Was anyone else as appalled as I am by the contents of Connie Loizos’ recent article, Coming out of COVID, investors lose their taste for board meetings? The stories and quotes in the article about investors reducing their interest and participation in board meetings, not showing up, sending the junior associate to cover, etc. are eye-opening and alarming.
The reasons cited are logical, such as overextended investors, Zoom fatigue and newbie directors. Connie’s note that “privately, VCs admit they don’t add a lot of value to boards” is pretty funny to read as a CEO who has heard a ton of investors talk about how much value they add to boards (although the good ones do add a lot of value!).
For the most part, everything about the substance of this article just made me angry.
Disengaged or dysfunctional boards aren’t just bad for CEOs and LPs; they’re bad for everyone. If the world has truly become a place where the board meeting is nothing more than a distraction for CEOs and investors think it’s a tax they can’t afford, then it’s time to hit the reset button on boards and board meetings.
Here are four things that need to happen in this reset:
Investors need to do their job well or stop doing it
Disengaged or dysfunctional boards aren’t just bad for CEOs and LPs; they’re bad for everyone.
The argument that investors did too many deals in the pandemic so now they don’t have any time is a particularly silly one, since the pandemic reduced the amount of time VCs needed to spend on individual board meetings as well. I used to have four in-person board meetings each year with directors who were traveling for the meetings, having dinners, spending time with the team and sitting in on committee meetings.
Today, boards are lucky to have one in-person meeting a year (more on that later). And as everything else takes less time, and there’s little transit, any given VC should have doubled the time they spend on board meetings.
Serving on a board post-investment is central to an investor’s role. They have obligations to the founders they back and to the LPs they represent, as their primary function is to “find deals, execute deals and manage the portfolio.”
If they no longer have time for the third job, they need to admit that to both founders and LPs before stepping down. If a VC can’t be bothered to focus on minding their investments and adding value, they should work with the company to find their replacement.
CEOs need to take their job as leader of the board seriously
Would a good CEO just throw their hands up if they found management team meetings boring or a waste of time? No. They’d fix the structure of the team or meetings. If not, they shouldn’t be the CEO.
It’s no different with boards. Whether the CEO is the board chair, they lead their organization. So, one of the few “must do” items in their job description is leading their board. The board is part of the CEO’s team, just like the management.
CEOs get to call the meetings, run them and insist on attendance. Their obligation is to make it easy and meaningful for everyone so the board can drive the company’s success. As my longtime independent director Scott Weiss used to tell me, boards consume whatever you put in front of them: Garbage in, garbage out. CEOs should pay careful attention to board materials, meeting etiquette and everything in between.
If the CEO doesn’t know how to do that, they should find a mentor, observe some well-run boards in action or read “Startup Boards: A Field Guide to Building and Leading an Effective Board of Directors,” a book I co-wrote with VCs Brad Feld and Mahendra Ramsinghani.
Here’s one tip for making board prep more efficient: Optimize your operating system and board book formats so you do one set of reporting for the company and management team that is 95% reusable without any changes.
The format for board meetings needs to evolve
Board meetings need to evolve in our world of hybrid work, just as office work needs to evolve. The format that works for in-person meetings can’t just be used on Zoom indefinitely.
Here’s how I’m steering my board:
I insist on one or two “old school” meetings per year, meaning in-person attendance of at least half a day is required, including a meal and even an activity. If I’m only going to see my directors together infrequently, I make it mandatory. But I’ll also make it worthwhile and fun.
Remote meetings that happen between in-person meetings are becoming shorter and tighter. I still send out a lot of reading material before the meeting, but I make sure to keep the focus on a fixed number of major topics to keep our discussion engaging.
We need a new set of expectations around Zoom meeting etiquette for long meetings. It’s OK to ask people to close their email, browser and Slack before the meeting starts. If a meeting is more than two hours long, a 15-minute break in the middle is important. Use breakout rooms to mix up topic discussions and working sessions.
I am trying a new meeting format to maximize director conversation and team development. I start every meeting with a director-only session for half an hour that’s not exactly an executive session but is more fun and social. It usually includes a non-work discussion topic, as if we were sitting around the dinner table having a cocktail. That gets the conversational juices flowing.
Then when my team and observers join the meeting, I ask those people to turn their video off, and I ask directors to adjust their Zoom setting to “hide participants not on video” to keep the number of Zoom squares to a minimum. Any time a team member or observer wants to engage in a particular topic, they turn their video on. Then we follow the meeting with an executive session and a closed session, and a single-director debrief of the closed session with me.
That is a lot of moving pieces to manage, but I find that doing so keeps the meeting fresh and well paced.
Finally, I’m following Fred Wilson’s advice and running a very short survey post-meeting to ask directors basic questions so they can summarize their thinking: What are we doing well? What do we need more work on? Did the meeting meet your expectations?
Companies need to follow the Rule of 1s
The secret to engaged and diverse boards is to mix up their membership more than most companies do. Our Board Benchmark study at Bolster indicates that the vast majority of private company boards have no independent directors at all. They only have founders and investors, and every year, the vast majority of the “open independent seats” specified in those companies’ charters go unfilled.
It’s hard work hiring a new independent board member, and it rarely rises to the top of the CEO’s priority list. But the more independent a board is, and the more diverse it is in every way (in terms of demographics as well as experience and background), the more robust the conversations around the table become, and the more valuable the board is to the CEO.
My Rule of 1s for building highly effective boards is simple:
- Add independent directors to your board on Day 1.
- Try to limit your board to 1 founder/team member.
- Then, for every 1 investor on your board:
- Add 1 independent director.
A great board is one of a company’s greatest assets. A weak board can kill a company. A mediocre board is just a waste of time. There’s no question that running an effective board, or serving as an effective director, takes serious time, energy and diligence. But that’s no reason not to try.