’s a fair summary, and I also think that as we think about taking on more risk in [00:26:00] particular at our bank, that often is a full-board conversation, not just a risk committee conversation.

Joe: Eric, when you served as chief risk officer for Nielsen, what were the responsibilities that that role entailed that were different from serving as their general counsel?

Eric: I characterize it as a member of a whole bunch of teams. We had a privacy team and that was at a time while I was there, the GDPR was starting to bubble up. It was implemented during my tenure there, but it was becoming an issue beforehand and Nielsen was a big data company and so it had potential privacy issues that needed to be addressed. We looked at major transition in our technology services provider and we understood there are a whole bunch of implications to that, some of which was on the risk side, and those are just a couple of examples.

As chief risk officer, I remember my team, usually depending on the issue, would be part of a team of people who were looking at the issue, and so my job was, A, to make sure people knew I was [00:27:00] there in that role because the risk team was not a big team, it was not a bank, knew I was there, knew that this function needed to be plugged in to your kind of risk-type items. 

It wasn’t difficult because my role in the company, I had a real finger on the pulse of what was going on, but still teams needed to know that risk needed to get plugged in the things that they were considering, and then participating in those initiatives from a risk perspective, thinking about things that could go wrong, how to mitigate it.

Joe: Eric, one of the things you mentioned earlier was that the general counsel represents the company, but as you also mentioned, there are times when the company, the board and management, may not actually be aligned. In what kinds of situations does that arise and what are the appropriate ways to address it?

Eric: It could arise in a number of instances. Examples could include, in a private company context and potentially public company context where there are private investors, kind of analysis of some of those documents, some of the [00:28:00] investment documents and understanding the rights of the different players, and you can have instances where certain investors may have rights to appoint people to the board, and there could be a dispute as to terms and conditions around those documents, not just the appointment but other rights, so you could see a conflict between the company, the board and certain individual board members in that context.

There have been instances, Nielsen is an example of this, where there were activists and an activist might raise certain issues around how the board is behaving or how certain board members are not behaving and fulfilling their responsibilities, and while that could create alignment or not necessarily cause misalignment between the company and the board, it could be a situation where the board might want to have its own counsel separate from the general counsel.

By the way, even in that context, typically those engagements are by the board as contrasted to by the company, but I’ve also seen companies where you just want an [00:29:00] outside counsel, not necessarily your in-house legal team to be advising so it could still be company counsel, but the company would engage a separate outside counsel to advise on a particular issue.

That may be, as I said, engaged by the company, not necessarily by the board. There are sensitivities along the lines of these types of conflicts or arrangements that may or may not suggest that there’s a conflict, you need a separate counsel or there’s not a conflict, but you may just want an independent counsel.. 

Joe: You have been involved or attended many board meetings. Have there been instances during that time when you thought there was a need or you raised the need for potentially getting counsel for one of the other constituencies and you are either ignored or maybe pressured to not voice that opinion because someone didn’t want another attorney in the room?

Eric: Yes and no. 

Meaning, yes, there have been instances where I’ve identified actual or potential [00:30:00] conflicts and no once identified I’ve never been in a situation where that’s met resistance. I’ve had the good fortune, even in smaller businesses, to deal with sophisticated parties and they certainly don’t want to cross the line and more often than not, they don’t even want to get too close to it.

They recognize that the risks associated with that are greater than the costs of maybe a little bit of time and maybe a little bit of money in bringing into separate counsel, but if there’s a record and it doesn’t have to be in minutes, although it could be, and it probably would be in the context you’re describing that something was raised and was rejected. But even if it was just a discussion item, no one wants there to be a record of going against advice of counsel, particularly when it’s in a material matter and these types of issues tend to be material.

Joe: Yeah, that makes perfect sense, so that leads me to my question about board minutes. When we talked earlier, you said basically you subscribed to the [00:31:00] philosophy that “less is more” when it comes to the minutes of board meetings. Talk a little bit about why that is and what it means and how it may be different for public companies, private companies, and in your case, the bank board, highly regulated companies.

Eric: Yeah. I do believe that less is more, I think minutes need to reflect what was discussed and that there was a discussion, assuming those are true statements. But I don’t think they need to be scripts or transcripts. I don’t think they need to be Raza said this and Joe said that and Eric replied this, and I’ve seen minutes drafted that way.

That is a dangerous recipe for lots of reasons. It makes a reader wonder, “Well, what were the other board members doing? What did so and so mean by this comment?” I’ve also seen instances where minutes are fairly innocuous and then there’s a topic that’s complicated and that really gets a lot of board attention and all of a sudden there’s a mini transcript of that discussion.[00:32:00]

I think that’s very dangerous to a board because people kind of wonder why you’re spending so much time there or why time wasn’t spent in other topics, so I think you want consistency in board minutes. You want to be able to communicate what was discussed and if there was a resolution, what that resolution was and then move on.

I think the other item I’d note here is that board minutes like contracts will largely be reviewed with the benefit of hindsight, so no one is looking at them unless and until there’s a problem. And once there’s a problem, if they’re inconsistent or if they provide fodder for misinterpretation or multiple interpretations, you run litigation risk. 

As an advisor to companies, I’d like them to be able to avoid or minimize litigation, which is another reason to keep minutes as short and simple as possible. Again, they need to be reflective of what occurred, but not necessarily more. 

The second part of your question as it relates to regulated businesses, further at the earlier part of our discussion, there were things that boards need to [00:33:00] do in regulated businesses that they may not need to do, topics that they need to address more specifically to satisfy the regulators, and so you want to make sure that your minutes reflect the fulsome discussion that actually occurred in those areas, and there I’ve seen minutes that are more robust and comprehensive.

Although there are lines, even in the regulated industry segments, that I think you don’t really want to cross and so you never want to get into that transcript mode and you never want to have outlying sections of your minutes because it happens to relate to a regulated item, take up two pages and then have four other agenda items take up one page and in the aggregate, it doesn’t feel right. There’s some experience and expertise and some judgment that needs to go into putting minutes together.

Joe: Yeah. Thanks. I said to Raza before the show it seems like it could be a boring topic, but it is so important to have good board minutes, not just for the avoidance of litigation or [00:34:00] liability, but just to keep track of what you’re doing and what you’re not doing, and I don’t really think a board can function as effective as it should without good minutes.

Raza: Joe, as I mentioned to you and Eric, when we invest in a company we often recommend as a best practice, the less is more philosophy for minutes, but we also give them a tip saying, “Hey have your law firm or somebody from your law firm do it.” Often they are very happy to do it just so that they’re in the boardroom as well and be able to look for anything that they can help with for these upstarts and startups.

Joe: It’s not the right place to try to save a few dollars. 

 Eric, it’s been great speaking with you today. Thanks for joining us on On Boards and thank you all for listening to On Boards with our guest, Eric Dale.

Raza: Please visit our website at OnBoardsPodcast.com. That’s OnBoardsPodcast.com. We’d love to hear your comments, suggestions, and feedback.[00:35:00]

Joe: Please stay safe, take care of yourselves, your families, and your communities as best you can. We hope you’ll tune in for the next episode of On Boards. Thank you.

42. Startup Boards: A Field Guide to Building an Effective Board of Directors

In this episode, Brad Feld, Mahendra Ramsinghani and Matt Blumberg talk about their new book, it is an incredibly inciteful and comprehensive look at Startups and all boards.  An instruction manual for CEOs who are building and leading a board and a valuable reference for existing board members, aspiring board members and venture investors.

Thanks for listening!

We love our listeners! Drop us a line or give us guest suggestions here.

Links

Startup Boards – Buy on Amazon

Quotes

Matt: It’s never too early to build a board and, as a CEO, if you get good board dynamic, you have created a secret weapon for your business – a strategic sounding board that you couldn’t go out and buy.

Brad ¨Jeff Lawson said: “I view the board as another team that I get, and why wouldn’t I take advantage of being able to create a great team at that level that can help me grow and develop both the business and me as a CEO?”  That summarized it as well as I’ve ever heard it said by an entrepreneurial CEO

The really interesting and important dynamic around board of directors are how they function as a team and how the individual participants engage with each other and how the CEO engages with the participant, and then how the management team fits into that, and that all of that is true if you’re aspiring any of those things; board member, investor, entrepreneur, or experienced.

Mahendra: The board can make it a safe place for the CEO to feel comfortable, feel confident and engaged as a team of equals.  It’s important for the CEO to build their inner self-confidence so that they can sit in the same table, to be in the same room with people who are 5 years, 10 years ahead in the journey and hold their hand or say, “I need help. How would you do this?” At the same time, being honest, and what they did in that time may not always be relevant, so there’s a fine line, but having the sense of confidence to surround yourself with giants is extremely important.

Matt: No Slides!  When there are slides on the wall, two things happen. Whoever is presenting reads the slide out loud, which drives me crazy. It drives everybody crazy, because you should assume your board members can read.  But the other thing that happens when you have a slide on the wall or a slide on the screen is that all eyes are on the slide. What you want to have in terms of a dynamic when you’re trying to have a meaningful discussion among people on a team is you want eyes on each other, not eyes on the wall.

Brad: The best boards: you fight, you argue, you challenge each other, you disagree, but you’re friends and you have respect for each other, and you carry each other with some amusement. Those are the best boards.

Big Ideas/Thoughts

New in the 2nd Edition of Book

  • Matt added a lot of new content from a CEO’s perspective
  • We made a very significant shift and replaced a lot of sidebars and quotes with new content specifically from women and from people of color, to allow the book to be more representative of what a board should look like for a startup in 2022 in terms both gender and racial equity.
  • We’ve written this book in such a way that it addresses the full spectrum from someone who is an aspiring entrepreneur, investor, board member, to someone who is a very experienced entrepreneur, investor, board member.

Lessons from the Boardroom

  • If nobody does the work to develop the board as a team  you have just a collection of people.  I see that a lot among startup boards where the CEO does not put energy into building a highly functioning team or the CEO doesn’t ask one of the board members to take a leadership role in helping her do that.
  • There a benefit of having a lead director or a board chair who is not the CEO, because then that person can take the leadership when all of a sudden things are not being constructive and to try to shift the tone and the narrative and the discussion dynamic from one that’s not constructive to one that is. 
  • In those situations, a strong, experienced, respected board member who might or might not be an investor can often play that role, and it’s a very, very valuable position to have an outside director that’s experienced, that’s well respected who in those moments can step in and basically say some version of, “Hey guys and girls, cut the bullshit. Let’s stop this. This is not being helpful. Let’s step back. Let’s calm down. Let’s talk about what the issue is and try to solve the problem.”  It’s important to have a lot of people that can play that role. 

More Important Board Meeting Practices

  • Prepare and circulate material in advance.  Then assume the board members can read, so start the board meeting and run the board meeting as though everybody has already read the material.
  • Have a clear objective of what is this meeting about. 
  • The best board meetings I’m in have a board package that goes out in advance that is separate from the board meeting presentation, and the board meeting presentation for each section has some version of a preamble, which is, “Here’s what we’re going to cover and here’s what I want to accomplish as CEO.
  • A lot of people think of their board or a way of thinking about the board is, ” I’ve got to have some investors in my board, and so anybody else I add to my board, I want to get the best networking I can from them because I want introductions.”  That’s really limited thinking. Especially if your business is young, you don’t really know what direction it’s going to go in, and so people that have very different frames of reference from you but experienced in things that are additive to what you’re doing can add another layer of diversity to the board.
  • There has to be a conscious effort to search for board members outside your zones of comfort. That is not easy. It takes time. There are no easy paths to build bridges into other domains, but that is a very essential function every entrepreneur should try and build upon.
  • No Slides!  When there are slides on the wall, two things happen. Whoever is presenting reads the slide out loud, which drives me crazy. It drives everybody crazy, because you should assume your board members can read.  But the other thing that happens when you have a slide on the wall or a slide on the screen is that all eyes are on the slide. What you want to have in terms of a dynamic when you’re trying to have a meaningful discussion among people on a team is you want eyes on each other, not eyes on the wall.

Episode 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. 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: 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 things, and how to make your board one of the most valuable assets of your organization. 

Joe: Our guests today are Brad Feld, Mahendra Ramsinghani and Matt Blumberg. Brad has over 34 years’ experience investing in and running startups. He is co-founder [00:01:00] of Mobius Venture Capital, the Foundry Group, Intensity Ventures and Techstars. 

Raza: Mahendra is the founder of Secure Octane, a cybersecurity seed fund based in San Francisco Bay Area. He’s the author of The Business of Venture Capital. 

Joe: Matt is the CEO of Bolster, an on-demand talent marketplace that supports startup and scale up CEOs, and he is the author of Startup CEO: A Field Guide to Scaling Up Your Business. Together they have coauthored a book to be published on June 15th, 2022 entitled Startup Boards: A Field Guide to Building an Effective Board of Directors. 

Raza: It is already the number one new release in business the entrepreneurship category on Amazon.

Joe: Gentlemen, welcome. It’s great to have you with us on On Boards. The second edition of your 

book, Startup Boards, is going to be published in mid June, [00:02:00] very exciting. Now, I know Brad and Mahendra coauthored the first edition, and now you’re joined by Matt for this edition. First, congratulations, the book is terrific. We did get an early copy and I hear that it’s a bestseller even before it’s actually published, which I guess that’s good news. Who’s the primary audience for the book? Anyone. Brad?

Brad: Matt, go for it, man. Jump in.

Matt: The primary audience for the book is CEOs, especially first-time CEOs. Most CEOs have never built a board. Even CEOs who are managing or leading a board may only in their career hire one or two board members. It’s structured as a field guide, almost like an instruction manual for CEOs who are building and leading a board, but it’s also, we think, a valuable reference for existing board members. There’s a special section for aspiring board members and even for venture investors, particularly new venture investors as well.

Joe: What are some of the changes or new topics appear in the second edition that didn’t appear in the first edition? [00:03:00] Brad?

Brad: Yeah, I’ll start with a major thing that we did, and then sort of go from there. Matt added a lot of new content from a CEO’s perspective which I’ll let him go a little bit deeper into, but one of the things that we did was we refactored the book very significantly from the first edition.

There were really two dimensions that we put that effort in. One of them was just the sequencing and order of which we sort of unfolded all the aspects of the board, but more contemporaneously when we looked at the book and we got some early feedback from a couple of women friends of ours that basically told us that the first edition was pretty inaccessible to them.

It was inaccessible to them because we had a lot of sidebars which were typically two to eight paragraphs from an entrepreneur or an experienced board member to make a point, and we had a bunch of quotes that underscored specific things that came from a lot of interviews that Mahendra did as we were sort of putting together the [00:04:00] pieces for the first edition.

It turns out that almost all of them were from men, and in 2013, well, the gender equity discussion in tech and the gender equity discussion around boards is one that only in the last three or four years do I think there has been real change. There was a gender equity discussion going back in 2013, but I think like many others at the time who, by the way, also thought that they were involved in gender equity and the idea is a gender equity and entrepreneurship, it actually didn’t reflect that in the sidebars that we asked people to write and the quotes that we got. 

We made a very significant shift and systematically replaced a lot of sidebars with new content specifically from women and from people of color, and same thing with the quotes, we went back and we didn’t change the context of what was going on, but we got different quotes to allow the book to be more representative of what a board should look like for a startup in 2022 in [00:05:00] terms of having both gender and racial equity.

Joe: It’s amazing how much things have changed since 2013 so good for you guys.

Matt: Well, we should also just add to that. We asked someone that Brad and I both know fairly well, Jocelyn Mangan, to write a new forward for the book, and Jocelyn runs a nonprofit called Him For Her and another company called Illumin, which together are about both diversity in the boardroom, gender diversity in particular, but also effective boards and running effective boards. Jocelyn is also on the cover with us and has written a great forward to the book.

Joe: Terrific. Let me ask you a specific about the audience again, though. The book has in its name startups, is it focused on the startup ecosystem or is it really have broader applicability to the board world?

Matt: My perspective on that is it is focused on the startup ecosystem and there are certainly chapters that are very unique to private venture-backed companies, but 60 to 80% of the book is probably useful for any board.

Joe: Great. That’s what I thought [00:06:00] and I just wanted people to not be misled by the title. Brad, you started off by talking about how things have changed from a diversity point of view in the last eight years. What are some of the most important messages that you would think people might take away from this book? And we can go around the room for this.

