Intro to Lindsay Jordan and Robyn Bew – experts who know what an effective board looks like and how to contribute to them
Pat Collins and Marcus Schafer (00:07)
Are you a business leader trying to think about how to improve your operations and the effectiveness of your business? Are you maybe somebody that is trying to give back to your community, either through serving as a board member on a nonprofit or a business? This episode, hopefully, is for you. This is going to be episode 18 of Greenstream, where life meets logic and investing. So what we’re going to be talking about is we have two amazing guests.
from EY here to give their personal opinions after working with boards. They have decades of experience. They’re amazing. Lindsay Jordan, Robyn Bew, the conversation was super, super awesome. It felt like we were at a conference and we had to pay to watch them. And what they were just talking about is here’s all the things that matter to boards. If you’re an individual trying to think about joining the board, here’s what you should be considering. So the conversation was awesome. They’re bringing
tons of experience you could just tell from the stories that they were sharing. ⁓ And just an amazing, amazing episode. found it particularly interesting maybe from a personal perspective because I’ve served on boards, I have served on boards in the past and Green Spring itself, Green Spring Advisors is governed by a board. So these topics were really, really interesting to me. ⁓ There’s a few takeaways I had that, you know, not to spoil everything that’s in the episode.
But I thought they had some really great insights on governance and what that means in a board setting and how it works with management teams and boards. I thought there were some great ideas around serving on a board. We have a lot of our clients, a lot of our listeners. Over time, we hear people say that that’s a goal of theirs is to serve on a board, make an impact, be able to lend insights on all the things they’ve learned over time. And so these are people that are in the trenches that are
interviewing people to become board directors, ⁓ and they’re guiding people on how to do this. They talked about resume building. So that was really interesting. And then the final thing was some of these hot topics that are literally boards of private and public companies are talking about every single day. So cyber and AI and some of these things that are kind of cutting edge and how boards are dealing with them. So I just thought there was some, some great topics. was a very meaty conversation. felt like so.
Yeah, it was a great time. Yeah. And there was also this great conversation around public boards. And one of my big takeaways was as an investor in a lot of different public companies, it was very reassuring to me to know that there’s all these protections in place for me as an investor. And we’re holding management accountable across all these different companies and we’re making sure that they’re making decisions in the best interest of all the shareholders. I thought just some of the examples they were talking about.
super relevant. I come from an asset manager. When they were saying, think institutional investors really care about this, I was just sitting there like, yeah, we do. We talk about it all the time. ⁓ That was just absolutely fantastic. To your point, Pat, a lot of our conversations here are just things that you and I are super, super interested in. I guess I just asked the audience to let us know if you like it. Send us an email or use the like buttons or type in a review, whatever.
format works best for you. Hopefully this was a nice reprieve from the statistics heavy, bias-y heavy episodes that we just did and was super, super fun. that would be my ask. Yeah, I’ll just leave it at this. There were several times in the podcast that they talked about the resources that EY has made available for boards and very graciously have made these things public.
And so we’re going to put them in the show notes. So whatever platform you’re listening to, scroll down. There’s going to be links to all sorts of resources, whether you are looking to serve on a board, whether you want to create a board or revamp your board if you’re at a company, or whether you just want to learn about boards, is some fantastic resources. So without further ado, we look forward to hearing your comments. Let’s get into it. All right.
The Purpose of a Board – advisory and accountability for enhanced value creation
Robyn, welcome. I want to lead us off with maybe one of the, maybe the most foundational question was what’s the purpose of a board and why do companies even have them?
Robyn Bew (04:33)
Yeah, it’s a great place to start, Pat. So I’d even back up one step further than that and say, hey, what’s the purpose of corporate governance as a whole? And if you really think about what it is, you know, we talk about it as corporate governance is really the practices, the rules, yes, rules, processes, policies that direct how companies are run and managed. And the board is one component of that.
but it’s not the only component. So if you think about management level governance, why do companies have legal departments or office of the general counsel, internal audit? So that’s all part of governance as well. In terms of where the board comes into play, it’s really around advisory on one hand, so advising on the strategy of the firm, on the direction of the firm, but also oversight. they’re there to, and we’ll…
we’ll get into this more in the conversation, really hold management accountable. So making sure that decision making is transparent, ⁓ making sure that there is ethical behavior. both the board level governance and management level governance, when you kind of combine it all together, the outcome is or should be enhanced value creation. And maybe ⁓
Quick analogy here, if you or any of your listeners are ⁓ F1 watchers, maybe you got into it with Drive to Survive, and you think about what goes into an F1 car and all of the incredible complexity, and it’s also very much a team. There’s one driver, but it’s a whole team behind that driver, but there’s also an incredible amount of data and controls and safety.
of a cliched analogy is F1 cars have really, really, really good brakes because they go really, really, really fast. So when you think about good governance, it can be there to really help the company go fast and innovate and create value, but in the right way.
Pat Collins and Marcus Schafer (06:42)
Yeah, that’s super, super helpful. I would love just to maybe dig a little bit deeper into what some of those specific duties of the board are. And maybe, Lindsey, this is a good question for you. But if we could just talk about those duties and those responsibilities and peel that back just a little bit more.
Duties and Responsibilities of the Board – evaluating management performance, approving major initiatives, and ensuring compliance with legal/ethical standards
Lindsay Jordan(06:57)
Yeah, happy to. And I love that analogy, Robin, of an F1 car. think what you think about some of the things that folks in governance talk about is you don’t need governance until you need it. And then when you need it, it’s the most important thing possible. know, foundationally, the board’s mandate, as Robin outlined, is one of oversight and strategic guidance. Obviously, they’re responsible for ensuring that the organization adheres to its mission while navigating risks and opportunities effectively.
Obviously they’re responsible for evaluating the performance of management, discussing and approving major initiatives, and ensuring compliance with legal and ethical standards. I think that’s the most critical link, if you will, that culture of ethics and integrity, ⁓ making sure that they’re fostering kind of a culture of trust and accountability, not only amongst themselves, ⁓ obviously.
their own ethical standards, but also amongst the board members and obviously ensuring that’s happening within management protocols and so forth, but ensuring they can communicate effectively to their stakeholders, right, as a kind shareholder primacy mandate. When you think about trust and accountability, I think one of the board’s mandates is around managing conflicts of interest. Conflicts of interest occurs, it’s a part of the natural business cycle. It’s around
being that last sanity check of ensuring the processes around evaluating potential conflicts, things like related party transactions, that there’s a formalized process that management is establishing to approve and potentially disclose conflicts of interest or related party transactions. I think about ⁓ fiduciary duties in general, duties of care, loyalty.
and good faith, duty to monitor. Those are all foundational elements of what makes a good director a good effective board. Without those standards, right, there’s a risk of kind of a governance free for all. And ensuring that ⁓ those are really top of mind of directors is really critical.
