4. Board Diversity, private company boards & the impact of social media: a conversation with Beth Boland

Beth Boland is a force to be reckoned with.  Named one of Massachusetts “most influential lawyers,” Beth was first initiated into the world of shareholder defense working as a clerk for a district judge on the Mike Milken and Ivan Boesky cases. Now chair of Securities Enforcement & Litigation Practice at Foley & Lardner LLP, she also serves as President of the New England chapter of the National Association of Corporate Directors (NACD). 

An expert on how boards operate, she champions the expansion of diversity on boards and has worked tirelessly to bring gender diversity to the boardroom.

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“I think folks [in private companies] are really growing away from the idea of thinking of their board as a potential nuisance that they have to deal with, and [thinking of it] as one that is really a strategic asset.” [12:10]

“I guarantee you that there are some rock star women and aspiring directors of color who will knock your socks off.” [19:05]

“Take care of your people, who will take care of your product, which will take care of your shareholders.” [27:40]

Big Ideas 

The increasing interest of private companies to run their boards more similarly to their publicly held counterparts. [09:50]

Board diversity. [14:53]

Shareholders are insisting that companies recognize and address a much broader range of stakeholders to benefit their shareholder’s long-term interests. (22.16]

The growing trend, and recent Delaware court decisions, to hold boards accountable for the interests of stakeholders beyond only shareholders. [22:38]


Beth Boland’s Website

Beth Boland on LinkedIn

B Corps

Business Roundtable

NACD New England


Joe: [00:00:00] Hello and welcome to On Boards: A Deep Look at Driving Business Success. Hi, my name is Joe Ayoub and I’m here with my cohost Raza Shaikh. Hey Raza. 

Raza: [00:00:11] Hi Joe, happy to be here with you co-hosting. 

Joe: [00:00:13] Good to be with you. On Boards is about boards of directors and advisors and all aspects of board governance. Twice a month in 30 minutes this is the place to learn about one of the most critically important aspects of any company or organization: its board of directors or advisors. 

Raza: [00:00:33] Joe and I speak with a wide range of guests and we talk about what makes a board great, what makes a board unsuccessful, how to be a good board member, and more importantly, how to make your board one of the most valuable assets for your company.

Joe: [00:00:51] Our guest today is a highly regarded securities attorney who represents clients in shareholder suits, SEC and Attorney General investigations and consumer class actions. 

Raza: [00:01:03] She serves as the securities enforcement and litigation practice chair at the law firm of Foley and Lardner, and also serves as the President of New England chapter of NACD, the National Association of Corporate Directors.

Joe: [00:01:20] We’re very excited to have Beth Boland as our guest today. Welcome, Beth. 

Beth: [00:01:25] It’s great to be here. 

Joe: [00:01:26] It’s great to have you as our guest On Boards. 

So your background as an attorney is really interesting. Can you tell us a little bit about  what you did that led you to focus on shareholder defense work?

Beth: [00:01:40] Sure, sure. I, after coming out of law school, I was so fortunate to get the best clerkship in the world, which was clerking for a very famous judge for the Southern District of New York in Manhattan. And, the docket that he had on some of the key cases were the Michael Milken and Ivan Boesky insider trading cases, I was clerk on those and got started there, really got hooked.

Coincidentally, I just got off the phone right before I came over here to the studios with a New York Times reporter who called me up to comment on a certain board situation and it turned out that he wrote the book that I read when I was a clerk. called Den of Thieves on Michael Milken and Ivan Boesky and so it was such a small, you know, small world sort of thing. 

We also sat by designation on the court of appeals for the DC circuit, and Ruth Bader Ginsburg was one of the judges who was on that panel for that week. So I was able to work with her very closely on developing, drafting opinions that she then issued and what a great experience. I thought she was awesome then I continued to think so.

Joe: [00:02:54] She is awesome. What a great start to a legal career. How do you top that? 

Raza: [00:02:59] Beth, how did, your work as an attorney then lead you to become involved with the NACD?

Beth: [00:03:05] Well, you know, after representing boards of directors and advising them and defending them for however many decades, it was a natural evolution to be asked to go on the NACD board. And from there, I got very interested in the work that NACD was doing. And at one point when the prior president was stepping down, I got the phone call to say, Beth, we have thought about it and have nominated you to be our next president, so I stepped right up. 