Brad: As a lead into that, I would say in all the books that I’ve written, and this book is no exception, the audience, while there’s a focus on the entrepreneur and the voice in a lot of cases, maybe a mix of a voice that’s an entrepreneur and a VC, it’s worth noting that before I was an investor, I was an entrepreneur, we’ve tried to write these books in such a way that they address the full spectrum from someone who is an aspiring fill-in-the-blank entrepreneur, investor, board member, to someone who is a very experienced fill-in-the-blank entrepreneur, investor, board member. 

It’s really trying to be comprehensive in terms of the audience. [00:07:00] As part of that, when you think about what we would hope somebody takes away from this on that spectrum from aspiring to experienced, there are, for sure, a bunch of sort of fundamental, structural, legal things that play into this and play into how board of directors work. But the really interesting and important dynamic around board of directors are how they function as a team and how the individual participants engage with each other and how the CEO engages with the participant, and then how the management team fits into that, and that all of that is true if you’re aspiring any of those things; board member, investor, entrepreneur, or experienced. 

We’ve tried to give a comprehensive landscape in a very accessible way, not in a legal turgid, here’s all your legal rules and requirements, but very much a practitioner’s guide. Hence, the [00:08:00] subtitle “field guide” and we’ve tried to do it so that you don’t have to read it from page one to the end. You can, but there’s lots of stuff that you can dip in and dip out of that are sort of consumable based on different scenarios that you find yourself in. Again, whether you’re aspiring or extremely experienced and whether you’re an entrepreneur, investor or board member

Joe: What about the value of building a board? What’s the message there?

Matt: My perspective is it’s never too early to build a board and that as a CEO, if you get the board dynamic, you have created a secret weapon for your business, a strategic sounding board that you couldn’t go out and buy.

Mahendra: When we started off, the first chapter was about the art of proactively building your board, and as you look at the second edition, having Matt as a founder, entrepreneur joined sort of this thought process of encouraging founders proactively go build a board because most of the founders, [00:09:00] they start up by raising money first, and then the board members are default based on who has invested. I mean, this process could be turned upside down, of course, in an idealistic way.

Brad: Just a quick, additional comment to that. There’s a great line from Jeff Lawson. Jeff is the founder and still CEO of Twilio, which is now a very large, I don’t know what their market cap is, $20 billion, something like that, public company, and he and I were having a conversation. I think it was actually an interview that we did together or a fireside chat that we did together somewhere a while ago. This topic came up and he said, “One of the powerful things is I view my board as another team I get to build a CEO. As CEO I get to build a leadership team and my job is to build and manage that leadership team. Now I worked for the board, the board can fire me, but I view the board as another team that I get, and why wouldn’t I take advantage of being able to create a great team at that level that can help me grow and develop both the [00:10:00] business and myself as a CEO?” 

That summarized it as well as I’ve ever heard it said by an entrepreneurial CEO, which is they’ve got a leadership team and they’ve got a board team, and those are the two teams the CEO has a unique relationship with in the context of the business.

Joe: Great perspective. I really love that, that’s excellent. 

Raza: Let’s talk about challenges in the boardroom, and this question is going to be for each one of you. What are the spectacular mistakes to avoid based on your experience for the boardroom? Mahendra, maybe we can start with you and Brad next, then Matt right after that.

Mahendra: I’ll share a couple of examples that I’ve experienced or heard, and this sort of speaks to the motivation for us coming together to write this book. One of the examples that I recall was a first-time founder walking into a board meeting with zero preparation, and the best way I would describe it, with his pockets in his [00:11:00] hands saying, “So, what do you guys want to talk about today?” And you could look around the table and say, “Oh-oh, somebody should have worked with the founder to help him think about what we expect.” I’d say the fault lies on both sides of the table. It’s not just pointing a finger to the first-time founder.

 That was one. I’d say somebody who doesn’t know what to expect, and this book does touch on what is your first board meeting about. How should you prepare? What should you do before the meeting? And what you should do in the meetings? So, that was one spectacular mistake. 

The other mistake was somebody who had the prepared a hundred slide deck. A hundred slides, Raza, I feel for the poor soul who had to agonize over a hundred slides, and this was a startup. It wasn’t like, as Brad pointed out, it wasn’t a company like Twilio with a $20 billion market cap. And so you see these extremes that say there’s something wrong and we want to try and fix it. 

Brad: I’ll give two that are from a people perspective. 

First, I think to some degree it links back to Jeff Lawson’s comment. There are many [00:12:00]boards that do not develop as effective teams. They’re collections of individuals who each have their own motivation and priority. Those motivations may be different. Theoretically, they all have a fiduciary responsibility to the company so very sort of well-defined legal responsibilities, but their individual motivations may be different, their economic characteristics and motivations may be different, and their behavioral norms may be very different. Because one of the things that you get with a collection people is you tend to get very different individual behaviors, but you can, as you’re building a team, you set an established norms that as a team everybody is expected to conform to.

Well if nobody does any of that work, you have just a collection of people, and I see that a lot amongst startup boards where the CEO does not put energy into building a highly functioning team or the CEO doesn’t ask one of the board members to [00:13:00] take a leadership role in helping her do that, so that’s one.

The second one I think is really more true in stressful situations than in non-stressful situations, you can define stressful any way you want, but it’s also true in situations where you’ve got people who are inexperienced on your board. You’re dealing with exogenous forces that are challenging for your business, things that you don’t have any control over, but they’re starting to impact your business negatively, like macro economy, like the one we find ourselves in right now where all of a sudden, I think the language people are using over and over and over again is we’ve had a 13-year bull market that’s now over. 

It’s undeniable that the environment that we’re going to be in for startups for some period of time could be a short period of time. It probably will be at least a medium period of time, it could be a long period of time. It will be a lot harder and more stressful from the standpoint of valuation, fundraising, what’s more important, growth or fundamental unique economics that makes sense or profitability and how much cash do you need to have to be in a safe position and [00:14:00] what’s your hiring environment like.

In situations like that where there’s more stress, you tend to find behavior with different labels. Passive avoidant is, in some ways, maybe the best of the worst behaviors that you’ll get, where you just get people who become passive avoidant, but you also have people who become actively antagonistic or actively hostile or board members who become self-justifying or they start looking backwards and have a revisionist history based on decisions that they were complicit in participating and making and how those things are not now working out. 

That kind of dysfunction in the more stressful environment is the one that I think is insidious, and it’s one of the things that I think a lot of even experienced board members continually fall victim to especially when the board itself is not a well-functioning team.

Joe: Question, when that is happening, that kind of behavior [00:15:00] you’ve described, whose role is it to address it and how should they do it? Is it the CEO? Is that the board chair? Is that the lead director? Who is it that should be jumping in and addressing that problem?

Brad: Well, generally speaking, there are two people who could be the logical ones to do it, even though you don’t necessarily have one of those two designated. The CEO of course can do that, but that’s difficult a lot of times because of the power dynamics between the various participants on the board, and including in the notion that the board members are in a position where they can decide, or a board member can decide to try to fire or replace a CEO. Usually an individual board member can’t do it, but you can create even more negative feedback loops if you don’t have that functional team. 

That’s the benefit of having a lead director or a board chair who is not the CEO, because then that person can take the leadership role on for that, and ideally not in concert with the CEO to try to [00:16:00] censor people or govern behavior a certain way, but to recognize when all of a sudden things are not being constructive and to try to shift the tone and the narrative and the discussion dynamic from one that’s not constructive to construct it.

A lot of times there isn’t explicitly a director. In many cases there isn’t a separate chair, the CEO might be the chair or the founder/CEO might be the chair as well, or there might not be a named chair. In those situations, a strong, experienced, respected board member who might or might not be an investor can often play that role, and it’s a very, very valuable position to have an outside director that’s experienced, that’s well respected who in those moments can step in and basically say some version of, “Hey guys and girls, cut the bullshit. Let’s stop this. This is not being helpful. Let’s step back. Let’s calm down. Let’s talk about what the issue is and try to solve the problem.”

Joe: Important to have someone that could play that role.

Raza: Yeah.

Matt: It’s actually important to have a lot of people [00:17:00] that can play that role. If I think about our experience, Brad and I have sat on four boards together, one of which was my last company, Return Path, where we were on the board together for like 18 years or something. I was the chair and the CEO. I didn’t have an independent director or lead outside director, but I can think of two or three different circumstances where I needed one, but I used different board members at different times, depending on what the circumstance was. If you have a board with great people on it, you have a bench to draw in.

Raza: In your book, you have dedicated three chapters to preparing and running board meetings. What is one best practice advice that each one of you would give to founders and to board members for preparing and running board meetings. May I start with you first, Brad? 

Brad: Assume your board members can read. Consequently, do a couple of things, prepare the materials in advance, get the materials out to board members a couple of days before the board meeting, if [00:18:00] possible. There are some instances where it’s not, but in most instances it should be, but then assume they can read, so start the board meeting and run the board meeting as though everybody has already read the material.

Raza: Very good, plus one on that. Mahendra, what would be your best practice advice for running and preparing for board meetings? 

Mahendra: I have an eye to follow that fundamental position that I make an assumption that all board members being able to read and being engaged. But the one thing I’d add is have a clear objective of what is this meeting about. It could be just a quarterly update, which is, here are the numbers, or it could be an active decision-making session in which you need to present data and get consensus or show that you want to move in a certain direction based on the research you’ve done. Is it informational session? Is it a decision-making session? Be very clear about that part.

Raza: It’s intentional crafting of agenda and having a goal for the meeting. [00:19:00] Brad, do you want to add? 

Brad: I want to add something just to back up what Mahendra said. The best board meetings I’m in have a separate board package that goes out in advance that is separate from the board meeting presentation, whatever it is, and the board meeting presentation for each section has some version of a preamble, which is, “Here’s what we’re going to cover and here’s what I want to accomplish as CEO,” where to Mahendra’s specific point, “I just want to inform you, or I don’t know what the answer is, and I don’t want to have an answer. I just want to have a robust discussion so I can get some more thoughts around it or we need to decide A, B or C.” Trying to not come into each conversation open-ended or ambiguous about what you want as the outcome and the input and outcome from the [00:20:00] board, but to be specific about what you’re doing at each step of the board meeting. 

Raza: For information, for discussion and for decision as a framework for setting the agenda.

Joe: I think you’re more likely to get from your board what you want if you tell them in advance and give them a chance to prepare for it. I mean, that’s what you’re saying. Don’t come into the room and people don’t know what you want. I mean, partly that’s building on what you were saying, Mahendra, what is it you want to do here? If you want to get the most, give them as much in advance by way of guidance of where you want to take it, so I think that’s great. 

Mahendra: The one thing I might add, Joe, and of course, Matt is the quintessential CEO amongst the three of us and he should share his thoughts. I think to Brad’s very earlier comment about how the board can make it a safe place for the CEO to feel comfortable, feel confident and engaged as a team of equals, not this lordship that he or she are looking up to. 

I think with that dynamic, I find that boards don’t do a good job, and I sort of point to my busy [00:21:00] peers and friends in the business who are short on time, they’re always on a rush, and so that feeling of safety does not quite arise, and hence you find that many times CEOs walk in, there may be some conferences that they should be, and I feel like there’s work to be done on both sides.

Joe: Thanks

Raza: Matt 

Matt: My best practice is simple, it builds a little bit on Brad’s point, but it’s no slides. Create board book ahead of time, all the details that people need. If in the course of the meeting, there’s a visual you need to show, of course, it’s okay to put a slide up. This is true of an in-person meeting as well as the Zoom meeting.

When there are slides on the wall, two things happen. Whoever is presenting reads the slide out loud, which drives me crazy. It drives Brad crazy. It drives everybody crazy, because you should assume your board members can read. But the other thing that happens when you have a slide on the wall or a slide on the screen is that all eyes are on the slide. What you want to have in terms of a dynamic when you’re trying to have a meaningful discussion among [00:22:00] people on a team is you want eyes on each other, not eyes on the wall. 

The day we started, we probably had slides on the wall like every company for 10 years at my last company, and the day we decided to stop doing that was the day our board meetings got 10 times better.

Joe: Great. Love it. 

One of the things that you’ve emphasized is certainly when we talked last week, we talked a lot about diversity, and Brad, you refer to it again this morning. First of all, what is diversity from a board perspective in your view, and talk a little bit about why you think it’s important, and I’ll start with Brad.

Brad: Sure. Look, I think that you have several different attributes that you’re focused on. I think, first is that you want to have a diversity of experience. In the context of that, I think you want to have very clear gender and racial diversity on the board. In the context of that, you can have ranges [00:23:00] of experience, but if your board consists literally of middle-aged white men, you’re almost by definition, not going to get diversity of experience.

Second, each individual is going to bring different strengths, weaknesses and their own experiences, whether it’s in business or with the product that you have, or the business model that you have, or that in your own frame of reference or their own lived experience to the board and having different characteristics on those dimensions are quite important.

Interestingly again, the diversity dimensions that would be, I guess, classically described as identity diversity, whether it’s gender or race, add a lot to that because people have very different lived experiences and very different experiences in companies with products or as consumers. 

Then I think the last is to recognize one of the challenges of boards historically [00:24:00] is that a CEO says, “Well, I want to get experienced people on my board,” and the problem with that is, I’ve been on many, many boards now, so I would be considered an experienced board member, but when I was on my first board, I was not an experienced board member. If you go back to my early boards based on my own work experience and you talk to the entrepreneurs whose boards I was on, they would probably say that I was really additive. No, I was not the person who was the expert at this or that I had done the most financings and understood all the governance issues here, but that I was able to add these things to the mix.

I think that’s an important thing for the CEO to be looking for is people that are adding different elements to the board, and then the CEO using that board as a team. 

Last comment I’d make on that, a lot of people think of their board or a way of thinking about the board is, ” I’ve got to have some investors in my board, and so anybody else I add to my board, I [00:25:00] want to get the best networking I can from them because I want introductions.” 

That’s really limited thinking. Especially if your business is young, you don’t really know what direction it’s going to go in, and so people that have very different frames of reference from you but experienced in things that are additive to what you’re doing can add another layer of diversity to the board.

Joe: Okay, thanks. Mahendra, thoughts about board diversity.

Mahendra: Absolutely. I have a little anecdote I want to share about, of course, that issue. It goes to what I respect and admire and in Brad’s thinking and how he operates. I very clearly remember that the cover design had already sort of been shared by our publisher, Wiley, and Brad pointed out that, “Look, the outlines of these six members of the board on this table are all men. Can we fix it?”

Then I’ve decided to go back and think about all the different instances where Brad had identified. Now, this was 2013, 2014, [00:26:00] before this wave of diversity and awakening had occurred. We had Heidi Roizen. There was this lady from Natural Women in Computing that Brad had suggested I interview. We did start going down the path of adding a lot of good context from women. 

Now, as I look at what’s going on today, I think as we become older, we become aware of our own subconscious biases that exist. If I look at my portfolio, half of the CEOs are Indians, so I say, “Okay, there’s my bias at work right there.”

When I look at the boards of those CEOs, guess what? There are more Indians, and so some of the default position is we reach out for the lowest hanging fruit, “Hey, this is the guy I know. This is the gal that I know,” and those become our network, those become our board members, and I feel like there has to be a conscious effort to search for people outside our zones of comfort. That is not easy. It takes time. There are no easy paths to build bridges into other domains, but that is a very essential function every entrepreneur should try and build upon.[00:27:00]

Joe: One of the things I think you said when we talked last week was, don’t be afraid to go get a big name or a heavy hitter or something like that, someone that is going to challenge you. Don’t be afraid to do that, and I think you’ve talked about it in the context of something that Matt has done building his board. Thoughts about that? 

Mahendra: Absolutely. I admire CEOs who can go and reach for giants. Mac has Brad and Fred Wilson on his board. I can tell you that those board meetings are not board meetings that Matt can walk in with his hands in his pocket and say, “Hey, what do you guys want to talk about?” No. I think those meetings are on a very different kind.

I feel like it’s important for the CEO to build their inner self-confidence so that they can sit in the same table, to be in the same room with people who are five years, 10 years ahead in the journey and hold their hand or say, “I need help. How would you do this?” At the same time, being honest, and what they did in that time may not always be relevant, so there’s a fine line, but having [00:28:00] the sense of confidence to surround yourself with giants is extremely important. 

Joe: Matt, how does Bolster help CEOs and others identify and recruit diverse board members? 

Matt: Bolster’s mission is to help CEOs and founders scale up their leadership teams, scale up their boards, and even scale up themselves as leaders, and we have built a very diverse talent network or marketplace that’s got many, many thousands of senior executives. We help our clients do searches for full-time executives, part-time executives, even project-based executives and also board members.