Roles and Committees on the Board – the difference between a director and a manager
Pat Collins and Marcus Schafer (09:04)
Yeah. It’s so encompassing of all the different jobs of a board, but there’s only so many hours that they’re called on to do it. So how do you structure a board? What are the different roles? Like how do you do all of that in a very few number of meetings a year? Yeah.
Robyn Bew (09:21)
can kick off and then Lindsay, feel free to chime in. You know, it’s an interesting observation, Marissa, when you talk about, you know, how much there is to do. ⁓ One piece of that, maybe, at least when you’re thinking about the public company side of things, ⁓ and we’ll talk a little bit about publicly traded company boards versus boards of privately held companies. ⁓ When public traded boards, as Lindsay was saying, there really is ⁓ a definition of independence
⁓ of board members that ⁓ is pretty critical. so independent directors are not in the day-to-day of management. Typically for a public company, the only member of the board who’s also an executive is the CEO. And so what that means is ⁓ they’re not spending all the time that the CEO and the management team are, you know, the day-to-day business. That also means they’re removed from the day-to-day pressures as well, which is good. And they can sort of provide, as Lindsay was talking about that,
that advisory, that guidance role, kind of be the constructive challenge, be the red team if there’s a red team that’s needed to help the CEO and the management team. Hey, let’s kind of turn this problem on its head and maybe think about it a little differently with that sort of outside perspective. But in terms of how they get it done, again, on the public company side, boards usually are structured around, so you’ve got the full board and then you’ve got a lot of work that gets done ⁓ in committees of the board.
So most public companies will have three key, they’re required to have three key committees. So all public company boards in the US are required to have an audit committee, a compensation committee, and a nominating and governance committee. And all of those, I mean, we could spend the whole podcast talking about any one of those. We’ve shared some resources that are in the notes to this podcast that go into some of those things ⁓ in a little more detail. But basically the board in concert with
⁓ the corporate secretary and his or her office of the corporate secretary puts together a calendar and agendas for all of those meetings across the year so that folks know, you know, here’s how much time we’re spending on the different responsibilities to make sure that everything gets covered. Because ⁓ again, especially in the public company context, boards have some very specific responsibilities that they are required by the SEC and by the listing exchanges, New York Stock Exchange or NASDAQ to carry out.
⁓ And so they have to make sure that everything gets covered across the year, as well as leave time for, you know, the stuff that goes bump in the night or the things that maybe were a little bit unexpected. ⁓ Like, you know, a lot of companies and boards probably in the early part of 2020 may not necessarily have had global pandemic on their risk heat map. Or if they did, they might not have thought, and this is going to be a global pandemic that also
completely shuts off global travel everywhere for an indefinite amount of time. So when things like that happen, then there’s gonna be, know, there’s the scheduled meetings that are kind of like the floor, but the ceiling is as high as the ceiling might get to be.
Lindsay Jordan(12:35)
Yeah, now I like the same thing. The analogy on the red team is great. I think also particularly for newer boards, private organizations, is you’ll find there’s a conflation between newer directors first time in the seat, ⁓ not really understanding their role as a director, whether they’re independent or not. So whether they come and they potentially sit as…
a C-suite executive at a kind of industry competitor, or if they’re, you know, as Robin mentioned, if they’re the CEO, oftentimes, depending upon the organization, you may see a CFO sit on the board as well. Again, it just really depends. There is a dynamic and making sure when you’re in the board meeting, when you’re putting your director hat on, you have your management hat off, right? They are fundamentally separate roles, separate
areas of remit and require kind of separate approaches. Obviously, there’s a fair amount of ⁓ illustrated examples in the market where combined CEO chairs do really well. JPMorgan is a great example. And then there’s a fair amount of examples where a combined CEO chair doesn’t do well. And this is why it’s an area where institutional investors are not super happy about it. And so
Again, know, board governance, we could talk about, you know, the different archetypes and structures for forever and individual roles and committee structures for forever. I think there’s really no one size fits all. And I think fundamentally, the most important aspect is really making sure if you’re in the director seat that you know what you’re there for and how you’re supposed to operate.
Who Does the Board Report to? – all investors and incentive structures to align with the goal of increasing total shareholder value
Pat Collins and Marcus Schafer (14:22)
Lindsay, you mentioned CEO, chairman roles, and I think traditionally the CEO tends to report to the board. If that’s the case, does the board report to anybody? Is there any oversight to the board? And if so, what is that or how does that work in traditional companies, either public or private?
Lindsay Jordan(14:42)
Yeah, I’ll cover this quickly and then I know Robin, I’m sure you have some flavor as well. ⁓ So oftentimes it’s not required in the US, but oftentimes when there’s a CEO and chair role that’s combined, meaning one individual is both the CEO and the chair of the board, you’ll have a concept called a LID, which is a lead independent director. It’s not mandated, but when you think about the constructs of corporate governance, you’ll have compliance aspect, then you’ll have investor pressures. So when you’re in the public realm,
A lot of institutional investors and proxy advisors do not like combined CEO chair because they believe it does not provide the fundamental value of an independent board. Right. The leadership position of the board is an insider. Again, if you think about ⁓ the shareholder primacy concept is really about total shareholder value.
And I mentioned JP Morgan. If you think of a company like JP Morgan, there’s really no conversation that they don’t have phenomenal TSR. There’s no conversation that their performance is somehow lacking. And so again, if you just think of that as one example, there’s plenty of examples out there as well. No one knows the business as well as a founder. No one knows the business and the strategic objectives and how to of innovatively get there than a founder. And so then it’s more about
Okay, how do you structure that board so it works best to create, as Robin mentioned, as much value for stakeholders and investors as you can? Sometimes that means combined CEO chair. Sometimes that means combined CEO chair and a lid. Sometimes that means, you know, ⁓ take away CEO chair. decouple that role.