Joe: [00:03:35] How long had you been at the board when that happened? 

Beth: [00:03:37] Oh, about eight years or so. 

Joe: [00:03:39] . And it was Bob Popeo who proceeded you, is that right? 

Beth: [00:03:41] He did. 

Joe: [00:03:42] How long did he serve as president? 

Beth: [00:03:44] I think it was four years and this is now my fourth year, going into my fourth year as president, I will be handing over the reigns to Cathy Minehan, the former president of the Boston Fed, in a couple of months.

Joe: [00:03:57] What a fabulous succession. Did you do succession planning in advance or did this work out? 

Beth: [00:04:03] Absolutely. I did succession planning.

About a year ago, I sat down with Cathy and said, what do you think? And then we planned it out. 

Joe: [00:04:10] Yeah. Good for you. I mean, it’s the best practice. It’s good to hear that it’s going on at the NACD. 

Beth: [00:04:15] Right? We try to practice what we preach. 

Joe: [00:04:17] How big is the board? 

Beth: [00:04:19] The board is about 20 to 25 people, depending on any given point in time. 

Joe: [00:04:24] Do you have term limits on the board? 

Beth: [00:04:26] We do. We do. Again, we practice what we preach. 

Joe: [00:04:28] Excellent. 

Beth: [00:04:29] We do three, three year term limits, so up to nine years on the board. 

Joe: [00:04:35] Great. you know, following Bob Popeo is, you know, big shoes to fill. When you took over, what issues or initiatives did you want to focus on?

Beth: [00:04:44] Well, Bob had really led the organization into a transformational change and really upped our game tremendously. And so what I saw my mission to do was to fill in the infrastructure so that we could continue that in a sustainable way, both in terms of drawing more on all of our board resources for the tremendous programming that we have, as well as establishing the committees to really think longterm about our programming, about our finances, about our marketing and so on.

So really building it out as kind of a business. 

Joe: [00:05:21] Does New England chapter kind of act on its own? Is it following the lead from other, other regions? How does that work? 

Beth: [00:05:28] Yeah. the National Association of Corporate Directors has 22 chapters around the country.

Each chapter is really quite independent in terms of their programming, their structure, their board, and so on. We are all independent 501 (c) 3s)   and we do look to our sister chapters as to, you know, the type of programming that they do. But we really have full freedom to do our own and kind of forge our own path.

Joe: [00:05:55] So what are the things that have happened since you’ve been President that you’re the most excited about? Most proud of? 

Beth: [00:06:00] Oh, a couple of things. First of all, our Director of the Year dinner rocks! Okay. May 4th, 2020 Westin Waterfront Hotel – be there.  

Joe: [00:06:12] I want to say this, it’s on my calendar.

Beth: [00:06:14] Fantastic. Fantastic. We have a tremendous roster of honorees that are really truly the, director visionaries, sittiing on multiple boards and who really have led transformational change on their boards and done so with grace and dignity. So,  we expect a very full crowd. We typically have the governor, the attorney general, the speaker, the mayor, coming out to it.

And, we’ll expect to have a similar roster this year. 

Joe: [00:06:43] My first one was last year. I thought it was fantastic. How did it come about? 

Beth: [00:06:47] Well, I’ll tell you, approximately 12 years ago, maybe we’re in our 13th year,  a former president by the name of Ed Pendergast had the wonderful idea to institute this dinner and to really honor some of the key people, you know, directors who’ve really shown extraordinary leadership.

And from there it just grew. It just. Kind of rocketed, especially as Bob Popeo took over. And then, now in the last four years, what I’m most proud of is how we have diversified, not only our board, but also our honorees. So you see really a diverse slate of folks and, we continue to sell out.

Joe: [00:07:26] Yeah. No, it was a full house last year. I do remember.  What are the other things that you are really happy about? 

Beth: [00:07:31] Also our programming is, I mean, you guys have been to some of the programs and, the level of speakers that we have, whether it is, you know, the CEO of GE when they came into town, or folks like Cathy Minehan, or Eric Rosengren, we had a great program where Cathy and, Eric led that on current economic forecast, we are planning to have Admiral Jim Stavridis, who used to be the allied commander of NATO, who is going to talk with us right around the November elections. and that’s going to be incredible. 