When we do a board search with a client, we typically do a little bit of bespoke work. We don’t just sort of send someone off to the UI on the platform. Part of the reason we do that is that board building is a little bit of an art or a lot of an art, and it’s one that most of CEOs have never done before. First time CEOs obviously haven’t, but even experienced CEOs, sometimes they’ve only hired one board member in their lifetime or two board members in their lifetime. 

We [00:29:00] spend a lot of time with our clients working through with them what it is that they really want, and Mahendra, while I agree with you that I always admire people who want to reach high and get a big name, sometimes the big names actually aren’t great board members, or they’re not great board members for an early stage company that needs someone who’s prepared to roll up their sleeves and do some work as opposed to come to board meetings and pontificate, which is sometimes what you get with the big name.

It’s an interesting process we go through with our clients. It almost always starts off with them saying two things. One, “I need diversity in the boardroom,” and two, “I only want to look at board members who have served on boards before,” to Brad’s point earlier, and we have to kind of wind things back a little bit and say, “Look, if diversity is a priority, we can help find you tremendous board members with great experience who can be very additive to your business, but it might be the first corporate board they’ve sat on before.”

We do a lot of work to define what board ready means. It doesn’t mean you have been a [00:30:00]corporate board member before. There’s a bunch of stuff that goes into that, and then we do a lot of work with our clients to really help them think through what are the different characteristics they’re looking for in this board member, not just, I need a good board member, but what’s missing, what’s the missing puzzle piece from your team? If you think of your team as both your management team and your board, where are you short of expertise? Is it a particular function? Is it an industry? Is it a customer site? You need someone to represent small businesses. Or is it a stage? You’re about to go through an IPO and no one around the table has been through an IPO before. 

We have a process we take clients through to identify what they’re looking for and then really coach them on what board ready means.

Joe: I love the term “board ready.” It’s something that you talked about when you’re a guest, whenever that was, last year, and I think that is a great way to look at what you’re really looking for. 

Raza: Brad, Matt and Mahendra, I want to pose a few specific situations and circumstances that board members and boardrooms may see, and one of you could pick up and answer that, [00:31:00] and we can go through maybe one or two of those from there. 

One particular situation that actually Brad alluded earlier while he was speaking that boards generally have fiduciary duty to all the shareholders, yet different directors may end up having different economic or individual priorities. How does the board, or how should the board deal with that situation in the boardroom? Matt, do you want to take that one? 

Matt: Yeah. I mean, the board members wear two hats. They come into a board meeting, they’re a representative of their firm who owns some piece of the company and they are a board member. Usually under Delaware law where there’s a fiduciary responsibility to look out for the value of common stock and they may not own any, and I think it’s very important as the leader of a board in a tough conversation like that. First of all, they probably have counsel in the room, but second, to remind directors that they wear two hats, 

Brad will remember this story, and I actually think this is in the book, we had one such board meeting at my [00:32:00] company and that Brad was on the board of many years ago, probably 15 years ago now. It’s a really meeting and we knew it was going to be tough going into it for this exact reason.

We actually made two sets of hats for the board members, like a white hat and a gray hat, they both had the company’s logo on them, and I just handed them out to everyone before the meeting and I said, “Make sure you put on the white hat if you’re talking as a board member and the gray hat, if you’re talking about your opinion as a director.” It was a little goofy and corny.

Brad: Not as director, as an investor.

Matt: As an investor, sorry, yeah. It was a little goofy, but I think it made the point and it kind of broke down some of the barriers, like it gave everyone a chuckle, but then people were pretty good about actually doing that during the meeting and I think it helped us make a better decision at that point.

Brad: Just a quick thing to add too I think Matt did that really, really well in that meeting, and I’ve used some flavor of that many times since. 

There is a flip of that, which is that you have a lot of investor board members who hide behind [00:33:00] that fiduciary duty language, and my own view is whenever somebody leads off a sentence with, “Well, I have a fiduciary duty to blah, blah, blah,” it means they’re probably avoiding dealing with whatever issue is in front of them. 

 As a CEO or as a lead director, sort of recognizing when someone is actually being either avoidant or disingenuous, because they have conflicting interests, nothing wrong with the conflicting interests, that happens all the time. You have to be able to, as a board member, talk about what’s going on in the context of those things, and the best board members to Matt’s point, the best boards, when they’re in those situations, acknowledge them and then work through whatever the problem is, recognizing that there may be conflicting issues.

Mahendra: I think is very unique to startup boards is that very few first time CEOs understand that the board members’ responsibility is to all the shareholders. The default position if you ask any [00:34:00] plus 10 founder who has a venture-backed board, the default assumption they make is the board members are only looking out for themselves.

This is something that I’ve corrected hundreds of times in very basic conversation, so knowing that which hat is being worn, what do they represent and how do they care for the entire stack, as we call it, is extremely important, and I think that also is something a CEO should be not only aware of, but know how to engage properly.

Raza: I think that the metaphor of the two hats and making it explicit and clear is like such a wonderful suggestion. Conflicts are going to come up, but at least you then know which side at that moment you’re talking about. 

Joe: By popular demand, the last question is, what’s the funniest or most outrageous, or maybe most embarrassing board experience you’ve ever had? Matt, why don’t you start?

Matt: I’m going to tell a very funny one that happened when I was not in the room, but I heard about the story and I heard the same account from enough people that I’m going to take it as fact. I always did 360 review. We did them for [00:35:00] executives in the 

company and we always did one for me, and when we did mine, it was the management team and the board together. Our style of doing reviews is not that it’s written on paper or in a system, but it’s a facilitated conversation. 

One year during my 360 review, so I stepped out of the boardroom and it was in person. This was back when everything was in person, it was my board and my executive team and then my coach that was facilitating this conversation, and Fred Wilson, a member of the board for a long time with me and Brad made some comment in the presence of my whole management team to the effect of, “You know, Matt’s biggest problem is he doesn’t move fast enough to fire under-performing executives.” Brad, you were there, but supposedly you could just hear a pin drop in the room.

Brad: I was there. It was awesome.

Raza: Awkward. 

Matt: I heard about that quite a bit afterwards.

Brad: I have so many funny stories on board meetings, and one of the things I’ve always tried to do as a board member is not take myself too seriously and have a sense of humor. Even in situations when things start to get heavy, I [00:36:00] just try to carry that throughout life. And yeah, I have bad days, and yeah, I lose my shit and all that stuff. I’m normal, I’m human. But generally speaking, I try to live life tongue-in-cheek,

Here’s the one I remember with humor whenever I think of Matt and his long-time partner Jack Sinclair who has been COO and CFO in many iterations of things. We were having a long board meeting. It was in New York. It was tiresome. I’m a vegetarian and the number of board meetings I’ve gone to where the food sucked for me is legendary. I mean, just the number of times that a plate of ham sandwiches showed up and my lunch was like two slices of bread and a piece of cheese with a mayonnaise scraped off. It just goes on and on. 

This particular lunch wasn’t a bad one. It was a Shake Shack lunch. We’re in New York and they asked us in advance what we wanted and I think I got a sandwich from Shake Shack because they didn’t have a veggie burger at the time. They probably do now, but then they didn’t, and so I just got a grilled cheese sandwich and they ordered a bunch of the Shake Shack [00:37:00] shakes. If anybody’s ever been to Shake Shack, they’re these delicious, awesome, incredible shakes. I’m a huge hot chocoholic. 

We all get our things and we eat and we’re talking and we all have our shakes and I have my shake and then there’s a shake leftover and it’s a chocolate shake and it’s just leftover, like somebody didn’t have their shake, so I have another chocolate shake. If anybody has ever had two Shake Shack chocolate shakes in quick succession, you will understand what happened next.

Joe: Yeah.

Brad: As the board meeting is going. I have to lay down on the floor

Because I am so wiped out, like it’s time for a nap, like there is no way I can stay sitting in this chair and pay attention to this board meeting anymore.

 I don’t know, 15 minutes, I just laid down and took a nap on the floor while the meeting was going They thought nothing of it and everybody sort of had their amusement with it and off we went. In the next board meeting, when we’re starting the board meeting off, we go through the board [00:38:00]minutes to approve and a couple of other formalities and Jack has put in the board minutes, “Barry, Dana, we did this, we did that. We did this. Mr. Feld has a second Shake Shack and takes a nap.. We If did this, we did that.” 

It just sticks with me. It is like just so perfect, like we were friends and the best boards, I would just sort of end with the best boards, you fight, you argue, you challenge each other, you disagree, but you’re friends and you have respect for each other and you carry each other with some amusement. Those are the best boards.

Joe: Yeah, I agree. 

Raza: Mahendra, your funny story. 

Mahendra: Yeah, this is one of those strange board calls. It was not a meeting, it was a call and there were different time zones. It was like a half an hour call to approve something very important to the transaction that was going to occur. Different people are dialing in from 11:00 PM in the night, somewhere it was different times zone, et cetera. As the call starts, within a few minutes, we hear this heavy breathing [00:39:00] and it’s starting to get awkward and then it would stop and then suddenly it will start again and then it will stop. Until finally the CEO says, “Okay, I’m going to call out each one of you. Whatever the fuck you’re doing, please stop.” This board member says, “Okay, that is me. It’s my dog standing behind my shoulder and panting very heavily into the call and there’s nothing more to that.”

Joe: Yeah, sure.

Mahendra: The various assumptions people have made about what was going on completely wrong. It was just an animal panting into the microphone.

Joe: A lot more exciting to think about what it might’ve been, right?

Mahendra: Exactly.

Joe: Brad, Mahendra and Matt, it’s been great speaking with you today. Thanks for joining us. And thank you all for listening to On Boards with our special guests, Brad Feld, Mahendra Ramsinghaniand Matt Blumberg. 

Raza: We have a request for our listeners. Please take a moment to rate and review On Boards on Apple Podcast app if you enjoyed listening to it. It really helps others [00:40:00] discover our podcast. 

Joe: This is the last episode of our fifth season. We’ll be back for season six in the fall. In the meantime, please take care of yourselves, your families, and your communities as best you can. Raza, you take care, too. 

Raza: You too, Joe. 

Joe: Thanks 

41. Terry Johnson: How companies are responding as the Pendulum Swings: ESG risk management, Board Diversity and Stakeholder Capitalism

In this episode, Terry Johnson, an attorney who advises management and board members of both private and public companies, talks about what clients are facing regarding ESG risk identification and management, and how boards are responding to the growing push back against mandated board diversity and stakeholder capitalism.

Thanks for listening!

We love our listeners! Drop us a line or give us guest suggestions here.

Terry Johnson Bio

Terry is a corporate and securities partner at the law firm of Arnold & Porter.  She acts as a trusted advisor to the C suite, boards of directors and board members. In her corporate governance work, she advises both public and private company boards and management on board diversity and stakeholder capitalism. Among other areas, her practice often involves counseling management and boards about ESG risk management, including disclosure and liability issues.  She often speaks and writes about corporate governance and in particular, board diversity, including the California board diversity legislation and NASDAQ’s listing rules, and she has authored articles in the Financial Times regarding the effectiveness of quotas in achieving board diversity and the treatment of climate change as a systematic risk to global finance. Terry’s experience also includes representing wineries and winery owners, and family-owned companies in a variety of industries.

She has been recognized by the Daily Journal as one of the Top 100 Women Lawyers in California and has been included in Best Lawyers in America since 2014.  In 2022 Terry was selected by the San Francisco Business Times as one of the 13 OUTstanding Voices paving the way for LGBTQ equality in the workplace in its annual Business of Pride awards.  Terry is currently the Treasurer of the Bar Association of San Francisco, in line to assume the presidency in 2024.

Links

Caught in the Culture Wars Crossfire: Board Diversity Initiatives Under Attack

SEC Approves Nasdaq Diversity Proposal

Public shaming will not solve the lack of diversity on corporate boards

Treat Climate Change as a Systemic Risk to Global Finance 

Quotes

Board Diversity

We are now starting to see a pushback on ESG generally and board diversity in particular as witnessed by the challenges to the California legislation regarding board diversity.  Conservative groups are also bringing claims in the Fifth Circuit in Texas against NASDAQ’s board diversity listing rule.

The NASDAQ rule is not mandatory, it’s not a quota, it’s a comply or disclose and explain why. Essentially, you’re not required to put more diverse directors on the board, you just have to tell people why you haven’t, but in today’s world, knowing that there would be a strong disincentive to having to explain why you couldn’t find a qualified woman for your board or you couldn’t find a qualified member of an underrepresented group.

The investment community has been the loudest voice in support of board diversity, but we’re certainly starting to hear other voices that are pushing back and saying, “No, we think you ought to be simply deciding board members based on the way we’ve always done it.”

Diversity quotas are a “rough justice” approach in that it requires you to put different people on boards – but it does work. 

The argument against mandated board diversity is that that instead of making a decision about a board member based on pure merit, it’s made on another basis: “We don’t want to be required to pick a director who happens to be a woman or director who happens to be part of a member of an underrepresented community, we want to pick the best director whoever that is.”

Big Ideas/Thoughts

ESG risk management

The ESG realm is huge, I mean, just climate change alone under the E part of it, is an enormous topic in itself, and then S and G, the social and governance aspects of it are related, but completely separate sets of issues and concerns to think through.

Wildfires are a huge concern here in California, which is where I’m based, and a good example of ESG risk management.  I’m talking to clients about in various respects about how to think about potential liability, how they could be affected by wildfires. If they are involved in a business that puts them at risk for liability related to wildfires, how to consider that – that’s just one example of things that I’m starting to see come across my desk.

One of the things that is challenging to navigate the ESG waters, especially for public companies, is that you have to figure out how to say things because you want to let the market know about your commitment, but at the same time, not set yourself up for liability, and that’s a huge challenge.  For example, what it means is reading your ESG report side by side with the 10-Ks and 10-Qs and other periodic reports you’ve put out under your 34 Act reporting and making sure that at the bottom line, you don’t have inconsistencies.

You have to be clear with the market and with all of your stakeholders, which would include not only your shareholders, but your employees and your suppliers and the communities in which you do business and so forth about exactly what you’re going to do and to be careful about not making statements that could be called greenwashing, not overstating what you’re going to do.

Stakeholder Capitalism

 I think that the Business Roundtable’s statement in August of 2019 really had an enormous impact on changing the conversation about stakeholder capitalism. It put that on the front page of every business newspaper, and it brought it to the forefront in a way that I don’t know that any other kind of initiative could have done.  

You have buy-in from companies that are the leading corporate lights, companies that are solidly in the mainstream, the biggest financial institutions, for example. I think that’s really a good thing.

Q: When you advise your clients about stakeholder capitalism, what do you advise them to do in order to be able to manage this issue? 

I draw their attention back to their fiduciary duties because the bottom line is, as a director, you have fiduciary duties, and that’s what governs your job, that’s your north star in fulfilling your duties as a member of the board…you have a fiduciary duty to your stockholders. 

Regarding short-term and long-term goals and how you look at it in advising directors, I would say, “Well, your fiduciary duty is to your shareholders. You don’t have a technical fiduciary duty to your stakeholders, but it’s a question of looking at the long term and looking down the road. 

Do you see that in order to operate your business in the longer term, you’re going to need to start planning for the effects of climate change? You’re going to need to start pivoting away from a particular business because it has such a high carbon impact, or maybe you want to invest in something that is a carbon capture technology?” It all comes back to your shareholders – from a legal standpoint, that’s still the guiding light.

Episode 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. 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 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 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: Our guest today is Terry Johnson. Terry is a a corporate and securities partner at the law firm of Arnold & Porter. She acts as a trusted advisor to the C-suite, boards of [00:01:00] directors and board members. She advises both public and private company boards and management on board diversity and stakeholder capitalism, and her practice often involves counseling management and boards about ESG risk management, including disclosure and liability issues.

Raza: Terry speaks and writes about corporate governance and, in particular, board diversity, including the California board diversity legislation and the NASDAQ’s listing rules, and she has authored articles in the Financial Times regarding the effectiveness of quotas in achieving board diversity and the treatment of climate change as a systemic risk to global finance.

Joe: Terry has been recognized by the Daily Journal as one of the top 100 women lawyers in California and has been included in Best Lawyers in America since 2014. Terry, it’s great to have you with us on On Boards today.

Terry: Great. Thank you, Joe. Thank you, Raza. It’s great to be [00:02:00] here. 

Joe: You have been working with clients on a lot of issues that we’ve been talking about on this podcast. Could you start off by just telling us a little bit about your practice and your work advising companies and boards.