There’s really, again, there’s not one model that we’ve seen to fundamentally work best for every single company.
Robyn Bew (16:41)
And just to build on that, everything Lindsay said, well, I completely agree with all that. And then also would add just Lindsay to your point on shareholder primacy. So ultimately, whatever the structure of the board is, and as Lindsay described, there could be different types of leadership structures. Ultimately, boards represent and they are accountable to the investors who are providing the capital to fund the business.
And so in a public company, that’s a huge amount of, it’s everybody’s ultimately retirement funds that are some big asset managers, asset owners, as well as individual investors and retail investors. In a private context, obviously, it’s a much smaller group. And in a private company context, oftentimes those investors have board seats. So they are sitting right across the table from that CEO and it’s pretty easy.
to hold him or her accountable because they’re right there and I’ll never forget. And then for a public company, ⁓ it’s a much, we can’t all be in the boardroom, but the independent directors are there to represent all of us. And I was gonna say, I’ll never forget ⁓ being in a small ⁓ round table where ⁓ a senior leader at a very well-known activist investor was ⁓ a speaker.
and they were telling a story about an issue that had come up with a board, a public company board that they had gotten the seat on through a proxy fight. And the person was describing this. And I will never forget the way the tone changed and the look on the person. And they said, it’s my money, my money. And I mean, you can literally like, this person was just recounting the story. And I mean, like a chill went up my spine. Like if I were a CEO sitting across from this person.
It’s my money. I’m listening. So ultimately, you know, that’s also who the board is going to be accountable to,
Lindsay Jordan(18:44)
Yeah, and Robin, maybe another concept related to that is around kind of director compensation. I know now we’re maybe totally off topic, but I think it’s an interesting topic to bring up something like stock ownership guidelines. That is also not a mandated requirement. And maybe just a second for what that is, is basically a governance nuance that establishes that each individual director is required to hold a certain percentage of company stock.
commensurate generally with some sort of multiple of their base compensation, right, their direct cash. So again, if maybe if they’re paid $200,000 in an annual director compensation, maybe their stock ownership guidelines would be 3X that just as an example. And that’s exactly right. Is it ties the directors kind of motivation to more of, you know, long term, sustainable
know, total shareholder returns, not just kind of immediate annual or quarterly results. ⁓ That’s something that is also, I think, looked at really well from the institutional shareholder community of encouraging directors to have more of a long-term focus. And that’s just a mechanism that supports that, where you tie the value that the director is getting, right, as sitting in the board seat, ⁓ to the overall value of the company.
Founder-led Boards – tend to be narrower in scope, credentialize the company, and/or create new opportunities
Pat Collins and Marcus Schafer (20:11)
One other follow-up that kind of sparked something ⁓ as you were talking about public and private companies. And I think a lot of our listeners, there’s probably a pretty decent split between people that work at public companies, may be interested in participating in public company boards, but then also a lot of privately held companies, family owned businesses, businesses owned by private equity or backed by private equity, things like that. Can you talk a little bit about the private company side?
And especially as it relates to boards, some of the challenges of ownership, ⁓ maybe management has a good amount of ownership and therefore is on the board. Maybe there’s investors that have a very direct tie and want to have influence over the management of the company and they want to be on the board. Can you talk a little bit about maybe…
some of the challenges of private company boards when you don’t have independent directors, but you have directors that have some sort of stake in the company, either ⁓ employment or some other kind of ⁓ want to have a lot of influence maybe in the direction of the company.
Lindsay Jordan(21:18)
So when we think about foundationally when boards are established, I mentioned kind of founder led organizations or just companies that are kind of in their infancy phase of kind of their overall life cycle. As you mentioned, most boards are established, I’d say for more targeted purposes, right? They will review an annual budget. They’ll provide, I’d say kind of oversight light type information.
You know, things such as if there’s crediting, know, creditor reporting or something of that nature. If there’s kind of oversight responsibility over an audit, they’ll do that as well. But it’s really, it’s super foundational. And I’d say it’s really not as strategic as you would expect kind of a public company board. I’d also say as independent, if independent directors are brought on a smaller kind of founder led company is it’s
Generally, I’d say to support two aspects. One, to either credentialize the company in a certain way. Maybe they have growth objectives. Maybe they’re ⁓ expanding internationally and they want a director who has that kind of multinational experience and expertise. Maybe it’s around ⁓ expansion of the business, right? Use your Rolodex to open doors for our business. So I’d say that’s…
predominantly when I see and work with really much smaller companies, when they bring on either advisory council or advisory board or independent directors, it’s for that purpose. And then it obviously evolves as the company evolves over time. So you mentioned when they get outside investment, ⁓ PEVC, right? That investment does not come without a board seat. I don’t think I’ve ever seen that.
⁓ And so then you’re now navigating that construct. have the CEO, again, I mentioned maybe a CFO on the board, ⁓ obviously an insider, and then you have the investment tied directly to the board seat. Things become more formal, but what I would say is there’s kind of a word that’s used pretty regularly is around factions or other board factions. So you’ll then have kind of an insider faction that
Hopefully the CEO and CFO are on the same page and want the same things. And then you’ll have the faction of the investors. I’ve worked with a fair amount of boards where there isn’t control, right? So the private equity sponsor doesn’t control the entire entity, but maybe has two seats. Maybe there’s an investor base of three or four other disparate organizations. So now you have potentially five, six, seven factions and then trying to develop consensus.
around strategic decisions becomes really complicated when you have competing priorities, right? You’ll have the insiders that have one perspective and want to make, you know, certain decisions around XYZ. And then, you know, potentially the investors are not on the same page as well. So it’s about really managing that dynamic. And I think it comes back to accountability, clarity and trust in my mind.
Robyn Bew (24:27)
Yeah, well said. And then if you play out the life cycle, ⁓ for some paths of evolution, right, Lindsay, I know you and your team spent a lot of time on thinking about the IPO window. And so as companies are starting to kind of enter that and thinking about, if that’s the way they’re thinking about an exit strategy, then bringing on independent directors is part of that plan because they know that they are going to need to have that structure in place ⁓
at or very soon after going public. So then the skill sets that they are starting to look for in the board members is, it might still be everything that Lindsay that you just said, which is we want the right types of experience around whether it’s markets or customers or industry sector, maybe somebody coming from a different industry sector that we want to learn from, ⁓ Rolodex, all those things. And then in addition, folks with experience serving on
on public company boards, particularly when you’re talking about things like the audit committee, because it’s just, companies are gonna enter into a completely different world. And so having folks with experience there becomes really important.