Raza: [00:08:08] And Beth, I can personally testify, a few years ago, I went through the aspiring directors bootcamp at NACD and I thought, it was a compact, morning till night,  dense and a wonderful program. 

Beth: [00:08:20] Right, right. We  pack your brain from eight o’clock in the morning till five o’clock at night, and then I think, y’all might’ve been at our, program kickoff our  fall program kickoff last year.

We had four  really, articulate and thoughtful CEOs on the stage. the head of John Hancock, the head of State Street Bank, head  (of) Boston Scientific and the CEO of IDG as well. I couldn’t be prouder of our programming. 

Joe: [00:08:48] Yeah, no, it’s been fantastic. And it’s really been, it seems like it has more momentum than ever.

Beth: [00:08:53] Yes, it does. 

Joe: [00:08:54] So one of the things I’ve been really interested about is that in the past the NACD, really focused on public companies, and there’s been an increasing focus on private companies, which I think is really great. How did that begin to happen? 

Beth: [00:09:07] Well, I’ll tell you,  we were actually approached by, there is another organization that deals really almost exclusively with private company boards and they were trying to kind of lift off in New England and they approached us and said, can we join forces?

And we said, sure. You know, this is really an important issue for our members. As you know, more and more public companies are now going private. And second of all, those that are private are becoming increasingly focused on adopting good governance practices. So we saw the opportunity there and, then,  when they came to us,  the light bulb immediately went off and hence that series was born.

It’s been very successful. 

Joe: [00:09:49] . But I have observed that private companies are increasingly viewing their boards, in a professional way   and doing the things that public companies do to make sure they have the right mix of skills and  expertise and attributes.

Why is that happening? 

Beth: [00:10:07] Well, you see it in a couple of different ways. Number one is the corporate governance law and liability issues are equally applicable to private companies as they are to public companies. A lot of people don’t realize that, and so private company boards are ones that are recognizing that they too can have liability if they don’t do the right thing.

So there’s kind of the risk side, but also, especially as those private company boards are either planning to go public or want to position themselves to attract more board talent, they are upping their game as well. So it’s not just purely a defensive issue. It is also to move the organization, the,  company forward.

Joe: [00:10:56] Yeah. So, I mean, are private companies recognizing how valuable a board can be?

Beth: [00:11:02] I think that’s true. I think that is definitely true.

 It used to be, in many respects, especially on the private company side,  venture capitalists and so on would populate it, but now we’re really moving to more a model that you have a number of independent board members that are joining those boards and providing that strategic value to the company and to the CEO.

 Raza: [00:11:26] I think for the private companies, one of the reasons also might be that companies are choosing to stay private longer. There has been a little bit of a drought in the IPO market, for example, in recent years that only recently unfroze a little bit. 

Also, it does seem that the capital formation and venture formation starts as private companies so there are a lot more of those  and I think that’s what I’ve observed as well, that even at the startup board level, which is private company boards,  there has been a lot more, recognition of the importance of a good board, and further as they grow to professionalize that board.

Beth: [00:12:09] Right. . I think folks are really growing away from the idea of thinking of their board as a potential nuisance that they have to deal with as one that really is a strategic asset. 

Joe: [00:12:20] Yeah. I’m seeing it though in the family owned businesses. Not just the venture and private equity funded companies.  Family businesses in the past, I think often did look at boards as a nuisance or maybe were concerned that they would somehow lose control, even though that’s not true and really failed to see how valuable it can be.

I mean, you know, for doing well, why do we need outsiders here?  There’s a great article by Cindi Bigelow, who’s the chairman of the board of Bigelow tea.

She wrote an article about, going to her parents and saying, I’m thinking of having a board for our company and their reaction, like a lot of family owned businesses was “why do we need that?” And she wrote a great article about 10 years later, she looked back and thought, this is the best thing I’ve done for my company.

So , if people like that, or obviously people like you, people that have been talking about governance and the importance of governance has maybe, I don’t know, seeped into the private sector. Is that, is that possible? 

Beth: [00:13:23] Well, I think so.  What you see is as more and more of these stories of board liability and boards that have been asleep get into the news, there’s a lot more recognition about, Oh, they’re, but for the grace of God could go, we.