Terry: Sure. The work I do is primarily, as you noted, as a trusted advisor to members of boards, sometimes to board committees or to the full board, also to members of management in the C-suite and elsewhere in working through corporate governance issues and, of late, that has focused significantly on ESG and stakeholder capitalism, and then within that, board diversity has been a big piece of it. To kind of give a little bit of a flavor of some of the things that we’ve been working on, for example, here in California, which is where I’m based, wildfires are a huge concern, and one of the things that I’m finding myself talking to clients about in various respects is how to [00:03:00] think about potential liability, how they could be affected by wildfires. If they are involved in a business that puts them in potentially at risk for liability related to wildfires, how to consider that, so that’s just one example of the many kinds of things that I’m starting to see come across my desk. 

Joe: Yeah, I think it’s a great example because sometimes when you say ESG, it’s such a big category that not everyone kind of connects the dots to who they are, where their company is and how it might affect them. I think the wildfire topic, especially where you are and where some of your clients would be, and I know you represent wineries among other things, I think wildfires might be an important aspect for wineries to be considering given what’s going on out there.

Terry: Oh, absolutely. There have been a number of concerns in the past couple of years where we had significant fires here in the wine-growing regions in Napa and Sonoma. A number of wineries, for example, had to essentially give up [00:04:00] all or a portion of their crops because of a smoke taint, and so that meant that they were not able to produce wine in those years or had to produce a lot less wine. There was a complicated set of insurance claims. The insurance process here in California has become much more difficult and much more complicated.

 There’s a ton of concerns in that space alone and that’s just one example. I mean, as you say, Joe, that the ESG realm is so large, I mean, just the climate change alone is under the E part of it, it is sort of an enormous topic in itself, and then S and G, the social and governance aspects of it too, are related, but completely separate sets of issues and concerns to think through. 

Joe: Let’s talk about one of the things that you advise boards and companies about, which is board diversity. We talk here a lot about the importance of diversity, big diversity, which means diversity of perspective and background and skills, experience, attributes. It covers a [00:05:00] lot of ground. One of the things we talked about when we met with you last week was the fact that there is a growing pushback on diversity in a number of areas. Can you talk about some of the statutory pushback that you’ve seen and what’s been going on with that?

Terry: In California we have two laws currently on the books. One was adopted in 2018 known generally as SBA 26, which is it’s named in the Legislature, and that requires that there be a minimum number of women on the boards of public companies that are headquartered in California.

There’s also another law that was adopted in 2020, called AB 979, which mandates a minimum number of members of underrepresented communities which is defined as minorities and members of the LGBTQ+ community on similarly boards of public companies with headquarters in California. Both of these laws have been the subject of litigation and, interestingly, the litigation was not brought by [00:06:00] companies that were subject to the laws and trying to push back on them, but instead

Terry: by advocacy groups from the conservative side of the political spectrum. Right now, both of those laws have actually been struck down at the trial court level. Most recently the gender diversity law was struck down, I think, in a decision that came out just a couple of weeks ago. The State of California is planning to appeal the decision on the gender diversity law, and I think no announcement has yet been made on whether they’re going to appeal the decision on AB 979 regarding a minimum number of directors from underrepresented communities. 

Joe: What is the argument that’s being made or arguments that are being made to push back on legally mandated diversity. 

Terry: Well, essentially, it’s an equal protection argument, so under the constitution of the State of California, but this would also frankly apply in the federal world as well, whenever you have a law that is specific to a particular group, like in the case of [00:07:00] the SB 826, and specifically tailored to women, then that triggers a particular level of scrutiny in terms of whether the law is appropriately tailored to address the discrimination that that group has experienced. 

Essentially, what the state is or what the plaintiffs have been arguing is that the State did not do a good enough job in adopting that rule to pass muster as a legitimate measure of equal protection. It is essentially challenging a couple of things. The State didn’t have enough of an interest in ensuring that boards have more gender balance, and that the State didn’t do a good enough job of showing that this was designed to address a pattern of specific discrimination. The trial court decision talks a lot about it sort of focusing on trying to achieve gender parity rather than remedying specific discrimination.

The way that the plaintiffs got to bring the claim was based on the theory [00:08:00] that they are California taxpayers and so as taxpayers, public funds are being used to track the data that the State is assembling, that’s part of the laws that the State is assembling, that it’s essentially kind of a database and companies have to submit reports, so that’s kind of how that played out at the trial court level.

Joe: Is the underlying argument something like, “We want to be able to pick the best people for our boards and this doesn’t allow us to do that”? Is that part of the fabric of this conversation? 

Terry: Yeah, that’s a big part of the fabric. I’ll not bore you with those sort of legal details of how the constitutional argument plays out, but in point of fact, that’s really what it’s about. It’s that, ” We don’t want to be required to pick a director who happens to be a woman or director who happens to be part of a member of an underrepresented community, we want to pick the best director whoever that is.”

Joe: There’s an underlying pushback that we’re being forced to put potentially unqualified people on boards.

Terry: Yes, that’s the [00:09:00] concern is that that instead of making a decision about a board member based on pure merit, that essentially the boards are going to have their nominating and governance committees, which are usually the ones putting together the slates of board members are having to put a thumb on the scale for women and for members of underrepresented communities and the result being that they’re not able to simply make a decision on merit.

Joe: Is the experience of many of the EU countries at all relevant in terms of what that has produced or is the legal structure so different than it really is not relevant?

Terry: I think it’s quite relevant actually. 

Maybe to provide a little bit of context in Europe, the European countries have taken a more bold and more kind of quota-based approach to trying to have board diversity, and they have been at it longer frankly. I think the first laws on this were adopted in Norway in the aughts, so this has been around for [00:10:00] awhile throughout the EU and in the UK as well. Essentially, I think the results we’ve seen in those countries is that boards have diversified significantly and one of the things that remains a question though is I think there was a theory that as the board diversified, that that would then have a trickle-down effect and diversify the management and diversify the companies as well. I think we’ve seen less of that than was expected, but nonetheless, the effect of these laws has been to cause the board forced to become quite a bit more diverse than they were in the first place, and that’s a strong step. 

I think once you have a board that has a number of diverse people on it, whether that’s women, members of underrepresented communities or otherwise, I think that sort of helps get the ball rolling and I think at that point then hopefully the board will maintain that level of diversity having kind of gotten over the hump. 

Joe: Among the stakeholders that probably have a position on this are investors, and [00:11:00] my understanding is that investors almost overwhelmingly think that diversity on boards is probably a good thing. Is that fair? 

Terry: I think that’s fair in talking about particularly the large investment funds, like the Vanguards, the BlackRocks and State Streets of the world and also a number of the big investment banks announced policies where they will cast their votes based on the levels of diversity, for example, on a board. 

We talked a little bit before though about this sort of groundswell of pushback, and I think that we are now starting to see a pushback on ESG generally and some pushback on board diversity as witnessed by the challenges to the California legislation and there’s also a core challenge going on in the Fifth Circuit in Texas over NASDAQ’s board diversity listing rule, which is somewhat similar. 

I think that the investment community has been the loudest voices have been in support of board diversity, but we’re certainly starting to hear other voices that are pushing back and saying, ” No, we [00:12:00] think you ought to be simply deciding board members based on the way we’ve always done it.” 

Joe: Isn’t the position that many institutional investors have taken that the diversity of boards, which has, for most people, been a critical element of how to make a strong and effective board reduces risk because with a diversity of perspective, diversity of skills, diversity of background, you’re less likely to miss stuff. If you’re an institutional investor putting millions of dollars into a company, you don’t want it to miss stuff. It seems logical to me, and I’m curious what aspect of the investor community is taking the position that being in a better position to identify and manage risk is not a good thing to look at when you’re investing millions of dollars in a company. What’s the argument against that? I really don’t understand it.

Terry: Well, I’ll see if I can argue against my own personal view, which is [00:13:00] I agree with you. 

Joe: I thought you might. 

Terry: Having that diversity of perspectives is really important, but kind of to be the devil’s advocate, the argument would be that, first, there are a number of studies that get talked about that show that there’s a correlation between share performance, the ability to respond to risk and show that companies that had women directors had stronger share values than companies that had all male boards, for example, and there are a host of those, and those often get cited by folks who were advocating for board diversity to say like, “Look, this is a good thing. This shows that not only is it kind of the right thing to do from the standpoint of society and having a more level playing field, but also it just makes economic sense.” 

The critics, on the other hand, will say, “Well, correlation doesn’t equal causation.” And so just the mere fact that you’re seeing both these things happen, you can look very closely at each particular study and try to figure out like, “Well, is it really caused by that, or were there other factors and so forth?” There are a number of [00:14:00] very prominent academics who have done deep dives on this and said, “Well, yeah, that’s true. Their correlation does not, of course, equal causation.” There’s that piece of it. 

I think the other sort of opposition to it is, it’s kind of framed almost in the broader opposition that you hear through affirmative action, which is that we shouldn’t be putting a thumb on the scale for people who happen to be women or for people who happen to be members of underrepresented communities and that we need to have a level playing field, and so what that means is that nobody gets an extra bump in the process. 

Joe: Interesting. 

One last question on this subject, which is that it seems like quotas is, I think you use the term “rough justice,” but I’m not sure there’s a better way to bring diversity or move the whole diversity issue forward other than quotas, because if you don’t do that, then it doesn’t look like it’s going to probably work. 

Terry: Well, I have to say I agree. I mean, there’s a lot of debate about this and different people have [00:15:00] different views about the benefits of quotas, and of course, there’s obviously lots of debate about whether they’ll stand up to a test in the courts. However, I agree with you. I think that it’s a rough justice approach in that it requires you to put different people on boards, but it does work. It does get there. 

One of the things that was a big factor in California’s consideration of the original legislation that requires a minimum number of women on boards is to say, ” We tried other approaches.” The state had back in, I think, the early 2000s adopted a lot of it and said they were going create like a registry of qualified women and minorities to be available for boards so that on the theory of like, “We’ll make a resource available,” and that didn’t change anything, and then sort of hortatory or disclosure-type requirements also didn’t really achieve much, and so it didn’t happen until we got there, and I do tend to think that the disclosure-based regimes are less effective. 

I mean, we’ll see with NASDAQ, because now there’s so much scrutiny on [00:16:00] this issue because technically the NASDAQ rule is not mandatory, it’s not a quota, it’s a comply or disclose and explain why. Essentially, technically, you’re not required to put more diverse directors on the board, you just have to tell people, but in today’s world, knowing that there would be a strong disincentive to having to explain why you couldn’t find a qualified woman for your board, you couldn’t find a qualified member of an underrepresented group. 

Raza: Terry, you just alluded to a little bit of a pushback on ESG coming up. Elon Musk recently tweeted that ESG is BS. As you know, the S&P ESG index has removed Tesla, but ExxonMobil is there, and so what is going on in that world? And why are we seeing pushback on ESG as well?

Terry: Well, I think one of the things that’s a challenge, and I kind of alluded to this in the first part of our discussion, is that ESG is such a broad measure, [00:17:00] and another thing that’s at play also is that there are so many different factors that go into the measure of ESG and there are a whole bunch of different metrics promulgated by different organizations that allow you to measure ESG that you can end up with some unusual results. I believe that’s kind of what happened in the case of Tesla being removed from the ESG index and Exxon staying on. The news reports indicate that the part of the reason was because of various issues related to Tesla’s addressing claims of racial discrimination and handling the NHTSA investigations about accidents related to their cars.

While, of course, Tesla is an electric vehicle company and its whole business is all about zero emissions, so I completely get why this would seem like an anomalous result and ExxonMobil is a fossil fuel company, so part of the challenge is you end up with these anomalous results because we don’t have a standardized way of going about it and in a way [00:18:00] it’s sort of shooting ESG movement in the foot, because it offers such an easy thing to point to, to say, “Well, this doesn’t make any sense.” 

Raza: I think as you rightfully pointed out, ESG is such a big topic and then turning it into an index or one number or one grade or one letter can really result in odd output or odd things coming out and muddying the water. Is there a messaging problem here as well where people just need to understand or elaborate better on what ESG really means and how to make that a more productive conversation? 

Terry: I think there’s a couple of things that that will need to happen in order to have it really be a more, as you say, productive conversation. I think one is, as I mentioned, kind of trying to come up with a standardized set of metrics that we all follow and that will take some shaking out in the market and perhaps a decision making on the parts of regulators to pick something to follow.

I think the other thing that’s tricky is that [00:19:00] particularly for public companies, they are under a lot of investor pressure and soon will be if the SEC climate-related disclosure rules get adopted in something close to what’s been proposed from a regulatory standpoint, companies are having to talk more about ESG and many companies are putting out voluntary corporate sustainability reports, for example, that talk about their ESG commitments and their goals and how they’re going to get there and so forth. 

One of the things that’s a challenge in that respect is that whenever a company, especially a publicly-traded company, is putting information out, is speaking publicly about its intentions, its goals, the metrics that it’s following, it now is subject to potential liability if, in fact, that is not consistent with what it has said in its 10-Ks and 10-Qs, for example, or if it’s misleading, if it kind of omits important information and the measures of those things are really [00:20:00] important,

I think one of the things that is challenging to navigate the ESG waters, especially for public companies, is that you have to figure out how to say things because you want to let the market know about your commitment, but at the same time, not set yourself up for liability, and that’s a huge challenge. 

Raza: I think you earlier said that you have to be careful and consistent, but in practice, what does that actually mean when companies are doing their corporate sustainability reports?

Terry: Well, what it means is reading that side by side with the 10-Ks and 10-Qs that you have for other periodic reports you’ve put out under your 34 Act reporting and making sure that sort of bottom line, you don’t have inconsistencies. That’s sort of number one. Making sure also that there’s information that’s in your corporate sustainability report that’s not in your periodic reports, like thinking about, “Well, why are we talking about it here? Why was it important enough to talk about here in the CSR, but it wasn’t material enough to talk about in our 10-K, and I [00:21:00] mean, they don’t have to be the same, of course. I mean, they’re not necessarily the same reports, but it’s important to give that some thought and to think about whether something that you’re talking about in your CSR is really something that’s truly material from a securities law standpoint that ought to be in your 10-K. 

Raza: From the company standpoint, it’s like saying you are being held accountable, but at the same time, you want to be able to protect yourself legally. 

Terry: Right. I mean, you have to be clear with the market and with all of your stakeholders, which would include not only your shareholders, but your employees and your suppliers and the communities in which you do business and so forth about exactly what you’re going to do and to be careful about not making statements that could be called greenwashing, not overstating what you’re going to do, and one thing that was a development this week is on Monday the SEC announced a settlement with BNY Mellon Fund that essentially assessed a fine against [00:22:00] them for greenwashing-type statements in the prospectus for their ESG funds. 

Raza: When the measure itself becomes the goal, people are going to kind of play all sorts of games so I think the trick or the key here is how to keep that conversation, disclosures real and really relevant to ESG rather than the so-called greenwashing.

Terry: Exactly. 

Joe: Stakeholder capitalism is one of the areas where you advise your clients. Let’s start with this, in August of 2019, the Business Roundtable issued its famous statement on the purpose of corporations that basically said that all stakeholders need to be taken into account. 

Their position is that since that statement, they’ve got a ton of criticism from the so-called Right, which said, “You went way, way [00:23:00] too far here,” and from the Left, which has said, “You really didn’t go far enough at all,” and their view is that means we probably did it right, because if we’re getting criticized from both sides, we probably did something exactly where we need to be for who we are. What do you think about that argument?

Terry: Well, I think that the Business Roundtable’s statement in August of 2019 really had an enormous impact on changing the conversation about stakeholder capitalism. It put that on to the front page of every business newspaper and it brought it to the forefront in a way that I don’t know that any other kind of initiative could have happened, so I think the mere fact of that was an enormous amount of impact and enormous amount of change, and of course the Business Roundtable represents the companies that are among the largest and the most powerful in the markets today, and that’s a [00:24:00] big deal that you have buy-in from companies that are the leading corporate lights, not companies that have kind of announced and made their whole business all about the environment, for example, but companies that are solidly in the mainstream, the biggest financial institutions, for example. I think that’s really a good thing.

I can see the argument to say like, “Well, if we’re getting criticized for both sides, that means we did something right.” They started the conversation, and I think that can have a lot of debate about whether you’re going far enough or whether you went too far, but like it or not, everybody’s talking about stakeholder capitalism and people have been thinking about how to incorporate that in considering how they run their companies. 

Joe: While we’re on the issue of pushback, there is among other things pushback on the notion of stakeholder capitalism. Could you talk a little bit about what you’ve seen out there by way of pushback on that concept in the recent past? 

Terry: Sure. Stakeholder capitalism [00:25:00] which we all understand as being kind of the idea of focusing on not only the interests of the company’s shareholders, but also on the interest of the company stakeholders, which is conceived more broadly to pick up employees and suppliers and the communities in which the company operates. 