Lindsay Jordan(25:37)
Yeah, I completely agree. From the IPO context, and as Robin mentioned, that’s where I spend most of my time within EY, is kind of supporting pre-IPO, or at least companies contemplating IPO as well, is an entirely different ballgame, right? The level of formality and what’s required when a company goes from private to public is a monumental undertaking. If you think about board composition and kind of requirements in general,
A lot of times, private boards, you know, Robin mentioned the different committees, a lot of times they don’t have formal committees established. If they do, they’re staffed by entirely of insiders frequently. ⁓ Things about, you know, CEO evaluation and secession is generally not formalized when you’re a private company. And then now you’re having to establish that independent compensation committee that has oversight over that process that will eventually discuss that process.
and an annual proxy and market that to their investors, ⁓ that’s a huge undertaking. Again, it’s not just establishing committee and composing it with independent directors. There’s a lot of process protocols and kind of, as Robin mentioned, kind of operating model governance, management level governance that goes into that. ⁓ Dan Clifford, who runs our director referral program within EY. ⁓
famously told me, I’ve heard him say it probably 15 times now on different client consults around, if you’ve seen one board, you’ve seen one board. And I think that’s fundamentally true. Whether you’re thinking about a private company, ⁓ a public company at any kind of maturity of their life cycle, ⁓ it really, really does differ.
The Evolution of Boards – advisory, then informal board of dependent directors, then formalizing the Board along with adding independent directors, IPO, and then S&P 500
Pat Collins and Marcus Schafer (27:21)
And what I’m hearing is these life cycles, right? It’s kind of like, let me just repeat back and I’ll ask you to make sure I didn’t lose the plot here, but you kind of have an advisory board and then you have kind of an informal board as a private company and that’s directors, inside directors. And then you start to formalize that, bring on outside perspective. And then when you’re a public company, it’s a completely different game. So that’s kind of like the life cycle of the private company.
Lindsay Jordan(27:51)
I caveat one thing. I mentioned I spent a lot of my time in the IPO space. An IPO board is also very different than an S &P 500 board, right? So I say the maturity and the evolution doesn’t stop at IPO. Maybe just a few quick data points. ⁓ an IPO board, just from most recent kind of examples, generally eight to nine members. But I’ve seen boards be as small as five. ⁓ S &P 500,
10, sorry, 12 to 14 maybe. So that’s just kind of an example. As the company matures, as it seasons in the market, the board becomes bigger. As the company’s sales gets more complex, I mentioned kind of international growth. ⁓ As revenue increases, you then get more ⁓ focus. I mentioned institutional investors. They become ⁓ more of a concept and group of stakeholders that you have to manage really well.
So making sure your board is ⁓ diverse, has the right skills and experience is super important. I’ve kind of mentioned ⁓ the marketing of the board. Obviously, ⁓ we talked about total shareholder returns or total shareholder value. Outside of kind of KPIs and performance, I’d say the most critical thing that’s important is governance. So whether it’s leadership,
CEO and critical executives or the board, that is part of marketing to your investors. Nothing screams, I’m a phenomenal company, like a great leadership team in the boardroom and at the C-suite. Again, you have to have the numbers, but I mentioned ⁓ governance isn’t important until you need it. When you don’t have the numbers or you go through volatility or adversity, is happening every day at this point.
It’s when you can point to those strong leaders, that strong boardroom to say, have the right people in the right seat at the right time. I think that’s super, super important. I’d say similarly on kind of board committees, like shape and size, same things with independence, right? Like the level of independence at IPO will grow. You know, you’ll generally have a super majority independent board for S &P 500s. Again,
more formal, maybe shareholder engagement, ⁓ more formality and structure around all sorts of governance protocols, whether it’s ESG and other initiatives, again, IPO, you’re really focused more on that first set of compliance factors. And most companies will say, let’s punt to a later date on dealing with what the institutional investors want. Let’s kind of go out strong.
accelerate that timeline as fast as we can, and then evolve as we season the market. And for the most part, I would say investors accept that, ⁓ but then eventually expect to see ⁓ the more formal processes and uplifted governance standards. ⁓
The Evolution of Boards – advisory, then informal board of dependent directors, then formalizing the Board along with adding independent directors, IPO, and then S&P 500
Pat Collins and Marcus Schafer (31:00)
Marcus mentioned this life cycle. I’m kind of maybe moving to a different kind of topic of types of boards that are out there, but he talked about this idea of an advisory board versus a fiduciary board. So, could you guys talk maybe a little bit about what are the difference between the two? What are the pros and cons? If you’re a company, let’s say maybe it’s probably more, you know, welcome to a private company. So, if you’re a private company, why would you consider an advisory board?
versus a fiduciary board, when would be the right time to pivot on that and any insight on kind of the types of boards for a private company to consider in this case.
Robyn Bew (31:38)
So I think, when you think about advisory boards and fiduciary boards, both of them share some common denominator, common aspects. So they’re both there to provide strategic guidance, sort of serve as a sounding board for the CEO. And again, I’ll pick back up on Lindsay’s comments earlier about being able to leverage insights from their own experience, international sector, customers, innovation, whatever it might be, ⁓ as well as
helping with the Rolodex and making connections. So that’s ⁓ being a mentor perhaps to either the CEO, him or herself, or maybe folks on the management team, all things that both advisory boards do and fiduciary boards do. And that’s often, those are the types of things that again, as Lindsay said early in the life cycle, that might be kind of the first thing that a founder is thinking about. I really could use this. I could just use sort of somebody who’s gonna be that sounding board for me.
help me, again, help challenge my thinking, maybe help open up some doors and maybe have some skills that are kind of complimentary to what I have with me and my team. And then as we’ve said, fiduciary boards have some specific responsibilities and duties that those include hiring and evaluating and determining pay for the CEO. ⁓ It includes
oversight of risk and controls. And again, you know, there’s loads of in-depth material out there, ⁓ some of which, you our resources point folks to, ⁓ but it can also look directly. If you really want to go for the details, you can go directly to, you know, New York Stock Exchange or the NASDAQ and get a sense for the specific responsibilities that boards who are public boards, publicly traded boards who are listed on those exchanges have to do in terms of risk oversight. ⁓
Fiduciary Boards and Navigating Different Investor Demands – legally obligated to act in best interest of ALL shareholders
oversight of financial reporting, oversight of controls, et cetera. And again, as we’ve been talking about this kind of theme, weaving through about the importance of the investor, fiduciary boards are legally obligated to act in the interests of all shareholders. So not just the biggest shareholder or not just if, know, again, in the scenario where perhaps an activist investor has now gotten a seat on the board of a public company and we see
We see that happening in the headlines all the time. Once they’re in that boardroom, they are legally obligated to act in the interests of all shareholders, not just themselves and their partners in their firm. So those are some of the things.