And I do want to recognize A.D. Makepeace who is our private company honoree for the director of the year awards. Their story is really an extraordinary one. Going back to the idea of family owned businesses, they have been family owned. They’re now on fourth, maybe fifth generation cranberry growers originally  on the Cape, and they brought in about 20 years or so ago an independent CEO, a non-family CEO, and now he has just stepped down and they’re on their second non-family CEO and have been just a true success story of making that transition from wholly family owned and controlled to that mixture of family versus independent. management. 

Joe: [00:14:30] Yeah. You know, I think you’re right. Stories like that. I, I know that story. I’ve heard that. but stories like that are probably in part, responsible for families looking at their companies and realizing outside expertise can be helpful. 

Beth: [00:14:45] Right .

Raza: [00:14:45] It seems like that the board of directors for private companies is the growing market for boards. 

Beth: [00:14:51] It is, it is. It definitely is. There’s two real growth stories in terms of board expansion or  that market for directors.

Number one is the private company boards, because there are far fewer public company boards nowadays, whether it’s through a public boards that have gone private or private companies that are, you know, professionalizing their board and really looking to those outside directors.

But also in the wake of California adopting the board diversity requirement, you see a lot more boards that are even expanding by a seat or so in order to meet those diversity requirements. 

Raza: [00:15:36] Beth, actually, that’s what we wanted to touch a more on. So, NACD and many other wonderful organizations have been doing work for gender and other diversity on boards.

Can you talk about  the progress that has been made and what has been accomplished? 

Beth: [00:15:52] Well, I would like to say that we’ve made a lot more progress. We meaning, you know, writ large around the country that we would have made more progress than we have now,  which is why you see statutes like in California, that used to be, “we would like you to be more diverse” to “thou shalt be more diverse” and other states around the country following suit and saying the pace of progress is not fast enough and we need to now mandate, or at least threaten mandating that sort of diversification. And you see that kind of dovetail as well with the “me too” movement, much more emphasis, especially now when you have “me too” issues within a corporation.

And if you don’t have some diversity around the board, then number one, is that board going to have enough independence to be able to address those issues? And second of all, what are the symbols? What are the takeaways that people who look at the board, either from outside or within the company, say that they’re really taking this seriously. 

Joe: [00:17:03] It’s always been true that diversity on a board makes it a better board. So it’s discouraging that it’s taken this much to get only where we are. 

As far as I know, I think we talked about this before, California is still the only state that’s actually adopted a statute that that addresses gender diversity.

Beth: [00:17:20] That’s correct. But there are a number of other States, including Massachusetts, that are considering it. 

Raza: [00:17:25] And Beth I saw the  article in the Boston Globe last month, that the state’s largest companies, have finally added  women on their boards. So, the so called zero zero list.   Talk about that and how, further initiatives are being taken by NACD and other organizations, to continue to make progress on that.

Beth: [00:17:45] Well, great credit needs to be given to the Boston Club for measuring that progress or lack thereof  Every year they come out with a very, time-intensive study on the 100 largest companies by revenue. And what is their diversity on their board, or at least gender diversity on their board and in their senior management.

And as you mentioned, Raza, they have a term for those that have zero women in senior management and zero women on their board called the zero zeros.  Yes, there was quite a bit of, fanfare about the very last company in Massachusetts that was a zero zero.  Shirley Leung and the Boston globe highlighted that and then they most recently added a woman to their board. 

Joe: [00:18:34] , Zero zero does not sound like a list that anyone wants to be on!

Beth: [00:18:37] It’s not a list that anybody wants to be on. 

Joe: [00:18:40] You have to call attention to it to put pressure on those who are making the decision to actually take action.

Beth: [00:18:48] Yeah. And what we’re seeing, I’ll tell you, I mean. People talk about it, but I will tell you it is true.  When you hear, whether it’s senior management or the board chair say, well, we’ve looked, but we just haven’t found that pipeline. It means they haven’t looked hard enough because I guarantee you that there are some rock star women and aspiring directors of color who will knock your socks off.

But they just weren’t in the circles that they were looking at either them, you know, the board directly or their search firm. But there are a number of different groups, that I’ve been involved with above and beyond the Boston Club that are working very, very hard to bridge that gap.  I think in the past year we’ve been far more successful, but the, the resumes that come across our desks are just like incredible.