The idea of stakeholder capitalism has gotten some pushback and there’s a lot of discussion around that particularly recently, and one thing in particular that I thought was quite interesting is just a couple of weeks ago it was announced that there is a new investment fund being formed called Strive which is going to be essentially focused on what they’re terming “excellence capitalism,” which I think kind of arguably the antidote to stakeholder capitalism in the sense that it is focusing on companies doing what they need to do and being excellent at their business, whatever that is, and essentially prioritizing the financial returns for their investors. If it’s an oil company, that it should be an excellent oil company. If it’s in [00:26:00] the business of making cars, it should be making the best cars, and that’s one example of the kind of pushback we’re seeing.

I think we’re seeing the pendulum kind of come back the other way. It sort of falls consistent with the pushback we’re seeing against board diversity. It’s consistent with some sense that the ESG ideas have gone too far in terms of, and, and there’s pressure on, on that too, given what’s going on in our economy, we know we’re in a circumstance where inflation is at levels that we haven’t seen for a long time, we’re seeing the market in, in a lot of volatility. And so, you know, that puts pressure on, on, you know, things that aren’t, you know, they’re purely tied to just the bottom line in the short term. 

Joe: So it’s, it’s really hard to push back against the notion of excellence. That’s something everyone can agree on, but isn’t this really a question of what excellence is. So for years, part of the risk according to a [00:27:00] lot of institutional investors was that the focus was on the short term and short term and short-term goals don’t put a lot of investors at ease, so the idea of really looking long-term and addressing issues that affect your business in the long term makes a lot of sense from an investor point of view, because we want our money to be safe more than just for the quarterly report. It’s not a quarter-by-quarter thing. We are investing in your company because we think it can grow. We think it can deliver returns. Why is it the short-term versus the long-term really the argument here as opposed to is this really excellence or not? Which seems to me to just kind of divert attention from the real issue. 

Terry: I think the short-term versus the long-term is really a good way to think about it, and that’s frankly, the way I look at it, I think that the debate probably hinges on things like, “Well, are you planning [00:28:00] for the long-term in a circumstance where you can really see around the corners, where you can really see what’s going to happen? 

Of course, it’s always difficult to predict the future, and depending on a particular company, you may have a greater ability to see what’s going to happen to you. Your company may be very much affected by foreseeable climate change and so you can kind of really easily plan for that and expect what’s going to happen. 

On the other hand, there are a lot of variables, and to me, I think the debate goes not so much around like short-term versus long-term because I don’t think anybody who’s opposing ESG would say, “Oh, well, we’re just focusing on the short term.” I think they’re focusing on the long term and it’s just a question of you may think this one thing is going to happen in the long-term and we think something else is going to happen in the long-term, and so we’re erring on the side of returning money to our shareholders versus thinking in broader terms, which is less certain. 

Joe: When you advise your clients about stakeholder capitalism, what do you advise them to do in [00:29:00] order to be able to manage this issue? 

Terry: I draw their attention back to their fiduciary duties because the bottom line is, as a director, you have fiduciary duties, and that’s what governs your job, that’s your north star in fulfilling your duties as a member of the board, and you have a duty of care, you have a duty of loyalty, and your duties under Delaware law, let’s assume most companies or most big companies are organized in Delaware, you have a fiduciary duty to your stockholder. 

I think then, Joe, this comes back to your thinking about short-term and long-term and how you look at it, so in advising directors, I would say, “Well, your fiduciary duty is to your shareholders. You don’t have a technical fiduciary duty to your stakeholders, but it’s a question of looking at the long term and looking down the road. Do you see that in order to operate your business in the longer term, you’re going to need to start planning for the effects of climate change? You’re going to need to start [00:30:00] pivoting away from a particular business because it has such a high carbon impact, or maybe you want to invest in something that is a carbon capture technology. It all does come back to your shareholders. From a legal standpoint, that’s still the guiding light. 

Joe: Yeah. That makes sense. Terry, it has been great speaking with you. Thank you so much for joining us today 

Terry: You too, Joe and Raza, thank you so much. 

Joe: And thank you all for listening to On Boards with our special guest, Terry Johnson. 

Raza: We have a request for our listeners. Please take a moment to rate and review On Boards Podcast on the Apple Podcast app if you enjoyed listening to it. It really helps other discover our podcast. Also, you can visit our website at onboardspodcast.com. That’s onboardspodcast.com. We’d love to hear your comments, suggestions, and feedback.

Joe: Please stay safe and take care of yourselves, your families and your communities as best you can. Raza, take care.[00:31:00]

Raza: You too, Joe.

Joe: Thanks.

40. Anthony Goodman – The many faceted challenge of creating and maintaining an effective board

Anthony Goodman is the leader of the North American Board Effectiveness Practice for Korn Ferry, and he understands the challenges boards face meeting the challenge of becoming a high performing board – and maintaining excellence.  In this episode we discuss some of those challenges. 

Thanks for listening!

We love our listeners! Drop us a line or give us guest suggestions here.

Links

Anthony Bio

Analyzing emerging trends in board evaluation practices

How boards can adapt to support ESG efforts

The ‘Climate Change’ Director

Quotes

Who is responsible for ESG?

The idea that ESG is not going to impact the entire board and every committee is a mistake. If you think about ESG as it’s supposed to be, it is about the company’s strategy and its risk management.  What you’re really asking is, “what are the material risks and opportunities of ESG.”

ESG Expertise

Question: With the increasing emphasis on ESG, does that mean board need a new set of skills and tools and, if so, what are some of the skills and tools they should be considering?

What boards need to do first is understand “what are the material risks and opportunities for our company, and when they have done that assessment, or management has done that assessment for them.”  Then the next question they need to ask is, “As we look at the issues for which we need to provide oversight, do we have the skills and experiences on the board to do that?

If there’s something glaringly missing, how do we get that skill into the board?  But maybe it’s about the whole board upskilling.  Maybe it’s about the fact that everyone on the board actually needs to understand what the material risks to the business are.

Michelle Edkins, who runs the stewardship team globally at BlackRock, has this wonderful saying: “A board made up of one trick ponies is a circus.”

Board Effectiveness

How involved is the board in the strategy how involved has the board been in helping to develop the strategy and overseeing the strategy? How involved are they in risk management and identifying and making sure that risks are being dealt with? How effective have they been in hiring and firing CEOs

The question is who can the board get feedback from? It’s often just within the board itself, but you could, for instance, ask senior managers whether the board is actually adding any value to them. Is it providing guidance? Is it providing challenge? Do they feel stretched by this board or not? 

You could ask your investors. You could ask your audit firm. You could ask your law firm. There are a number of stakeholders that are in and around the boardroom that observe how the board is doing.

Board meeting agenda

It takes a certain amount of courage to ask for an outside-in view of the board. It’s much easier to do than an inside-out view and just ask the other directors how you’re doing.

People have got a lot of choices these days. The idea that boards are the buyer, actually no, boards now have to sell themselves to candidates, particularly good candidates who are women – who are people of color, who are digital natives – because those are the people everyone want on their board, and the real question is, why should they want to come on your board?

I think we’ve all got to be grownups about this, that sometimes it’s just our time and we have to be willing to let go, but I think a lot of people’s personal identity is tied up with being a board director, and if this is your last public company board, you’re going to try and hang on to it as long as you can. Otherwise, what are you going to tell people down at the golf club that you do? You’re a board director.

I sometimes say collegiality is a mask that covers up a lot of problems underlying in the board, and one of them is the inability to let go and allow people to make a dignified exit from the board.

Big Ideas/Thoughts


Board Culture

The question that comes to my mind here is accountability: how does a board hold management accountable for building the culture. 

I think it’s very hard to draw a straight line between an effective board and an effective company, but I think when the board is ineffective, it starts to erode what the company can do, what kind of strategic opportunities it has, the quality of the people it can recruit into senior management.  A bad board, I think, can create a lot of havoc inside a company, but a good board doesn’t necessarily make for a good company.

Boards are often lagging indicators around strategic change.  They’re not always leading indicators and we often see companies where the board is quite a way adrift of where the company has evolved to.

I want to give you another C-word that boards should be thinking about and that’s courage. If we had courageous conversations between board chairs and board directors, between non-gov chairs and board directors, this [off-boarding] would be so much easier.  But collegiality often trumps courage, and I think that’s a big problem for boards. 

Diversity

Just to go back a little bit, so why is there this focus on diversity? A lot of it actually came via the investors, the investor community. Why did they want boards to become more diverse? What they’re really trying to do, I think, is to make sure that boards are cognitively diverse, but that is something that is really hard to do from outside.

You can’t assess whether a board is cognitively diverse from the outside, and by the way, there’s nobody trying to assess whether they’re cognitively diverse on the inside either. What do investors say? They’ve said, “Okay, if we knew that the people on the board who definitely come from different backgrounds and different approaches to life, then we could imagine there might also be cognitive diversity.”

Our own practice, our board practice over the last couple of years, has been running at about 55% of all the people we put on boards in the US are women or people of color, I think that’s pretty consistent across all the search firms.

A lot of first-time directors, women and people of color, are not perhaps being heard as much in the boardroom as they would have liked. I think a lot of board chairs probably think they’re doing a good job trying to get everybody’s voices to be heard, but I think that boards have to work quite hard to be inclusive and to make sure everyone feels comfortable in the boardroom.

Board Succession Planning 

They ought to be looking at the strategy of the company, thinking about where it’s heading over the next three to five years, and then looking at the skills and experiences that they have today and understanding the gaps. Let’s say 10 years ago, the company might’ve been a purely domestic company. Now it’s made a number of acquisitions globally, and there’s nobody on the board with international experience. 

Think about what next three, four, five directors are going to look like, and wouldn’t it be great if out of those five, at least two, maybe three were going to be women that a certain number would be people of color, a certain number of them would be under the age of 56. In that way, if we land on some fantastic former CEO today, happens to be a white male and doesn’t check any of those other boxes, we can still have that person on our board because we know we’ve got four more slots to fill, and we’re going to make sure that in that batch of five people that we’ve got all the skills, experiences, and backgrounds that we want as opposed to trying to load them all on one person.

Episode 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. 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 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 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: Our guest today is Anthony Goodman. [00:01:00] Anthony is a senior partner with Korn Ferry where he is the leader of the North American Board Effectiveness Practice. He advises public and private company boards, including large non-profits, mutual funds and family-influenced businesses on a range of confidential matters from board chair succession to board composition. He’s an experienced advisor to non-executive directors and C-suite executive teams in the United States and Europe on organizational and leadership strategies, the alignment of leaders and organizations for effective oversight of environmental, social, and governance opportunities and risks, that’s ESG, and improved relationship with stakeholders. 

Raza: Anthony spent more than 12 years as a partner at Tapestry Networks, an organization convening board directors, investors, and regulator for peer learning and mutual understanding. He was the [00:02:00] founder and co-chair of the Shareholder Director Exchange ,that’s SDX, which developed the first protocol for board-shareholder engagement in the United States. For five years, from 2009 to 2014, Anthony wrote the leading viewed column for Financial Times.

Joe: Anthony is a board director of Boston Scores, a non-profit providing after-school programs in public schools. He is a member of the National Association of Corporate Directors (NACD) and the International Corporate Governance Network. (ICGN). Welcome, Anthony. It’s great to have you today on On Boards. 

Anthony: Thank you, Joe. And thank you, Raza. 

Joe: As the head of Board Effectiveness in North America for Korn Ferry, the first question I have is, how does a board know if it is [00:03:00] effective? 

Anthony: I think that’s a great question, Joe, and I would answer that in a couple of different ways. First of all, I think one would potentially judge the board on the outcome, so how involved is the board in the strategy? I don’t think it’s fair to judge the board entirely on whether the strategy is successful or not, because it’s going to be developed and executed by management.

But how involved has the board been in helping to develop the strategy and overseeing the strategy? How involved are they in risk management and identifying and making sure that risks are being dealt with? How effective have they been in hiring and firing CEOs? That’s another major responsibility they would have. Have the transactions that they’ve approved value adding or value destroying, and are they regularly refreshing themselves so that they are keeping [00:04:00] pace with, if not ahead, of where the company’s strategic evolution is headed? 

I think those are some of the things you could look at to say how is the board doing on each of those things, but at the end of the day, if you want to know whether you’re effective or not, and this is true for any of us in our jobs, you have to get feedback. Now, the question is who can the board get feedback from? And often it’s just within the board itself, but you could, for instance, ask senior managers whether the board is actually adding any value to them. Is it providing guidance? Is it providing challenge? Do they feel stretched by this board or not? 

You could ask your investors. You could ask your audit firm. You could ask your law firm. There are a number of stakeholders that are in and around the boardroom that observe how the board is doing.

[00:05:00] Finally, of course, you can bring in a third party to conduct an independent evaluation and they will tell you how you’re doing. But I think there are ways boards could be much smarter about evaluating their effectiveness than they currently are. 

Joe: Do many boards go about determining their effectiveness in the ways you just suggested primarily by looking to outside or third parties, even though it may be internal, such as senior management, do many boards actually do that?

Anthony: Not that many, no. I think among the larger cap public companies, I think that’s more common than other types of boards. It takes a certain amount of courage to ask for an outside-in view of the board. It’s much easier to do than an inside-out view and just ask the other directors how you’re doing.

Oftentimes, even the way you do that is a bit antiquated. [00:06:00] If the way you’re getting that feedback is just by doing the survey, perhaps administered by your corporate secretary and you’re answering questions on a one-to-five scale and there may be a box to comment, but who wants to put in a thing in writing these days? That’s probably not a very effective way of finding out how you’re doing, but that’s what a lot of boards do. 

Joe: One of the things you said on a number of those points was how engaged or how active is the board in certain things like strategic planning, which makes sense to me. Is active and engaged enough for a board to consider itself effective? I mean, just being active in helping create a strategic plan doesn’t seem to rise to the level of, is this a good plan? What have we done to make it better? 

Anthony: Yes, exactly. What are the skills and experiences of the board members that are going to add value when you’re spending time on the strategy? There [00:07:00] are boards today still where the board meeting is a peremptory two-and-a-half to three-hour meeting four or five times a year. We thought maybe those boards all have to change, but not all of them have.

When you look at those boards, you often find that the directors themselves, there’s nobody on the board who actually really knows anything in depth about that business, and so if you’re the CEO, why would you want a longer board meeting? I mean, what value is that going to create for you?

You’ve got to know something about something, I think, in order to be able to be active and engaged. Just getting excited and asking lots of questions may or may not be useful, but asking them because you’ve seen it before or because you’ve had this experience or because you’ve sat on other boards that had the experience is going to give much more weight to what you’re doing.[00:08:00]

Joe: I guess a question, we say in our intro that board of directors can be one of the most valuable assets of any company or organization. Is there, in fact, a link between what we would consider successful companies and effective boards? 

Anthony: I think it’s a tenuous link. I think we’ve all liked to say that the very best companies that are performing really well have fabulous boards, and that’s not always the case. I’ve also worked with companies where I thought the board was absolutely fantastic. It was superbly diverse. It had wonderful skills and experiences. This was in a retail environment and it completely missed the omni-channel change. 

I think it’s very hard to draw a straight line between an effective board and an effective company, [00:09:00] but I think when the board is ineffective, that does start to erode what the company can do, what kind of strategic opportunities it has, the quality of the people it can recruit into senior management. A bad board, I think, can create a lot of havoc inside a company, but a good board doesn’t necessarily make for a good company. 

Joe: Interesting. We sort of know what’s supposed to happen if there’s a relatively effective board and they view the CEO as someone that’s not particularly effective, he or she gets fired and they find a new CEO. What about the situations where there’s a great company, a strong CEO and maybe senior management team, but the board is basically ineffective, and it kind of rides on the coattails and if they look at the stock price and things are great with the market and investors love them, but [00:10:00] it has nothing to do with the board’s performance. It’s really something about what management has done, or maybe what the culture that this particular board inherited. How does that play out? 

Anthony: Boards are often lagging indicators around strategic change. They’re not always leading indicators and we often see companies where the board is quite a way adrift of where the company has evolved to. I’ll give you a very stark example. A few years ago, I was working for an oil field services company that had made a decision that it really wanted to be in the shipbuilding business, and so this was quite a big strategic pivot, and they had started to make that pivot. They have brought people into the management team to help with that. 