Lindsay Jordan(34:18)
Yeah, and Robin, I like the activist play there is, you would obviously you and I were at a conference last week and in the activism breakout, the presenter said, you know, when when there is an activist ⁓ campaign going on, kind of pre public announcement that that’s occurring at a business, the activist is the most important investor that the board has to deal with, meaning
And for those that are unfamiliar with that process, generally, you know, a shareholder activist or some sort of fund will ⁓ start developing a position in a company ⁓ significant enough to then potentially influence certain decisions that are occurring. They will start communicating with the company behind the scenes, right? In private, they’ll provide some sort of letters and sort of communication on.
I think you’re underperforming. I don’t like your CEO. Your board’s too old, has been there for 20 plus years, they’re no longer independent, right? They have a variety of demands around performance, strategy, and kind of governance, or kind of the three areas. ⁓ And the presenter who is in this field basically said, and oftentimes that letter is then released or leaked. made public. And so before that time,
the activist investor and what they care about, what they’re saying is the most important investor to consider. How do we deal with them? What are they asking for? Is it reasonable? Their demands? Maybe there’s an information asymmetry, maybe the things that they’re saying we’re already working on, we just haven’t made public, ⁓ those strategic priorities and so forth. Then as soon as it’s made public, to Robin’s point, they’re actually the least important investor and everyone else becomes more important because then it’s around
How do I engage and have conversations and make sure that they still maintain, the other investors still maintain trust in our business when there is kind of, know, mom and dad are fighting in public? Like, how do we navigate that? And so I thought that was really interesting. And I completely agree with Robin where ⁓ even when there is investment tied to a board seat, right, particularly when a… ⁓
company has, again, received P or VC funding, it’s really critical. I mentioned the hat concept is taking off the investor hat and having the director hat on. What is going to benefit the company and its investors as a whole, not just, ⁓ you know, great example. If one investor wants, ⁓ no longer wants to hold that investment, but another investor wants to hold and
you know, potentially create additional value from the company through whatever sort of value creation mechanics they have going. That’s a conflict, right? Because it’s a kind of short termism versus long termism. How do they deal with that? How do they reconcile with the strategic decisions that need to be made for this company? And so, again, I think I think that’s a really great, great point that Robin mentions around how do you navigate, right? The different investor demands. And obviously, as you go public,
It increases in complexity and it’s evolving, right? In the public markets, that’s the whole point is that you can easily trade equity securities and the holdings ⁓ evolves constantly from week to week. so making sure you have a really good investor relations function is super critical so that they’re kind of surveilling the market and understanding what ⁓ equity positions are held by whom.
Nonprofit Boards – are legally required for tax-exempt status and they have a duty of obedience to the mission
Pat Collins and Marcus Schafer (38:03)
One of the things that we’ve mentioned a few times is the board is responsible to maximize returns for shareholders. But if we kind of switch to a situation where there aren’t necessarily shareholders like nonprofits, how does a nonprofit board kind of differ? Because a lot of these don’t apply, but it’s still a board. So there’s a lot of commonalities. I just love some comments on nonprofit boards.
Robyn Bew (38:26)
Yeah, absolutely. And I’ll borrow Lindsay’s phrase. You’ve seen one nonprofit board, you’ve seen one nonprofit board. A lot of variety, a couple things. ⁓ So in the case of a nonprofit, which by the way, nonprofits are legally required in the US to have a board in order to stay tax exempt. So that’s maybe one place to start. And then therefore that board
is still gonna have those fiduciary responsibilities that we’ve been talking about. In this case, instead of to ⁓ shareholders, it’s gonna be to the donors, to the funders, to the trustees. And also, this maybe sounds a little vague, but broadly speaking, their fiduciary responsibility is to carry out the mission of that organization, sort of whatever it is. ⁓ And so how that translates into what boards might look like and what they do in the nonprofit context, again,
lot of variety, but in one dimension, ⁓ boards might be pretty large, especially if part of their job as a board member is not just to be doing things like reviewing the budget and reviewing the performance of the executive director or whatever the person’s in charge is, but they’re also, if they’re responsible for fundraising, that board could get really big. So if you just think in terms of whatever
big city is closest to you and think about like a major museum in that city or the Philharmonic Orchestra in that city, those boards are big. And that’s because a lot of those folks are out there helping with fundraising or serving as donors themselves and also fundraising. ⁓ Also for nonprofits, ⁓ boards might include and possibly be required by their charter or their bylaws to include ⁓
different stakeholder representatives. So for example, if you think of like ⁓ big hospital systems or even small hospital systems, it’s likely that they might have community representatives, you know, in one sort of like dimension or other. ⁓ and the same thing with, you know, universities and colleges might have different sort of stakeholders on the board. So again, fiduciary responsibilities at the end of the day are going to be very similar ⁓ and also similar to for-profit boards, at least
the good governance approach for a nonprofit would be to have some committee structures to carry out the work. Again, especially around budgeting, around checking the quality of the controls, around the financial reports and the budget, on evaluating the executive director or the person at the top of the organization. They’re gonna have bylaws, they’re gonna have policies on things like conflict of interest, as Lindsay mentioned earlier, things like confidentiality and those types of things.
Lindsay Jordan(41:17)
Yeah, and think Robin, maybe just to highlight exactly what you said and say it again, because it’s helpful, is when you think about the unique fiduciary duty related to a non-for-profit, it’s duty of obedience, which is like obedience to the mission. In order to maintain tax-exempt status, you have to, as an organization, ensure that you are fulfilling the principles as you’ve indicated in your charter and your governance documents.