Joe: [00:19:41] So, you know, it’s really a matter of making it a priority. I was just involved in building a new board for a bank. The board is larger than a lot of other bank boards. It’s 11 people, and we have four women on the board.  I mean, you look at this board and it is such a strong board  because the CEO of the bank really wanted to make it diverse. That was a goal from the start. 

So when people say, “Oh, we can’t find women candidates who will fit in on our board”- I agree with you, I think a lot of times it just because they’re not looking.

Beth: [00:20:18] Right, right. And now we’re seeing, that there are some boards that instruct their search firm to say, come back only with a diverse slate, whether gender diverse or ethnically diverse.

And only if we don’t find the candidates that we really need for this board, then we will move beyond that. 

Raza: [00:20:41] Beth, you call it the “last mile” problem as in, bringing it to the last mile. What are the steps for organizations from NACD to the Boston Club  to help with that last mile?

Beth: [00:20:52] The Last Mile – that is the moniker that, some of us have chosen. 

There is a small group of, women who have come together, many of us, Boston Club members, and so on. Who have said, we need to shake things up a little bit differently.  We’ve been at the static rate far too long, look at the Boston Club numbers and what is it? What’s that missing link. Okay. 

And we call it the last mile because as a reference or illusion to the telecom industry and, , hooking up or the utility industry hooking up that very last mile is the most expensive and time intensive. And so what we have done is basically take the Boston club’s list and go through and say, okay, who knows the  CEO of this organization of this company, or the chair of the board, or the head of the nom gov committee, or whatever it may be.

And we sit down with them and say,  what are the obstacles that you were finding? And if it’s a question of candidates, we can help you with that. And people that we personally vet and know and know your board and know this candidate so that we can say that this candidate will fit, 

Joe: [00:22:00] You know, it’s classic grassroots campaign organization.

That’s what it is. So it’s an informal group?

Beth: [00:22:06] Yes,  we really just kind of come together and, you know, said, what can we do to change this? We’re all frustrated and need to do something.

Joe: [00:22:16] That is fantastic. 

So . I’d like to talk a little bit about the changing landscape of board responsibility.

You said in a recent article that “shareholders are insisting that companies recognize and address a much broader range of stakeholders to benefit their shareholder’s longterm interests.”  

Can you talk a little bit about what’s going on with that?

Beth: [00:22:37] Sure you see two different but related trends that are coalescing now.

On the one hand, you have the Delaware courts, whether it’s a publicly traded company or a privately traded company, saying very clearly in their decisions: you as a board member can no longer just sit back and passively accept, whatever the landscape is for your company and whatever management may tell you about that.

You need to affirmatively be asking the right questions. Nobody ever votes to say. “Oh, we’re going to have a sexually hostile work environment” or we are going to evade emission standards or impose new bank accounts on our customers who don’t want them. 

Nobody ever votes for that  but what directors have a duty to do is to ensure that the compliance infrastructure there meets the risks that that particular company  faces and that there are metrics that they’re asking the right questions. 

In the past, in the “bad old days”  it used to be that the courts would say, you know, unless basically you’re moribund, then , there’s no liability. But that’s all changing. 

In the last six months, there been two decisions that came out from the Delaware courts that said we will no longer just allow you to be passive as you were in the past. And you know, not have liability. You need to be active. You need to know what the risks are and ask management the right questions. Are we addressing those risks? So on the one hand that’s going on with the courts, 

On the other hand, what you see are like the business round table talking about we need to look at a lot more constituencies  then just our shareholders. Shareholders, of course, are the owners of our company, but they’re not the sole stakeholder that we need to pay attention to as we make those decisions. 

So you see both of those, trends coming together, and that makes boards take a look around and say: we need to up our game.

Joe: [00:24:53] So who are the other stakeholders that companies are really starting to focus on? 

Beth: [00:24:57] You look at the Business Roundtable in a statement, and they identify its vendors, its employees. It’s the community in which they’re located or when in which they operate their business. So, there are, there’s supply chain  folks, you know, third party vendors down the chain. 