But when you look to the board, everyone on the board was an oil-and-gas expert, nobody was a shipbuilding expert and the board was like the last piece of the jigsaw [00:11:00] that was changed. I think companies and boards miss a trick that if they are going to be changing the strategy, if they’re going to be doing some form of transformation in the business, actually changing the board ahead of the change, or at least at the same pace as the change, would give you a much better chance of being successful, because you’ll have people there who can ask the right questions, who can share their experience, who can provide coaching and mentorship to management, who can help inform the other board members. 

But in the absence of that, the board is actually really captive to management because there’s nobody on the board that can successfully challenge management. I think getting boards to recognize much earlier on that they need to change as well and thinking through what that change looks like and executing it, I think would be very, [00:12:00] very helpful to a lot it. 

Joe: That makes a lot of sense. When a company goes through a merger, one of the things that I think we all would agree is that it’s important to look at culture. Are these two companies compatible? Because when they aren’t, it’s highly likely there are going to be problems and it may not work at all, and I would say the Boeing McDonnell-Douglas example is probably a good one. Without necessarily commenting on that particular situation, how do you address that if you were brought in at a time when you could actually do something about a merger of cultures that didn’t look right or might present problems, what would you advise? 

Anthony: I think the question that comes to my mind here is accountability, so how is the board holding management accountable for building the culture. Now, of course, that implies that they’ve had some kind of conversation [00:13:00] about what they want the culture of the one company to be, and I think a lot of boards have only in the last few years started talking about organizational culture as a board issue. Prior to that, it was always a last management’s responsibility. 

But the board is always challenged in the area of culture in the organization because, think about it a bit, part time they come in four to six times a year, maybe a little more often in Europe to have a meeting. Oftentimes they’re meeting in the corporate headquarters or a nice hotel somewhere, and they don’t really see the company. Good companies will spend time doing site visits and try and get directors in front of employees, but it’s a bit like when the queen mother comes to go and visit a town, the whole town would get painted before she arrived and she would think that every town in Britain just look beautiful.

The same thing happens when the board comes to [00:14:00] town, so it’s very hard for boards to get a handle on culture, but they’ve got to try and they’ve got to at least have management talking about it in the boardroom, and they’ve got to understand, well, what are the metrics? How are you going to measure whether or not you’ve created the right culture? How does that feed through into how you’re going to reward management who gets promoted? 

There are a lot of levers that management can pull to impact on the culture. Are they doing that? And what kind of dashboard could be created for the board so they can have some kind of a handle on what’s going on, but we’ve seen culture problems cause issues for lots of companies; banks, oil companies, it is an issue and it isn’t just when there’s a merger. It can be where you’ve got groups of employees that are fundamentally different to each other. how do you treat those employees?

The compensation committee, I think, has increasingly taken [00:15:00] this on for a lot of boards. Many of them are being renamed, as you know, compensation, talent development, compensation and human resources as a way of getting the board to spend more time going much more deeply into what is the talent. How are we attracting, developing, rewarding, retaining the talent that we have. And of course the great resignation has just made that a much bigger issue. It’s very hard now for boards not to be talking about these issues. 

Raza: Anthony, there’s a lot of momentum now behind the ESG conversations. How have you seen boards dealing with that conversation now?

Anthony: Yeah. Look, I think the talking point is there. Boards want to talk about ESG. I think many of them are still questioning how to organize themselves to do that, and they’re starting to ask questions about what kind of expertise do [00:16:00] we need in order to have these conversations. If you take the organization side of it first, the inevitable question we’re asked is, is this a full board issue or should one of our committees deal with this, or should we have a new committee just to do ESG?

I think for each company, the answer will probably be slightly different, but the idea that ESG is not going to impact the entire board and every committee is a mistake. If you think about ESG as it’s supposed to be, it is about the company’s strategy and its risk management, because what you’re really asking is, what are the material risks and opportunities of ESG. Now, whether that’s climate change, whether that’s societal change, whatever the issues are for your company, how is it going to affect our strategy and how are we going to manage the risks? That’s a full board issue. 

At the same time. The idea that you could [00:17:00] just kind of pigeonhole this into non-gov and that somehow the audit committee doesn’t need to be involved when we hear investors saying, if the audit firm doesn’t mention climate risk as one of the critical audit matters in their report, that’s a red flag that the board is not providing proper oversight. If the comp committee is not asking about these KPIs that we’re setting around ESG for management, how are we compensating people? Do we need to change anything? 

Raza: Does that mean that the board itself needs a new set of skills and tools, and what are some of those skills and tools that they should be looking at for overseeing ESG?

Anthony: That is a great question. I think the SEC’s proposed rule on climate related, actually I think, is going to make more intense scrutiny around this in the years ahead. First of all, I think the easy answer is [00:18:00] that boards are going to say, “Oh, we now need a climate expert of some sort. We need an ESG expert on the board.”

My response to that is it didn’t help ExxonMobil defeat Engine Number 1, and interestingly, when you look at that situation from last year, ExxonMobil actually did have a climate scientist on its board. It had one there since I think 2017 and what Engine No. 1 did was put people who had more industry knowledge on the board. There’s a lesson there I think , that’s the first thing. 

I think what boards need to do, first of all, is understand what are the material risks and opportunities for our company, and when they have done that assessment, or management has done that assessment for them, then the next question they need to ask is, “As we look at these issues that we need to provide oversight of now, do we have the skills and experiences on the board to do that? 

If there’s something glaringly [00:19:00] missing, how do we get that skill into the board? But maybe it’s about the whole board upskilling. Maybe it’s about the fact that everyone on the board actually needs to understand what the material risks to the business are, or it may be about bringing in consultants or setting up an advisory board. I think there’s lots of potential answers once you’ve done your homework and you’ve understood what the issues are. 

Raza: I think what you also refer to, I think the SEC regulations/requirements will also drive as a trigger or a mechanism for boards to kind of up their ESG game, and will require disclosures and other things that the boards will need to come up to speed with.

Anthony: Interestingly, they also came out with a proposal a few months earlier around cyber risk and they asked, are we going to need to disclose the expertise of directors around [00:20:00] cyber security? 

I have colleagues at Korn Ferry who then said to me, “Oh, this is a great opportunity to put more chief information/security officers on board and yes it is, but at the same time, do those people add value to all of the work of the board, because I think the last time we had a cyber security focus, maybe five, six years ago, there were CSOs put on boards and there was some buyer’s remorse by non-gov committees that many of those people were not well-rounded enough to be able to contribute to CEO succession, broader strategic issues, other risk issues, and what they found was that if you put people on the board who say it led to digital transformation, but they were a business leader who led a digital transformation, those people often actually had a really good [00:21:00] working knowledge of technology, including cybersecurity, and they can add value across the board, whereas the one-trick expert doesn’t necessarily, you already have to have a financial expert if you’re going to have a cyber security expert and an ESG expert, and given what we just said about having human capital expert on the board.

Michelle Edkins who runs the stewardship team globally at BlackRock has this wonderful saying when she said, “A board made up of one trick ponies is a circus.” 

Joe: Well said.

Raza: Just finishing up on this, the common thread between the cyber things and even ESG is the notion of risk, and I think that’s where it kind of relates to how you tell your ESG story to investors, how can boards be more effective, and because now investors are [00:22:00] demanding and they view it as a risk to the organization. How can boards be more effective in telling their ESG story? 

Anthony: Well, the one thing I would say is, and if you listen to investors carefully, they usually use some formulation where they talk about ESG-related risks and opportunities. I do think the opportunities piece is quite important. We were doing some work for a company in the automotive industry and they provided auto parts and it emerged that actually every single one of these parts was created using businesses that were using exclusively geothermal energy, so they could be claiming that every single auto part produced by this company is produced with clean energy, and I think that would be a very attractive opportunity to the OEMs who are all trying to get us to drive cleaner and [00:23:00] greener cars. But the board didn’t know. I’m actually new. We found out by accident looking in the small print of one of their reports that hadn’t gone in front of the board and we sort of flagged this up, and now of course, it’s something that will get mentioned in the proxy when they talk about ESG. 

I think it comes down to a question of thinking about the balance of risks and opportunities here, but being clear, it is about both, and being really clear what the company is doing, like I think disclosure, the investor point of view, is really about, can you tell us what you’re actually doing?

The problem is, when you write stuff that you’re not doing, greenwashing, because the whole point of the disclosure is that it should be a forcing mechanism that just forces the company to do something because they’ve got to say something. 

Joe: In your bio, it talks about Korn Ferry working with [00:24:00] companies on ESG enablement. What does that mean? 

Anthony: ESG enablement, yeah. Look, we talk very much about how, if you decide that you’re going on an ESG journey, and I think every company is on an ESG journey, somewhere on that journey, some are further ahead than others. I doubt anyone ever arrives because we’re continuously evolving our strategies and our businesses and hopefully they’re growing.

But as you embark on that journey, ESG enablement is really about the people and culture aspects of that. Do you have the right people that you need? Do the people you have understand what their roles and responsibilities are? How are you compensating people, including at the top level, but all the way through the organization? Does the organizational culture support this ESG journey that you’re on?

It’s really a whole series of things that [00:25:00] companies need to do once they’ve identified their ESG strategies, how are we going to execute this, and the answer is always through people and if you do anything with people, it has an impact on your culture, and so how are you going to transform your organization to deliver.

Joe: Let’s talk a little bit about board composition. One of the biggest topics for a while, and rightly so, has been diversity. Talk a little bit about the momentum that’s gained and what is going on with the efforts of both public and private companies to diversify their boards. 

Anthony: Just to go back a little bit, so why is there this focus on diversity? A lot of it actually came via the investors, the investor community. Why did they want boards to become more diverse? What they’re really trying to do I think is to [00:26:00] make sure that boards are cognitively diverse, but that is something that is really hard to do from outside.

You can’t assess whether a board is cognitively diverse from the outside, and by the way, there’s nobody trying to assess whether they’re cognitively diverse on the inside either. What do investors say? They’ve said, “Okay, if we knew that the people on the board who definitely come from different backgrounds and different approaches to life, then we could imagine there might also be cognitive diversity.

If we got more women and people of color and people from different socioeconomic backgrounds and younger people on the board, we could hope that there would be diversity of thought in the boardroom. At the end of the day, those people who argue, “Well, I’m not interested in diversity around gender or people of color. I’m only interested in diversity of thought,” [00:27:00] it’s the same discussion. It is putting women on board, putting people of color on the board because you want more diversity of thought than you could get from 11 white men. 

That’s kind of the background to this. What we’ve seen is boards have made extraordinary efforts to get more women on. We know that there are very few in the large caps now. I think none in the S&P 500, all male boards. As you move down the long tail of public companies, the picture’s not quite so good when you get down to the small caps in terms of people of color, probably a similar picture. 

But there was a huge impetus after George Floyd was murdered and a lot of companies has made public commitments to do more around diversity in the company, as well as on the board.

Our own practice, our board practice over the last couple of years, has been running at about 55% of all the people we put on [00:28:00] boards in the US are women or people of color, I think that’s pretty consistent across all the search firms that that’s what it’s looked like so the new directors are coming on boards are more diversed.

They also tend not to have been on boards before, and I think one of the challenges we’re going to face over the next few years once we start meeting in person again after the pandemic is that we’re going to have, I think, a bit of an inclusion problem in the boards, because a lot of these first-time directors, women and people of color, are not perhaps being heard as much in the boardroom as they would have liked. I think a lot of board chairs probably think they’re doing a good job trying to get everybody’s voices to be heard, but I think that boards have to work quite hard to be inclusive and to make sure everyone feels comfortable in the boardroom.

Joe: [00:29:00] One of the things you said earlier was, interestingly, that boards are a lagging indicator, the last thing to change, whereas my instinct is, it should be the first thing to change. What are boards doing? What should boards be doing in order to be ahead of the curve? 

Anthony: Yeah, I think boards ought to be doing board succession planning. Now, we know that they do in their own reckoning. When you look at these polls, they feel they’re doing a fairly mediocre job of management of succession planning. They’re doing an even worse job when it comes to board succession planning.

But thinking ahead, they ought to be looking at the strategy of the company, thinking about where it’s heading over the next three to five years, and then looking at the skills and experiences that they have today and understanding the gaps. Let’s say 10 years ago, the company might’ve been a purely domestic company. Now it’s made a number of acquisitions globally, and there’s nobody on the ward with [00:30:00] international experience. Nobody has actually lived and work. 

That’s just a small example of digital transformation. The more obvious one on it now, every company is going through a digital transformation, but not every company has got a board with a lot of experience in digital transformation, because if the last time you were an operating executive was 10, 15 years ago, your experience is a lot less useful now than it was then, so taking an inventory of skills and experiences and backgrounds and matching that to the strategy and figuring out what the gaps are, and then not thinking about board searches are one-off, so what’s the next director going to look like? 

But thinking about what next three, four, five directors are going going to look like, and wouldn’t it be great if out of those five, at least two, maybe three were going to be women [00:31:00] that a certain number would be people of color, a certain number of them would be under the age of 56. In that way, if we land on some fantastic former CEO today, happens to be a white male and doesn’t check any of those other boxes, we can still have that person on our board because we know we’ve got four more slots to fill, and we’re going to make sure that in that batch of five people that we’ve got all the skills, experiences, and backgrounds that we want as opposed to trying to load them all on one person.

Because when that happens, you get what we call the sort of purple unicorn factor, which is you asked your search firm or your poor old non-gov chair to do it on their own to go out and find somebody who cannot possibly meet all of those criteria and you can spend a lot of time and meet a lot of people and still not find anybody for [00:32:00] your board and you want to kind of end that paralysis and be able to make swift decisions. 

People have got a lot of choices these days, the idea that boards were the buyer, actually no, boards now have to sell themselves to candidates, particularly good candidates who are women, who are people of color, who are digital natives, because those are the people everyone want on their board, and the real question is, why should they want to come on your board? But a lot of boards have not got to the point yet where they’ve realized it’s not a gift that we’re giving you, come and be on our board, it’s the candidates who are assessing two or three offers at the same time, trying to draw out what’s best for them.

Raza: Anthony, it sounds like that for newer board slots that are opening and getting filled, there is a lot of momentum in the positive direction of having diverse candidates being placed. But we also know that [00:33:00] new slots actually come up rare. I think we heard from one of the last guests that they figured that actually it’s statistically more likely to be hit by a lightning than to be placed on a Fortune 500 board. How can there be a capacity increase? I mean, it also relates to term limits and the culture around that. Boards like each other. How can there be some capacity increase to make room for more skills, more diversity and more modern skills to be as part of the board?

Anthony: Raza, I think you’re probably more likely to be hit by a lightning than asked to leave a board once you’re on it. If we go back to the process that we were talking about, this board succession planning approach, I think part of that actually has to be an honest assessment of who’s on our board now, and somebody who was adding tremendous [00:34:00] value a decade ago may not be the right person for our board today.

I think we’ve all got to be grownups about this, that sometime it’s just our time and we have to be willing to let go, but I think a lot of people’s personal identity is tied up with being a board director, and if this is your last public company board, you’re going to try and hang on to it as long as you can. Otherwise, what are you going to tell people down at the golf club that you do? You’re a board director. 

I think it’s hard for people to let go and it’s very hard for boards to tell people to go. They’ve spent 10, 12, 15 years in this person’s company. It’s probably a man, so they know this person’s wife. They’ve played golf together. I sometimes say collegiality is a mask that covers up a lot of problems underlying in the board, and one of them is the inability to let go and allow people to make a dignified exit [00:35:00] from the board. 

I think dignity is important here. I think there are ways to do it gently. I think there are ways to do it using evidence, having a third party come in and do that assessment for you. It makes it easier because then they can be the bad cop and you can be the good cop. But at the end of the day, we’ve got to be a lot better at asking people to leave and retirement age as a blunt tool, investors don’t like it particularly. 

I was literally talking to a director today and their board retirement age is 72, and I said to him, “If Warren Buffett said, ‘I’m wanting to invest in your company and come and sit on your board,’ you’d change that retirement age tomorrow and get rid of it, wouldn’t you?” Of course, the answer is yes so age has nothing to do with it. I think tenure in many ways is more important.

One of the things I find fascinating, I mean, I have a British accent, and in the UK, in nine years you’re no longer [00:36:00] seen as independent. I’m not trying to make that case, but look at American non-profit boards, almost all the big ones have term limits. You can do three-year terms and you can have three or four three-year terms, and then it’s time to leave the board. But we don’t adopt that idea in public companies, and I sometimes think we should give it more consideration that we do.