I would say that loosely, generally happens in a for-profit sector, but it’s a required mandate within the non-for-profit sector. ⁓ Robin mentioned conflicts of interest. That’s another critical one is having the policy, making sure you have protocols, whether you’re a, I’m on a local community board within DC, you know, $100,000 budget board ⁓ or a $100 million budget board of a non-for-profit, you have to have a process
over approval of conflicts of interest, making sure the organization is acting with ethics and integrity in order to make sure there’s compliance with that kind of tax exempt ability.
Liabilities of Board Members – Boards get sued a lot, so make sure they are doing it right
Robyn Bew (42:29)
If I could just add one more thing to, what you said, that also may be helpful to think about if you’re thinking about serving on a nonprofit board. Because oftentimes for a lot of executives and business leaders and CEOs and founders, this cohort is a cohort that gets asked that a lot. And there’s probably a lot of opportunities and maybe a lot of causes that folks are passionate about. And you think, boy, wouldn’t I love to serve on this board? I care about this mission so much.
I’m so excited about it. But some of the things that Lindsay just mentioned are good things to check out. ⁓ So as an amateur as you might be with the mission of that organization, making sure that they do have some of those good governance foundations in place ⁓ is important because as a board member, we haven’t talked about this so much, but maybe it’s a good time to mention it. know, directors have duties and responsibilities. There’s also some liabilities.
Boards get sued a lot, particularly in the public company space. And so one of the things, and that’s not to scare anybody away from serving on a board, but just to say kind of know what you’re getting into, ⁓ and that goes for nonprofits as well. So one of the things to look into is whatever organization you’re thinking about joining the board of, what is their, ⁓ there’s an acronym that folks may have heard called DNO.
liability insurance, as directors and officers liability insurance. And ⁓ I am not an attorney, but in a nutshell, you know, it’s going to help ⁓ provide insurance to protect the members of the board and officers of the company if they are fulfilling their duties in an appropriate way, if they have not violated their fiduciary duties, so they’re not acting out of a conflict of interest.
they’re acting with duty of care, loyalty, et cetera, they’re not gonna be held personally liable ⁓ for if something goes wrong with the company or with the nonprofit. So making sure that there’s good governance, ⁓ foundations and policies in place when you’re thinking about joining any board, but also a nonprofit. ⁓ And also what kind of directors and officers coverage does that organization have are some good questions to look at.
Joining a Board – create a Board Bio, identify what value you bring, and understanding the Board culture
Pat Collins and Marcus Schafer (44:46)
I think that’s such an amazing thing for people interested in joining, right? Like, hey, check your liability, make sure you do that. Our audience is people that want to join boards. What else should they be looking at beyond the liability coverage? If they’re thinking, hey, I think I want to serve on a board. What are those first few steps that they should be taking?
Robyn Bew (45:08)
I would say the first thing to think about, it actually goes back to something Lindsay’s mentioned a couple of times in the course of our conversation around taking off your management hat and putting on, or your investor hat and putting on your board hat. So the first thing to do is think about ⁓ what’s my board bio and effectively kind of what’s my value proposition? What am I bringing to a board? And everybody says, I want to give back, I want to learn and yeah, yeah, yeah, but really, really.
What is it that I am bringing? And a board bio ⁓ actually looks kind of different than an executive resume because boards aren’t hiring for another CFO. They want somebody to join the board and maybe join the audit committee. They don’t need another CFO. They don’t need another head of HR. They don’t need another CEO, especially. ⁓ They might want folks with those skills and insights, but that’s not what you’re there to do. And again, in the resources that we’ve shared, we have some templates
An example, board bios in our ⁓ Center for Board Matters Board Readiness Resource Center. So take a look at that and it has some examples. ⁓ And then also, back to the question of looking at the directors and officers ⁓ liability, also just kind of looking at when you’re thinking about due diligence, what’s gonna be a good fit for me? So we’ve in the course of this conversation talked a lot about different, we’ve got public companies, you’ve got small.
founder led, you’ve got different stages of a life cycle of a company. Obviously, there are going to be different challenges. ⁓ And, you know, I’ve talked to some executives serving on board to say, you know what, my thing is really turnarounds. I love to kind of get in there as a board member and really, you know, kind of be part of that turnaround. Others say, I’m really great at that IPO window. You know, I’m the one who comes in and I’m kind of bringing it because I’ve served on public companies.
boards or I’ve been a public company CFO, so I know how financial reporting works in an SEC registrant company. So that’s where I can and that’s what I really love to do. So kind of knowing sort of where your niche is and where you would fit. And also that gets to another key point, which is around just time commitment. What kind of which we talked about ⁓ earlier, you guys were asking about, how do they get all this done?
So if you’re a sitting executive really thinking about really, really, what can I commit to? ⁓ And, you know, in a public company, you have to make every single board meeting ⁓ because it gets disclosed and investors pay attention and they take attendance. And so if you’re not showing up to the board meetings, not good. So first of all, can I even make all the board meetings that are already on the calendar? And then the last thing I’d say is kind of understanding, you know, what’s my value proposition, doing my due diligence.
thinking about where I would fit so that I know what to look for. ⁓ And then also really getting as much information as possible to get as an outsider and as a candidate about the underlying culture. Lindsay, I think you talked about culture in the boardroom earlier and I just wanna come back to that. how are decisions really made? How are, do we have, is this a boardroom that’s sort of…
all about healthy debate and that constructive challenge that we talked about earlier? Or is it one of two not very good extremes, either total rubber stamp board, you know, this is all about what the CEO wants and we all just nod our heads. Not only is that not good governance, it’s also not really a very interesting board to be on probably. That’s going to be kind of not that it’s not that exciting. Or on the other end of the spectrum, is everything a flat out shouting match? And
that’s probably not really going to be a great place to be. And so ultimately, you know, asking yourself as a board candidate, and I’ve talked to a lot of executives who are, you know, either they’re in the process of looking at board service or they’ve just got on a board or they’re thinking about choosing between a couple of options or very tenure directors who are giving advice to all these folks. And, you know, some of the best advice that I’ve heard from really, really senior tenure board members is to candidates is it’s so hard.
when you’ve got that first board offer to say no, if your gut is telling you, isn’t right. But really, really don’t say yes, if you don’t have a good gut. If you don’t trust the CEO and you don’t trust your fellow board members, because if something really does hit the wall, you are gonna be, not to mix my metaphors here, but you are gonna be in the trenches with that CEO, with those board members. You are gonna get sued.
with that CEO and with those other board members. And if you don’t feel like you can absolutely trust them, this probably is not the right board for you. As much as you might love the company, as much as you might think the mission and the product and the strategy is so cool, if it’s not, if your gut is telling you this, something just doesn’t smell right, there’ll be another opportunity that will come. Just wait for it.