So there is a whole host of tentacles that a business, a company’s business operations touches and that they need to think about because otherwise it’s not sustainable. 

Joe: [00:25:27] Putting aside what the law is saying, why is it just really good business for boards to do that?

Beth: [00:25:35] Yeah. Well, the boards need to, it’s good business because otherwise they’ll have some supply chain issues. You know, they’re using the lowest cost vendor out of Bangladesh to do their manufacturing, but unless they’re paying attention to them. You know, those vendors could be exploiting their workforce.

And then it does two things. They can’t keep their employees and they get a lot of bad press.  Reputational risk is an issue that boards are becoming far more sensitized to. 

Joe: [00:26:10] Do you think social media has raised the stakes , on reputational risk? 

Beth: [00:26:14] Oh, like astronomically astronomically.

The court of public opinion is a far more jealous court and a demanding court then, the, judicial decisions that you might get six months or 12 months down the line. 

Joe: [00:26:31] So I, what I got from your article a, one of the things I got from your article was that the court is actually kind of catching up to the trend rather than leading the trend.

Beth: [00:26:40] I would say that that’s true. . One thing that, that if you look around the country, there are a lot of state that adopted statutes in like the late 1980s, early 1990s that require companies that say to the board, either thou shalt or thou should or may  consider the interests of those other stakeholders.

And then it kind of went dormant for a little bit. But then again, it ramped back up in the last 10 years or so and a number of additional states have adopted those, what we call multi-constituency or multi-stakeholder statutes. And, then you see the BRT, the business round table statement being a seismic shift, recognizing that, and the courts then following behind, but both of those together.

Beth: [00:26:40] I would say that that’s true. . One thing that, that if you look around the country, there are a lot of state that adopted statutes in like the late 1980s, early 1990s that require companies that say to the board, either thou shalt or thou should or may  consider the interests of those other stakeholders.

And then it kind of went dormant for a little bit. But then again, it ramped back up in the last 10 years or so and a number of additional states have adopted those, what we call multi-constituency or multi-stakeholder statutes. And, then you see the BRT, the business round table statement being a seismic shift, recognizing that, and the courts then following behind, but both of those together.

Joe: [00:27:34] Powerful combination. 

Raza: [00:27:36] I think in terms of value creation, I see it as they say that, take care of your people who will take care of your product, who will take care of your shareholders. So I think it’s, it’s that chain of  values protection that brings the other constituents ,in addition to the stakeholders, in the picture for businesses to run. 

Beth: [00:27:57] And on that point as well, think about the, the power of employees now. , Everybody always talks about all our talent is our greatest asset, and so on. But , it is now amplified so much because those employees feel empowered in a way that they never did before.

Whether it is staging a walkout, because we just gave a severance package of $80 million to somebody who, you know, we think was a serial harasser or whether in  the case of Wayfair. So interesting that, you know, there was a person in there, do you know, who did their procurement, some, you know, fell in procurement who got a request from, Homeland Security to supply goods and so on, to detention centers, immigration detention centers.

In the past one, couldn’t even. Imagine that, first of all, that word of that would have seeped around enough within the company, but second of all, that they would have organized a walkout.

Joe: [00:29:00] Right.  That’s one way to make an impact. That’s for sure. 

Raza: [00:29:03] Beth, on the, startup and new company creation side, we’ve seen a rise, or I’ve seen a rise of the trend where  companies are incorporating as benefits. Corporations are B Corp’s of explicitly stating that there, is a mission oriented and a profit oriented venture. And you know, that, continues to be, another trend where, companies want to do, the mission as well as the, profits. 

Beth: [00:29:31] And on that, on that score, I thought it was brilliant. 

. About two days after the business round table came out with their statement, and I remember I was reading the wall street journal hard copy. I see a full page ad from the BRT.

I nearly fell off my chair when I was reading it, and then two days later in the New York times, there was a full page ad of a number of different CEOs of B Corp’s that said. Come join our club. Wow. And I said, that’s brilliant. That was very smart. 

Joe: [00:30:03] So what is the advantage of the B Corp? What is the motivation  for referring to yourself as a B Corp?