In Canada, they’re starting to look at this, and they’re looking at 10 years. If you’ve been on the board 10 years, A, are you losing your independence? And B, are the skills and experiences that brought you to the board still things that we need, and are you as up-to-date as you could be? In all of this, let me just say this to tie a bow on it, I wouldn’t do retirement ages. I wouldn’t do term limits if boards really took [00:37:00] changing directors seriously doing serious board evaluations, including individual director assessment and getting really good at knocking on people’s doors or tapping them on the shoulder when it’s time to go, you wouldn’t need these other things. 

Raza: Yeah.

Joe: Yeah, it makes sense. I would say that your argument about age limit and Warren Buffett works the other way with term limits. Warren Buffett is on your board, you have term limits of 12 years, and now you have to go tell Warren Buffett to leave. You’re right, age is a blunt instrument. Term limits might be slightly better, but the reality is that the only thing that’s really going to work is to have a better board culture around future planning. Like every other strategic plan, here’s what we plan to do in the next three to five years and let everyone in on it and let everyone have a voice in on it, and so no one feels like they’re being singled out. We’re all in [00:38:00] this to make the company better and you can help us do that by helping us plan what our board of the future is going to look like.

Raza: Joe, it all starts with when they’re being recruited onto the board with those expectations, like onboarding is such a crucial element of that, because that’s where that, “Hey, one time on the board, I’m never going to leave things.” It comes from, nobody told him, “Hey, you may have to leave.” But yeah, it’s a great, great topic to consider that as time passes, are we going to see more capacity on US boards coming up so that we can freshen up our collective boards and the state of boards?

Anthony: But also let’s talk about that expectations thing, because I was once having a meeting with a stewardship team of a large investor and they raised that very point. They said, “Look, you’re a search firm. Presumably, you tell the candidates for the board that they are only going to be on the board for[00:39:00] 10 years, whatever the number is,.” and we said, “No, that’s not our job. That’s really to signal that.” But, the fact is, I don’t know any candidate that’s ever had that conversation with a board chair or a non-gov chair that said to them, “Hey, sometime around the 8- to 10-year mark, we might tap you on the shoulder and say, it’s time, and you should expect that it’s going to happen.

It would be so much healthier if we could set that expectation, and think about this, boards are trying to put sort of younger, more digitally savvy people on. You’ve got a board director that are aged let’s say it’s a 52-year-old board director so about 10 years younger than the average age of being appointed to a board, and your retirement age is 72. Are you really telling that director you expect them they’re going to be [00:40:00] on the board for 20 years? It’s absurd, and when you say it like that, it sounds absurd. But have you told that director, “Our retirement age is 72, but somewhere around the 10-year mark, we’re going to come and have a chat and we may keep you on. We may ask you to leave.” 

It would be a lot healthier if we were willing to do that, and by the way, look, we talked about collegiality. I want to give you another C-word that boards should be thinking about and that’s courage. If we had courageous conversations between board chairs and board directors, between non-gov chairs and board directors, this would be so much easier, but collegiality often trumps courage, and I think that’s a big problem for boards. 

Joe: That’s a great way to end it. Collegiality trumps courage. Anthony. It’s been great speaking with you. What a terrific conversation. Thanks for joining us today. 

Anthony: Thank you, [00:41:00] Joe. Thank you, Raza. 

Joe: And thank you all for listening to On Boards with our special guest Anthony Goodman.

Raza: We have a request for our listeners. Please take a moment to rate and review On Boards on the Apple P odcast app if you enjoyed listening to it. It really helps others discover our podcasts. Also, you can visit our website at OnBoardsPodcast.com. That’s OnBoardsPodcast.com. We’d love to hear your comments, suggestions, and feedback.

Joe: Please stay safe, take care of yourselves, your families, and your communities as best you can, and Raza, you and your family, take care as well.

Raza: You too, Joe.

Joe: Thanks. Take care.


39. Gabe Kleinman – The most valuable companies of our time will be the ones solving humanity’s biggest problems

In a very short time – six, seven years – we’ve gone from impact investing being referred to as “invest for less” to “companies responsibly harnessing technology to solve big problems will outperform.” In this episode we discuss how ESG has helped to drive that shift and the impact it is having on investing and board governance.

Thanks for listening!
We love our listeners! Drop us a line or give us guest suggestions here.

Links

Gabe Bio: https://obvious.com/team/gabe-kleinman

Quotes

Ev Williams on why he founded Obvious Ventures: “I want to fund the companies that I wish existed in the world.”

Obvious exists to back purpose-driven founders reimagining trillion dollar sectors. We are a multi-specialty firm investing in the fundamental building blocks of life and society: food, transportation, housing, healthcare, and more, investing in companies that are completely reimagining each of those sectors for the better.

For the first number of years at Obvious Ventures, we did not talk about impact. We actually banned the “I” word because the industry of “impact investing,” as it was originally constructed, was not a returns-focused industry. It was an industry wishing to realize some returns alongside some sort of social or environmental impact. There was a general belief that one would have to sacrifice profits in order to get that impact return, so to speak.

We founded Obvious Ventures on the simple belief that the most valuable companies of our time will be the ones solving humanity’s biggest problems.”
For earlier-stage venture, board observers are common, and I think that’s due to the nature of the stage of the company and what they need to do in order to survive, because for early-stage venture-backed companies the fatality rate is high – they want as much good advice and help as they can get.

A colleague of mine has a saying, “Startups don’t die of starvation. They die of indigestion.” And so helping them figure out what to focus on and how to get there really helps, and from a CEO standpoint, the board is an extension of your team.

Board meeting agenda
So many boards get bogged down in the actual board room with these graphs and data and charts and everyone’s squinting and it’s like going through a boring presentation for 80% of the meeting. We recommend that CEOs really anchor their meetings in OKRs, (known as Objectives and Key Results), walking through a literal scorecard of how we are doing. Red, not going so well, yellow, we’re doing okay, and green, things are going really well.

If you’re spending 80% of your board meeting with presentations, you’re wasting your time. The board meeting is not the time to educate the board. That is the board’s homework. They should come to the meeting, having done their homework and be prepared to do exactly what you just said, address the issues that the CEO and/or whatever, the management team is really grappling with to get the most value out of the people that are in the room.

Boring presentations at a meeting can be a telltale sign. Most early-stage startup and venture-backed boards are hands-on problem-solving boards. The nature of the meeting tells you a lot of what’s going on with early-stage boards.

Objectives and Key Results, and it’s a framework popularized by John Doerr, and before him, Andy Grove at Intel, can be an effective way of running organizations from small to large, and especially an effective dashboarding mechanism for board meetings.

Big Ideas/Thoughts

What is a B Corp
What it means to become a certified B Corp is you have to score above a certain threshold on an assessment that an organization called B Lab has created which assesses what are functionally environmental, social, and governance practices of the company. I think it’s a great tool for any company of any size to take just as a reflective tool to understand your operation and how you’re doing.

Refreshing your board
A company is a different company at a Series B stage or series C stage with $50 million in annualized revenue, then when it had a $100,000 ARR and it was just getting started with three board members. So often it makes sense that a CEO may need a different set of directors with a different kind of experience at a different stage, while still maintaining some continuity and understanding of the roots and the original purpose of the organization.

Impact Investing vs Investing in purpose-driven companies
We believe that the biggest challenges that our world is facing, oftentimes highlighted by activists and social entrepreneurs were, in fact, big market opportunities and that companies solving those problems would realize the greatest returns

If you look at both consumer sentiment as well as companies that are trying to attract the best employees, the best employees want to work at companies that are having some sort of an impact, and the easiest way for us to measure that impact is through revenue generated and services rendered. It’s that simple.

For example, if you look at Proterra, every time they sell an electric bus, they’re taking a diesel bus off the road. Every time Diamond Foundry sells an engagement ring or creates a semiconductor wafer chip that is lab grown, it’s hopefully taking a diamond mine, which is carbon-intensive with horrible labor practices, out of business.

It’s everywhere now, and everybody is waking up to the reality of these problems that we have to solve. It’s important to note that we need the public sector. There’s no question about that. Without a healthy public sector, none of these can be solved, and same with social activists who often highlight these areas for us, but we need the private sector to be a driver of innovation and delivering those solutions through the market. We are believers in capitalism. We think we need to change the definition and the practices of capitalism, but that’s kind of happening on its own. Everyone is waking up to these new realities and the role of the private sector in helping solve them.

Beyond Meat as a great example of the shift. There were plenty of plant-based options before Beyond Meat, Morningstar Burgers and Quorn, and they were all in the novelty food section of the supermarket. The epic shift that Beyond Meat pioneered was you don’t have to be a vegetarian to love a plant-based product. We are not creating something that is for vegetarians only …we are competing with Angus, and we are going to take them on. One of the big defining moves that Ethan Brown pioneered at Beyond Meat was getting Beyond Meat placed in the meat case alongside Angus options so that everyday people could choose these things. What it really boiled down to was creating a super product that competed with the “original,” and you see this playing out across a host of industries, not just in plant-based protein. Tesla makes the safest, fastest car – which also happens to be the best for the reducing carbon. Nest makes the most beautiful, money-saving thermostat ¬– which also happens to be best for efficient energy use. And so on.