Lindsay Jordan(50:16)
Yeah, Robin, when you were talking, I said, I wrote down when to say no, which so you summarize that and took the words off of my ⁓ plate and spoke it perfectly. ⁓ But I completely agree. You were interviewing some fantastic directors last week and one of the individuals was basically his summary, kind of his, you know, critical takeaway was to me, I am paraphrasing, but was self-awareness, right? Having self-awareness.
as a director, whether it’s your first time in the board seat or fifth time in the board seat, I think is really important. Whether you’re contemplating navigating saying yes, or you’re navigating kind of an annual refreshment process. Do I still add value? Am I still ⁓ effective in my current seat? Maybe I’m in a leadership position, but I don’t have the capacity to do that anymore. And I need to step down. I need to have the self-awareness.
to ⁓ communicate with my fellow board members about where I am personally and the other obligations that I’m navigating. ⁓ Things change. An organization changes. Maybe hypothetically, business starts out as advanced manufacturing and all of sudden they shift priorities and they’re in artificial intelligence, which is not incredibly different. That’s happening all the time.
And so maybe the mission and vision objectives of the company has fundamentally shifted and that director no longer is significantly valuable as they historically were to that company. think having self-awareness is probably the most important thing I’d recommend. Obviously, all the things around your board bios and doing the due diligence and asking the right questions, absolutely.
But I think really making sure you have clarity and where you are, the value you’re adding now and potential to add is and again, through your due diligence, do you still continue to feel good about this company? I think is super important.
Finding a Board – mine your network and independent advisors first, but stretch to look at Board placement agencies and vetted databases
Pat Collins and Marcus Schafer (52:18)
So if I flip the script a little bit and to look at it from the company’s perspective, so let’s say I’m either trying to build out a board for the first time or I’m looking to maybe fill roles at my company that have an existing board. What are some of the best strategies on how to find, I guess, first, maybe identify what you need and then second, where do you find these candidates? Where do you guys counsel your clients to go?
Robyn Bew (52:46)
So something in terms of thinking about what you need, I think Lindsay just framed up some really good points that I wanna draw on, which is thinking about sort of, what’s our strategy? Where are we today? Where are we going? Because companies don’t wanna be swapping board members in and out every year. That’s not helpful. But also at the same time, and this is a sea change from maybe how it was in the so-called old days. ⁓
Board seats are not necessarily lifetime appointments. And a lot of boards are now saying, as Lindsay pointed out, strategies are changing, the world is changing. So as board members are coming in, even to some very large cap, very mature big revenue boards, ⁓ we’re gonna be thinking about board refreshment and making sure that we have a good mix of skills as the strategies evolve. So really thinking about what do we need? ⁓ And then from a skills standpoint,
and from an experiences standpoint. So maybe we do want someone from, you we might be in a industrials kind of category, but we might want somebody from FinTech just because it’s going to be helpful to us to think differently. you know, we’re in a highly regulated industry. So we want to make sure that we have some folks that understand how that works, whether it’s in our same industry or maybe other industries that are similarly, you know, similarly heavily regulated.
So thinking about kind of what that makes, and we’ve already talked again about sort of international and sector and product. So thinking about kind of that matrix, and this is true, I think we would say both for leaders and founders who are looking to build their board or refresh their board, but also candidates is, okay, so it’s important to mine your network first, but then also, you know, challenge yourself and look outside it a little bit. So certainly it’s good to look at who you know, but again, thinking about the points that we’ve,
that we’ve covered across the course of the conversation in being able to have an outside independent perspective and being able to constructively challenge, even in a private company, you might not want it to be just people who know you really well, ⁓ because it can be helpful to have, mean, there’s, know, people talk about group think a lot, you know, you want to have just some different perspectives and different experiences. A director shared this anecdote at a, ⁓
panel that I was attending where they said, you know, they had joined a board. And when you looked at like a photograph of all the board members, it was clearly a very diverse in terms of, demographics and, you know, even industry sectors when you kind of looked at that level. But when you clicked one level down, almost everyone was, you know, a public company CEO or CFO. Almost everybody was coming from kind of the same more or less set of a half dozen or so.
universities and business schools. So it was actually, when you looked at it from that lens, it really wasn’t super diverse. It was a lot of kind of very similar thinking. So that could be another thing to look at. And that’s why it could be helpful to go outside. Now, some, there are a of different ways to do that. You know, some boards and CEOs and management teams, there’s a fantastic group of, you know, ⁓ search firms in the profession who this is, this is what they do. ⁓ And they have incredibly broad, deep,
know, almost four dimensional Rolodexes, you know, that can really help to, have you thought about this kind of a person? And then there are organizations that maintain what I would sort of call like vetted databases that are, you know, they don’t do placements necessarily like the search firms do, but they sort of collect and act as hubs for executives, you know, and maybe current directors who have room to take on another board seat. So sort of looking outside a little bit.
be helpful. and last point, last I should add also ⁓ is ⁓ a lot of, ⁓ you know, lot of companies and, and executives will, will also ask, you know, their independent advisors. So they might ask, you know, whether it’s their law firm, their bank, audit firms are precluded from ⁓ providing that sort of detailed support to, ⁓ to companies that they audit. So we just want to make that clear. ⁓ We can certainly help think about
you know, what kinds of things to look for or what we’re seeing in terms of trends in the market. But ⁓ in the audit profession, you know, we’re not, ⁓ we’re not able to provide direct help in sourcing candidates to companies that we audit.
Lindsay Jordan(57:13)
Yeah, I would maybe just add one thing around. It also goes back to what type of organization and where they are on the kind of complexity, maturity and the life cycle. But if you’re a controlled portfolio company of a private equity organization, the PE sponsor is going to drive those conversations, right? For them, I’d say 99 % of the time. So it’s not as if ⁓ every single organization has full…
⁓ ability, you know, the CEO in the current board has full ability to change the composition of the current board. Also in the public realm, ⁓ board nominees can, you know, can take different approaches, but the actual board, I’d say reappointment approval is a shareholder vote. So ⁓ again, I mentioned kind of the board being a marketing tool to discuss how effective a company is.