Beth: [00:30:09] Well, I think, and you know, it imposes a lot more responsibility on the company and there’s like certifications that you have to go through and they’re quite rigorous. In order to continue to be a B Corp, but the advantage obviously is,  as more and more employees and customers and clients become mission-driven, it signals to the market very clearly we are a mission driven organization. We are going to practice what we preach and we are going to put our good name behind it and our incorporation behind that. 

Joe: [00:30:44] You know,  when you do that, it means that people can hold your feet to the fire. 

Beth: [00:30:47] Exactly, exactly.

Raza: [00:30:49] A nother trend or possibility that I’ve seen is something called the longterm stock exchange. And the idea is floated by, Eric Reis of the lean startup fame, to say that, I think somebody mentioned that now your typical shareholder is.

You’re a shareholder for only like 10 seconds or something like that because of algorithmic and high frequency trading. And that just misaligns the incentives. Your shareholders are not really your shareholders. they’re just gaining from the volatility and movements. and there, there’s these, initiatives where they are trying to align, things towards the longterm and to align it with the stakeholders and shareholders.

Have you seen anything about that? 

Beth: [00:31:34] Well, I think another venue in which you see that are the increasing number of companies that are adopting proxy access, you know, for their directors, nominations for their directors on their proxies. And those are limited solely to those shareholders who have to, you know, hold a certain amount of stock.

It can’t just be one chair. but they have to have had it for a certain longevity. Okay. And so you see more benefits being offered to longterm shareholders that are not available to short term traders. 

Joe: [00:32:12] Has anyone challenged that?

Beth: [00:32:14] Oh yeah. on the proxy axis, what happened was the SEC came out with regulation, a number, maybe it was four or five years ago, saying that we are going to mandate proxy access for shareholders who, are above a certain level and have held for a certain amount of time that went to the courts and that was invalidated.

And so now there’s a whole movement of shareholders who are asking that companies, I wouldn’t say voluntarily adopted, but put it on our ballots so that the shareholders can vote for it, or they’re just adopting it on their own. So, so even though that particular regulation is not on the books now, you see more and more companies simply adopting it on their own.

Joe: [00:33:04] I could see how it really would add to the long-term value of a company because if you’re owning a share for 10 seconds or less, I mean, you’re not really an owner. It’s just a, it’s a,

Beth: [00:33:16] …different relationship to the company. 

Joe: [00:33:18] You have a completely yeah, you have a completely different relationship. You don’t care about the long-term growth. 

Raza: [00:33:24] To me it sounds like almost a society’s going to soul search and , ultimately come to the conclusion that the only way to assure. shareholder value is by looking at other things as well.

Beth: [00:33:40] That’s Right.

Raza: [00:33:41] In the longterm. So,  hopefully that trickle backs to, legal jurisprudence, cases, other things that happen that will make it a regular part of the business landscape.

Beth: [00:33:53] I think the, the question that  the lawyers, at least are grappling with is in the wake of the Business Roundtable revised statement of purpose. How is that going to actually impact when you decide to sell the company, when you have one of those strategic transformations? 

Are the Delaware courts going to stick in the future with shareholder is king. The only duty you have is for maximization of shareholder value and you know for that transaction, or will there be some companies that said, you know what, we’re going to take a, perhaps a lower price. But with a different company, a suitor that we think really is going to be a better fit for our employees.

And that really is the driver for us. And how much of that, outside of immediate shareholder impact, are the Delaware courts going to allow in the future in the wake of that statement? 

Joe: [00:34:53] Maybe it just leads to a broader view of what it means to maximize shareholder value. 

Beth: [00:35:00] Yes, 


Joe: [00:35:01] It’s not as narrow as maybe right now the Delaware courts are saying.

Beth: [00:35:05] Right  the price right now, but rather that longterm, especially in a merger where shareholders, they just change stock in one company for the new company and so they, continue to have that interest in the company and shouldn’t they be wanting that there is that longer term view of, you know, it’s not just the money that we’re getting today for our shares.

It is that longterm, return that we get on our shares. 

Joe: [00:35:33] Exactly.

Beth, it’s been great speaking with you. Thanks for joining us today. 

Beth: [00:35:37] I am delighted to have been here. Thanks so much for having this podcast. It really is a great service. 


Joe: [00:35:44] And thank you all for listening to On Boards with our guest, Beth Boland. Take care Raza 

Raza: [00:35:50] You too, Joe