Episode Transcript

Joe: [00:00:00] Hello, and welcome to On Boards, a deep dive at what drives business success. Hi, I’m Joe Ayoub, and here with 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 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 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: Our guest today is Gabe Kleinman. Gabe is head of Portfolio Services and Marketing at Obvious Ventures, a venture capital fund that invests in purpose-driven companies, [00:01:00] re-imagining trillion-dollar sectors. He was previously at Medium where he led people operations, product marketing, and partnerships.
Raza: Prior to Medium, Gabe co-led the design for learning practice at IDEO, helping organizations in private, public and social sectors tackle large-scale challenges in education. Gabe begun his career at Creative Artists Agency (CAA) working across CAA marketing, the CAA Foundation and strategic agency initiatives for over a decade.
Joe: Gabe recently co-founded and serves on the board of US Megafire Response, an organization dedicated to ending the megafire crisis in the United States. He also serves on the advisory board of Marketplace from American Public Media.
Welcome, Gabe, it’s great to have you with [00:02:00] us today on On Boards.
Gabe: Thanks for hosting.
Joe: Let’s start at the beginning. What path led you to working with Obvious Ventures?
Gabe: Well, this is really not a linear path. It’s much more of a zigzagging, squiggly line.
I began my career as a paralegal at a big Wall Street firm, and that led me to the decision not to pursue law school and a career as a lawyer.
Joe: Bravo.
Gabe: Thank you very much. No offense. My father was an Assistant Attorney General and my grandfather was a judge, so I hold no grudge against the legal industry.
Joe: Well, Gabe, let me tell you, my father was also an Assistant Attorney General and I was a practicing lawyer for over 30 years. I take no offense. I give you great credit because where you are now seems like a really great place to be.
Gabe: All right, thank you.
After I left, I ended up leaving New York, moving to Los [00:03:00] Angeles and worked for Creative Artists Agency, which was at the time the largest talent agency in Hollywood, and I worked in the marketing division working with big corporate clients, helping them build big entertainment-based and media-driven marketing programs; music tours, integrations into television shows and things like that. Pretty quickly I wanted to move into the foundation, helping those companies, but also big talents and athletes, help them figure out how to spend their time, money, and influence to make the world a better place, so I had some corporate experience, but also a good deal of work with talent on the nonprofit side.
Then eventually I moved into a role that was much more of an operating role with the talent development program at CAA, the agent training program, which I would highly suggest your listeners research. It used to be a bit of a glorified [00:04:00] hazing program. There’s a book called the Mailroom, which is a fascinating look at how talent agents and movie executives rose the ranks within Hollywood.
I was there for a while, 10 years, spent a couple of years building a sports marketing business out of London, and then moved over to IDEO when my wife and I moved back from Europe and the jump at the time was led by my desire to have a larger impact in the world. IDEO really is the temple of design. It was the firm that designed the first Apple mouse, amongst many other devices and systems that we use every day, and the company at the time was moving into much bigger design challenges, applying design to businesses, to scaling education programs and more so it was really inspiring and we got to work with some amazing clients.
In that process I met Ev and Sarah Williams, and Ev Williams who was the co-founder of Twitter [00:05:00] and they tasked IDEO with trying to improve San Francisco Unified School District’s school food program and taking a design-led approach from the food that was served to the experience, to the backend financial and operational model to make it more solvent, and in that process, I also learned about Medium and what was being built at Medium, which was Ev’s follow-up act to Twitter.
I was always a writer and loved writing, and it was just a brilliant platform to help people share their ideas, ideas of greater import on the internet, and so I went to work for Ev just as the company was coming out of closed beta, and I was there for two and a half years at a number of operational roles; people ops, and you mentioned it at the beginning, Raza, as is typical in any startup on an executive team, you oftentimes bounce between many, many roles. That was also my first experience with venture [00:06:00] investors and my first experience in a venture-backed boardroom.
It really opened my eyes to the ways that companies work and really how difficult it is to build a business from scratch, and so after two and a half years and two children, was a little bit fried, and in that process while I was at Medium, I got to meet James Joaquin and Vishal Vasishth who were Ev’s co-founders in Obvious Ventures.
Ev was continuing to be CEO of Medium, but he co-founded this venture firm at the same time, and the more I learned about the Vishal and James and their worldview and what they wanted to do with this venture capital firm, a different type of venture investing in a different kind of company, ones that were solving big problems, one that looked at their purpose as a competitive advantage, that’s when I got excited about Obvious Ventures and decided to jump in.[00:07:00]
Joe: You shared a quote from Ev Williams about what attracted you to Obvious, and the quote was, “I want to build the companies that I wish existed in the world.” That sounds like a pretty lofty goal. What made you think they could do that?
Gabe: That’s an excellent question. Part of it had to do with their professional track records. Vishal, as an example, Vishal had worked at Patagonia for 10 years. He left as chief strategy officer. Their revenue went through the roof during that period, and they were using business as a powerful tool to really improve the world, and that was just with clothing and apparel and outdoor gear, and so this philosophy applied to huge sectors of the economy and companies looking to transform those sectors for the better, I thought there was extraordinary power in that, and their their early investments we’re [00:08:00] proving that out.
What if instead of mining diamonds, we grew them in a lab, in a plasma reactor, and they were carbon free, not just carbon neutral. What if we were funding electric vehicle startups that were completely transforming mass transit and heavy duty vehicles to electrify them all so that we didn’t have to rely gas-powered vehicles that were emitting extraordinary amounts of carbon. Like all these “what if” questions apply to these major industries that just got me on the edge of my seat.
Joe: Let’s talk a little bit about Obvious and its fund, just an overview, which fund, where are you, how much under management and a little bit more about the categories in which…
Gabe: I think it’s helpful to anchor this part with what our purpose is. Obvious exists to back purpose-driven founders [00:09:00] re-imagining trillion dollar sectors. It’s pretty straightforward. We are early stage investors. We lead the first priced round and often take a board seat or a board observer seat in that process. We have four funds under management, over a billion dollars of AUM and over a hundred companies funded and, as you know, many venture capital firms are either highly specialized or they are generalists, and we sit in between. We are a multi-specialty firm and we’re investing in basically the fundamental building blocks of life and society, so food, transportation, housing, healthcare, and then we are looking at investing in companies that are completely re-imagining each of those sectors for the better. How do we electrify every single combustion engine on the planet? How do we make our food system plant forward? How do we back [00:10:00] and build a healthcare system that is driven more by values and outcomes than by fee for service?
Joe: It sounds fantastic.
One other thing about Obvious Ventures beside everything you’ve already said, which makes it very different from almost any venture firm that I’m aware of, is that it’s also a B Corp. I think most people will know what that means, but tell us a little bit about what it means and why Obvious Ventures decided to be a B Corp.
Gabe: The short story on why, and then I’ll tell you what it means, is that the short story on why we became a B Corp is that one of our limited partners asked that we require all of our companies to take the assessment required to becoming a B Corp, not to become B Corps themselves, but just to take that assessment.
As the gentleman in charge of portfolio services, my job is to help our companies and not pile on more work for them, and so I said, “Okay, hold on, let’s pump the brakes. I want us to [00:11:00] take this ourselves to understand what’s the work that goes into it and to determine its value.”
I took the B impact assessment, and Jack Rothacher, who’s our CFO, he came on board and we did a lot of it together. It was really an exercise in empathy, more than anything, which is why we started it. But as we completed it, we realized that our score was high enough to qualify to become a B Corp certified and we decided to just flip the switch and make it happen.
What it means is, it means to become a certified B Corp, you have to score above a certain threshold on this assessment that this organization called B Lab has created assessing what are functionally environmental, social, and governance practices of the company.
I think it’s a great tool for any company of any size to take just as a reflective tool to understand your operation and how you’re doing. But as far as B Corps is go in venture, there aren’t that many. We were the first or one of the [00:12:00] first. There’s another venture firm called Better Ventures in Oakland that they are also a B Corp, but not so many.
Joe: Yeah,
Raza: Venture Capital has the word “capital” in it and they’re not usually associated with ESG, although I think as Joe and many of our guests have pointed out, ESG is now part of the fabric. If you’re not looking at it, working through stakeholder capitalism, you’re probably behind.
Gabe: I think that is definitely true for growth equity and it is moving upstream pretty quickly toward earlier-stage venture.
Joe: But beyond venture and PE-backed companies the entire world of business, whether you’re a private or public company, is not checking the box. It is now, as Raza I think very appropriately said, part of the fabric of what companies need to think about, because it is increasingly viewed as a risk.
If you’re not looking at it, [00:13:00] you’re taking risks with people’s money that maybe makes you less attractive in ways that we’re so focused on before, but we will get to that. I’m going to let Raza take you on a little discussion about governance at Obvious Ventures first though.
Raza: Gabe, you did mention that as Obvious Venture invests in companies, you guys take board seats and board observer seats. Talk a little bit about that. Do you do that for every investment as a condition of investment, or it depends and then maybe in some ways I’ve heard that for venture capital firms, the number of boards collectively that partners can be on is kind of the rate-limiting factor of how many companies the venture fund can invest in.
Gabe: Yeah. When we do lead the first priced round, more often than not, we will take a board seat or a board observer seat, and that often changes throughout the life cycle of a company as it matures and grows and raises additional capital. It’s [00:14:00] always in concert and discussion with the founder and the board about what makes most sense for the company. Oftentimes as the companies do scale, we will roll off our official seat into an observer seat, or just roll off entirely. We’ll maintain information rights, obviously, and we’ll be there for the founder always, but we are critical at the earliest stages from a board perspective.
When it comes to limiting factor, yeah, you nailed it. There are some venture firms that hire partners just as board partners. Their only job is to sit on boards to help expand the capacity of the firm. For us, we don’t have that. Our managing directors and one or two of our venture partners are deeply involved in as many boards as they can handle and not more than that.
Raza: What is that number, like a range, for, per partner or per venture partner? Are they on four to seven boards at a time or [00:15:00] more or less?
Gabe: I think it’s more like five to eight, not to split hairs, but once you get up towards eight or nine, it becomes a little bit less untenable.
Our managing directors and our investment team, they love meeting with new companies and love to be inspired by that, but also that’s the venture capital business.
Raza: Yeah, it is that business where on the one hand you want to find a new investment and it takes a lot of time. And on the other hand, as we know every single one of those is kind of a full-time job of its own and really venture capitalists add that value by being board members.
Gabe, you also mentioned the concept of board observer. Now, I want to point out that maybe in public companies, it’s not as popular, and maybe in certain other private boards, not as common. But what would you say have you observed in terms of venture-backed and PE-backed boards? Is the practice of having board observer fairly common?
Gabe: For [00:16:00] earlier-stage venture, board observers are very common, and I think that’s simply due to the nature of the stage of the company and what they need to do in order to survive, because early-stage venture-backed companies, as you likely know, the fatality rate is very high and so they want as much advice and help as they can get.
As an investor, you want to provide as much as you can give, and so from a governance standpoint for a Series C or A-stage company, it doesn’t make sense necessarily to have more than three board members on the official board, but you want more than three people in the room talking about the most strategic matters for the company, and so that’s why it makes sense to have board observers involved for earlier-stage venture-backed.
Raza: Just to point out to our [00:17:00] listeners, the board observer does not have the vote of a board member. And at least in the startup boards, we say that the board observer earns the right to speak over time. For example, board meetings are not scheduled beholden to the board observer’s schedule, just as an example, but I think you aptly put it that you’re getting all this free labor with experienced folks that know about your industry, your area, your customers, and can help you, the entrepreneur, with strategy, so board observers are actually a really great resource in the board for startups to have.
Joe: Well, one of the things you said, Gabe, when we talked last week, was that the right to vote is not as important as this stage as business and operational strategy, and that’s where board observers can still be very impactful. As companies mature, that changes obviously, but I think it’s really a great observation that the actual voting is not so critical. [00:18:00] It’s really getting the best input you can from the people that know your company.
Gabe: Yes, don’t get me wrong, voting matters, especially for critical or contentious matters that do require the vote. However, on the whole, you’re going to want the right people around the table to help with exactly what you just outlined, how do we build the business and scale it, how do we find the best people, how do we choose what to do, what not to do.
A colleague of mine has a saying, “Startups don’t die of starvation. They die of indigestion.” And so helping them figure out what to focus on and how to get there really helps, and I will say from a CEO standpoint, the board is an extension of your team. They’re just a very special team and how you manage that team and how you manage that time in that room matters critically.
So many boards get bogged down in the actual board room [00:19:00] with these graphs and data and charts and everyone’s squinting and it’s like going through a boring presentation for 80% of the meeting and instead we recommend that CEOs really anchor their meetings in an OKR, in Objectives and Key Results, with like a literal scorecard of how are we doing. Red, not going so well, yellow, we’re doing okay, and green, things are going really well. To the extent that you can as a CEO, and I’m assuming there are some CEOs listening, you want to give all the data and the reading to your board members in advance and give them notice and hold them accountable too. You’re managing them, and so if your board comes unprepared to a meeting, then you can say, “I’m sorry, we can’t talk about this. You needed to read that. I want to talk about the three most pressing issues that are facing our company and I want to [00:20:00] use this group around the table to give me ideas and direction for how I move forward.”
Raza: Gabe, very well put. We’ve seen that for early-stage boards. Boring presentations is a very telltale sign. Most early stage in startup and venture-backed boards are hands-on problem-solving boards, as I call them. The meeting tells you a lot of what’s going on with that company.
Joe: But before you go on, I want to say, Gabe, what you just said is not just applicable to venture-backed and PE-backed boards. What you said is applicable to all boards.
When I work with companies and their company boards, I tell them exactly what you just said. If you’re spending 80% of your meeting with presentations, you’re wasting your time. The board meeting is not the time to educate the board. That is the board’s homework. They should come to the meeting, having done their homework and be prepared to do exactly what you just said, [00:21:00] address the issues that the CEO and/or whatever, the management team is really grappling with to get the most value out of the people that are in the room. You couldn’t have said it better. Thank you. That’s great.
Raza: And for reference to OKR, Gabe, that you mentioned for our listeners, that’s Objectives and Key Results, and it’s a framework popularized by John Doerr, and before him, Andy Grove at Intel, and it’s a very, very effective way of running organizations from small to large and a very effective dashboarding mechanism for board meetings.
Gabe, I want to move on to a little bit on the evolution of how the board grows. You mentioned initially it might start from a three-man board. What is the typical composition of that board, and then how does that grow over time as more investment comes in? And we can talk about kind of how off-boarding happens in venture- and PE-backed boards.
Gabe: The typical three-person board is not going to [00:22:00] involve independent directors. It’s going to be the CEO and then likely two investments. There are definitely variations on a theme with that, but that’s a typical construct, and obviously, a mix of common and preferred. As it grows, I will admit, I’m not an expert at inflection points or when to grow a board and what those look like, but I do know that with a number of our companies and especially our CEOs, a number of them when we do give up a board seat, they do request that we stay on as an observer because they like that continuity and also, if they value the input from the investor, they’ll want to keep him around.
Raza: Yeah. We’ve seen it go from three to most typically five, and the five has the very typical composition of what we call two-two-and-one board, two preferred, two common and one independent selected by both or nominated and agreed by [00:23:00] both, preferred and common, and then that may evolve to seven, but oftentimes I think that’s where new investor coming in want to replace the preferred board seats and, as you were mentioning, either they become a board observer or get rolled off the board. And Joe, often we mention that offboarding is hard, one of the hardest thing that most boards are, but I think in the venture and early stage world, it’s actually fairly common, fairly accepted, and it happens fairly regularly.
Gabe: It makes sense, the company is a different company at a Series B stage or series C stage with 50 million in annualized revenue, then when it had a 100,000 ARR and it was just getting started with three board members, so it makes sense that you want a different set of directors with a different kind of experience at [00:24:00] a different stage, well, still maintaining some continuity and understanding of the roots and the original purpose of the organization if you can.
Joe: I would say that also applies to boards that are not venture and PE backed because companies change all the time. Someone sitting on the board for 10 years, well, 10 years ago that company needed certain skills and experience and attributes. It probably needs something else now. The difference is that in the venture and PE world, people are very focused on those needs and once it gets outside of that, it becomes more difficult, but I think it’s the same issue. Companies are changing all the time and need to look at their boards and change the boards to reflect the initiatives and the needs of the company.
Raza: Gabe, another thing in that evolution off boards for venture-backed companies that is worth kind of talking a little bit about is, even though all board members are [00:25:00] fiduciary to the company and shareholders, yet some board members are representing Series A investors and other board members are representing Series B investors, and it turns out that the Series B investors fund is that you’re in a pretend and really needs to close, and there is an acquisition opportunity for the company, and now the Series A investor has very different incentives than the Series B investors. Have you seen that play out in boardroom drama or ways where there is tension between various stakeholder, and of course, common has a different view where the founder is either do want to sell at that exit opportunity and how does Obvious Venture and your board members kind of deal with those situations?
Gabe: Yes, we have seen that. I think any venture investor would see that type of activity happen at some point, and this happened recently, which we talked [00:26:00] about a little bit last week, but ultimately we really want to be aligned with the founder, and if the founder is still in the CEO seat and we want to ensure that we are doing what is our fiduciary responsibility, yes, with respect to investors and if that’s able to align with really what the founder wants to do, then we’re going to back the founder.
There was a company of ours that recently exited, and we thought there was extraordinary growth ahead as an independent company, like incredible growth ahead. The founder really wanted to sell because he wanted the outcome, but also as he articulated it, he felt like he would be able to move his company and its mission forward even better by working underneath and with the acquiring company, to be able to leverage their assets and their resources [00:27:00] in addition to the team that they had built, and so we supported the founder. That’s how we roll.
Raza: I think starting from maybe even Peter Thiel’s Founders Fund and others before him, we know that these companies are led, built and really made successful by the founders. And if they’re not in it at any point, you can’t really force it any other way. They got to build that.
Gabe: Yeah, because that’s ultimately a fiduciary consideration. We see tremendous growth ahead. No, you cannot sell, we’ll vote against it, and then all of a sudden you have a CEO who’s not so happy and maybe even disincentivizes some of the other team members, so you got to make sure to take the long view on all of this.
Joe: Gabe, you referred to Obvious Ventures as investor in purpose-driven businesses. A lot of people know the term “impact investing,” and I noticed you did not describe it that way. Share [00:28:00] with us if you will, what the difference is or what the connotations of impact investing at least used to be.
Gabe: Yes. For the first number of years at Obvious, we did not talk about impact. We actually banned the “I” word as we refer to it. Because the industry of impact investing, as it was originally constructed, was not a returns-focused industry. It was an industry, and many of the early players would talk about, wishing to realize some returns alongside some sort of social or environmental impact. There was this general belief that you would have to sacrifice profits in order to get that impact return, so to speak.
Over the years we believe that has changed. For Obvious, we never set out to become an impact investing firm. We believe when the firm was founded in [00:29:00] 2014 that the purpose of a company and the impact that it would drive were a competitive advantage. We believe that the biggest challenges that our world was facing, oftentimes that were highlighted by activists and social entrepreneurs were, in fact, the biggest market opportunities available and that company solving those problems would realize the greatest returns.
If you look at both consumer sentiment as well as companies that are trying to attract the best employees, best employees want to work at companies that are having some sort of an impact, and the easiest way for us to measure that impact is through revenue generated and services rendered. Like that’s it.
If you look at Proterra Electric Bus Company, every time they sell an electric bus, they’re taking a diesel bus off the road. Every time Diamond Foundry sells an engagement ring or creates a semiconductor wafer chip that [00:30:00] is lab grown, it’s hopefully taking a diamond mine, which is a filthy and horrible labor business, out of business.
You see these one-to-one corollaries between the positive impact driven by a business and its revenue in ways that I think previously it was people kind of tiptoed around, but now it’s exciting to see more and more people and investors waking up to this reality.
Joe: There’s a quote on your website that says, “We founded at Obvious Ventures on a simple belief that the most valuable companies of our time will be the one solving humanity’s biggest problems.”
Great quote. Kind of does summarize it. What I’d ask is, what drove the change over six, seven years from “invest for less” which is how some people have described impact investing, to we can make money and save the world. How did that happen?[00:31:00]
Gabe: Well, I wish I could say it was from people becoming more enlightened, but I think it’s really from a lot of clear and present dangers that used to feel far off that we would read about in newspapers and in magazines that people began feeling at a visceral level. If you look at our social unrest and you look at real environmental catastrophe being driven by human-caused climate change, we’re all now feeling this at a visceral level in ways that we hadn’t previously. If you look just at the past six to eight years, I mean, especially look at something like this mega fire crisis, I’m not going to go off on the organization that I created, but the largest fires in the history of the nation have all happened in the past eight years.
A mega fire is defined as a fire that’s over a hundred thousand acres. You’re now seeing the effects of this play out in New York and [00:32:00] Boston. I was in the Berkshires in Western Massachusetts last summer and I was smelling fire smoke that was coming from Washington State.
It’s everywhere now, and everybody is waking up to the reality of these problems that we have to solve and that we can do so with a combination of, yes, definitely, we need the public sector. There’s no question about that. Without a healthy public sector, none of these can be solved, and same with social activists who often highlight these areas for us, but we need the private sector to be a driver of innovation and delivering those solutions through the market. We are believers in capitalism. We think we need to change the definition and the practices of capitalism, but that’s kind of happening on its own. Everyone is waking up to these new realities and the role of the private sector in helping solve them.
Joe: Why do you think it is true that these companies that are changing the world [00:33:00] that are addressing humanity’s biggest problems, now many people believe can be the most profitable companies? What changed to introduce the fact that they could be the most profitable and therefore attract investors? Because none of this works without the money you’re raising.
Gabe: Well, I would look at something like Beyond Meat as a great example of this. There were plenty of plant-based options before Beyond Meat, Morningstar Burgers and Corn, and they were all in the novelty food aisle, the novelty food section of the supermarket the epic shifts that Beyond Meat pioneered was you don’t have to be a vegetarian to love a plant-based product and we are not creating something that is for vegetarians only and going to be in the novelty food section, we are competing with Angus [00:34:00] and we are going to take them on, and one of the big defining moves that Ethan Brown pioneered at Beyond Meat was getting Beyond Meat placed in the meat case alongside Angus options so that everyday people could choose these things. What it really boiled down to was creating a super product that competed with the “original,” and you see this playing out across a host of industries, not just in something like plant-based protein, but. Elon Musk never says with his product, “You’re saving the world by driving a Tesla.” No, nowhere in Tesla’s go-to-market strategy was anything other than “we’re going to create the best car. It’s the most beautiful, it’s the fastest, and it’s the safest.”
That’s what it is. These products are now competing on par with their dated dirty originals, [00:35:00] and they’re winning. I mean, look at the market cap of Beyond Meat compared to kind of like big food companies that have optimized for shelf stability and an ingredient stack that you need a PhD to understand what’s in it.
It’s the same thing with Tesla compared to some of the older automotive manufacturers, and many of them are now waking up and you’ve seen this shift to the point where in the Super Bowl, every ad from an automaker was from an electric vehicle with the exception of, I think it was Nissan and Toyota, and all people were talking about after the Super Bowl was, “Whoa, Nissan and Toyota way out of step. Why are they gas-powered cars?”
Joe: Great observation. It’s so true. Gabe, that was a perfect example and it really does highlight how, as you said, you can be a capitalist and still want to save the world, and that is a [00:36:00] powerful combination.
It’s been great speaking with you today. Really, thanks so much for joining us.
Gabe: Thanks for hosting. It was really a pleasure.
Joe: And thank you all for listening to On Boards with our special guest Gabe Kleinman.
Raza: We have a request for our listeners. Please take a moment to rate and review On Boards on Apple Podcast app. If you enjoyed listening to it. It really helps others discover our podcast. Also, you can visit our website at onboardspodcast.com. That’s onboardspodcast.com. And we’d love to hear your comments, suggestion, and feedback.
Joe: Please stay safe and take care of yourselves, your families and your communities as best you can. Raza, you take care too.
Raza: You too, Joe.
Joe: Thanks.

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