All of those things are disclosed, public bios, information. Robin mentioned director and officer insurance. Oftentimes when directors are being vetted initially and then also on an annual basis, there’s a D &O questionnaire, which could be 400 pages of, please tell me your investments. I want to know your immediate family members. What companies do you have affiliations for? Again, this is to support
independence, confirmation, well as like managing conflicts of interest. But there’s a fair amount of rigor that goes into ensuring, you know, those one or two board seats, right? These are very, particularly a couple of company boards, very lauded positions to make sure you’re bringing the right person in. So it is right. It’s not, you know, TSSCI level clearance, but it is a generally kind of a
⁓ a long process of vetting that a company will do. There’s generally a background check that may be involved. ⁓ So right from a company’s perspective, that’s ⁓ like a risk management protocol that they instill to make sure that the directors are who they say they are. And there’s not going to be a risk of reputational damage one way or another.
Hot Topics Facing Boards – resilience, AI, cybersecurity, leadership development, and board effectiveness
Pat Collins and Marcus Schafer (59:24)
Great. ⁓ So kind of our last section that we wanted to cover was some of the topics that are maybe top of mind, hot topics with boards today. So maybe I’ll just start with that. What are some of the big topics that are on the minds of like leading boards that you’re seeing right now?
Robyn Bew (59:43)
There is a lot. ⁓ think, you know, again, hearkening back to that earlier ⁓ discussion we’re having about, you know, how are boards just managing to cover this all? I think that’s one thing we can say is that the agenda is just sort of keep getting bigger, and particularly for companies that are, you know, larger and have a more global operating footprint. So a few of the big themes that we’re hearing, if I had to sum it up in one word,
that word would probably be resilience. So we’re living in a world where ⁓ things that we maybe thought and things that CEOs probably for many sitting CEOs for most of their career and certainly many board members for most of their careers that we kind of took for granted ⁓ aren’t necessarily ⁓ holding true anymore. so thinking about ⁓ and what boards are thinking about is how can we
again, fulfilling our main job to help provide strategic guidance, oversight to the CEO and to the management team, whatever the risk or the opportunity is, and we don’t know which it is and when it’s coming or what exactly shape it’s gonna take, but are we gonna be able to be resilient enough to bounce back, you know, if it’s a hit or be able to dive for that ball and grab it first?
ahead of our competitors if it’s an opportunity. So kind of big picture, we’re hearing all about resilience. ⁓ And then kind of going below that, certainly, and we’ve already talked about it a little bit today, ⁓ understanding AI and how that’s affecting the company’s business model, the company’s strategy, the company’s competitive position, the company’s risk position, and sort of what’s our risk appetite for AI? And the biggest risk of all might be to do nothing or to move too slowly.
and then we end up getting bypassed or getting disrupted by our competitors. Cybersecurity, ⁓ I’ve been working with boards, mostly public company, mostly on the larger cap side for about 15 years. And cybersecurity has been the number one topic or a number one topic right on top of the board agenda for a long time. And it’s just, it’s not going anywhere because the bad guys aren’t going anywhere. And in fact, with AI now they’re getting a little bit enabled to do
more bad things. But the good news is that AI is also helping the good guys ⁓ to be more resilient and to defend the companies better. So, Ford’s continued to ask a lot of questions about, you know, what’s going on with our, you know, with our cybersecurity posture. ⁓ One other one I’d add ⁓ is talent people. And we’ve talked about that throughout this conversation as well. So, that’s sort of in general, thinking about,
what’s our human capital strategy, what’s our talent strategy. We’re seeing in the public company domain, compensation committees are one of the three required committees of the board. And historically, if you dial the clock back 10 years or 15 years or more, for the most part, most of those compensation committees were really focused on designing the pay plan and kind of the compensation philosophy for the CEO and the top executives of the company.
And over the last, you know, 10, 12 years, ⁓ it’s really changed to think about human capital strategy. And a lot of those committees have actually changed their names. So instead of the compensation committee, they might be the compensation and people development committee or the human capital committee or, you know, fill in the blank. But so ⁓ the question about talent writ large and then also around succession planning, CEO, of course, CFO, of course, and some of the other key
know, keep thinking about kind of the leadership pipeline of the company. Boards are really, really interested in that as well.
Lindsay Jordan(1:03:40)
And maybe Robin, to supplement, and I’m sure you come across this a fair amount as well, is also just bored effectiveness, right? If you think about the rise of activism, this is increasing. There are new players in the field. ⁓ When we think of kind of the success rate, if you will, of certain kind activist campaigns.
⁓ Perhaps that’s not ⁓ a perfect data point, but what is really helpful is to see that they are at least influencing and making effort on their campaigns around CEO turnover and board composition. So if you think about what is or at least should be top on the agenda is making sure you have effective governance, a good C-suite, kind good leadership team, and a really well-rounded board with
with helpful protocols that are transparently communicated in the proxy.
Robyn Bew (1:04:36)
Yep. And Pat, if you’re thinking, my gosh, how is it possible that board members can stay on top of all this? ⁓ Again, I’d point folks toward the resources that we’ve shared that are in the notes to this podcast. We’ve got some links to some pieces, current pieces on all these issues, including the board effectiveness ⁓ point that Lindsay mentioned, which is a great point. actually have what we call the board effectiveness framework that looks at what are some of the key components and what does good look like? Like, how do you know if you’re effective?
and some links to how to stay on top of ⁓ new topics that are coming out from our center. So, we point folks in that direction.
Pat Collins and Marcus Schafer (1:05:15)
Wow. Thank you both so much for this conversation. This was super, super awesome. It gave me a ton of confidence just that companies out there are doing all these little things right as an investor. I think really insightful for our audience to think about how can they get better in their own business, but also how might they be able to contribute. So thank you. Thank you very much for sharing your insight.
Robyn Bew (1:05:39)
Thanks for having us.
Resources:
EY Center for Board Matters – Our latest thinking | EY – US
Connect with Lindsay Jordan on LinkedIn
Connect with Robyn Bew on LinkedIn
EY CBM Board Effectiveness framework
Americas board priorities 2025 | EY – US
EY CBM Board Readiness Resource Center
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