By Rob Wright, Chief Editor, Life Science Leader
Follow Me On Twitter @RfwrightLSL
PART 3: CURIOUS WHAT SERVING ON A CORPORATE BOARD ENTAILS?
If you have never served on a corporate board, you might be curious as to what it all entails. Thanks to BioBreak and Drexel University, Life Science Leader undertook the development of a three-part series of articles titled “Journey To The Corporate Boardroom.” Part 1 explored how to seek a board opportunity, while Part 2 dug into what leaders should be thinking about when building their company boards. In this final installment, we delve into what serving on a corporate board is really like. For insights we engaged the following five executives: Richard Baron, former CFO and board member of Zynerba Pharmaceuticals; Rich Daly, president, CEO, and chairman of the board for Neuralstem; Don Hayden, former global pharmaceuticals president for Bristol-Myers Squibb and current board member of several biopharmaceutical companies; Kirk Gorman, former CFO and EVP of Jefferson Health Systems and board member of several companies; and Gwen Melincoff, founder of Gemini Advisors and board member for Kamada Pharmaceuticals and former board member of Tobira Therapeutics.
LIFE SCIENCE LEADER (LSL): Walk us through your recent board service experience while also managing expectations at a current employer.
GWEN MELINCOFF: I joined the Tobira Therapeutics board when I was in between positions at Shire and BTG. In fact, one of my conditions when accepting the position at BTG was to remain on Tobira’s board. Having served on as many as six boards at one time when employed by a public company (i.e., Shire), I thought I had a good understanding of my priorities and felt I’d be fine. As it turned out, it did require an inordinate amount of time. I had a manager in London who didn’t really know what I was doing other than four times a year I would go out to California (a two-day trip) to do some board work, not to mention the numerous monthly phone calls as part of my serving on various board committees (e.g., the compensation committee). Despite my board service being a larger commitment than anticipated, my employer remained very supportive. And though I had previously served on a number of boards at the same time, I am not sure I could have handled serving on more than one in this instance, as Tobira went through two transactions that involved a significant amount of board work (i.e., an IPO and a $1.7 billion acquisition by Allergan).
LSL: When you joined Neuralstem as the CEO, the former CEO was still on the company’s board. How do you manage running a business and serving on the board with a potential “backseat driver”?
RICH DALY: For starters, you have to be pretty up front about who’s in charge. I remember talking with the board when we first met and I asked, “Who’s in charge?” They responded that I was. So we were very clear from the beginning on who was accountable for the day-to-day running of the business, while the board would be involved in higher-level decision making. That being said, having the ex-CEO on the board or having access to the ex-CEO can be very valuable. There are a lot things that happen in the day-to-day running of the business that the board is not involved in, which is a good thing, because that is not their role. And though the ex-CEO wasn’t running the business, I could call him when I had questions. For example, I recall looking at some documents and determining that something appeared to be missing. So I called the ex-CEO and he told me where to look for the needed information. If you are the CEO and find yourself in a similar situation, set the operational guidelines for that relationship very early, and very firmly, as this will be critical to your success in working together.
LSL: What has been your experience regarding the time commitment required for serving on a board?
KIRK GORMAN: To be an effective board member requires a fair commitment of time and energy, such as outside boardroom reading and thinking and interacting with management and other key stakeholders. I think many people underestimate the level of commitment required beyond routine board meetings. My advice would be to think carefully about how much time you have to commit. How much flexibility do you have to adjust other parts of your life to what board and committee meetings may require, because the scheduling of these meetings is not completely under your control and you are expected to be there.
Serving on boards will provide for conflicts and pressures, and that’s normal. But one of the positives of serving on a board is it gives you access to different ways of thinking and exposes you to different approaches to tackling similar problems. Even if the industry is a little bit different from the company you work for during the day, the running of a company has a lot of similar themes, and seeing how other executives and board members approach those same challenges and issues can be very helpful to your day-to-day job. One of the reasons I was permitted to join a couple of boards by each of my employers was because the leadership thought it was useful to have me learn how other people approach similar problems and how to identify opportunities for improvement.
LSL: What about serving on a board that has a dysfunctional management team?
RICH DALY: If you are on a board, you have to keep in mind that you are not a manager but a steward of the organization. When serving on the board of a company other than your own, keep in mind that you are diving into the company four times a year officially, and depending upon company specific circumstance, maybe a few other times as well. So a board member might be getting little pieces of information, which can make it very difficult to understand what the real issues are let alone determining perceived management dysfunction. Serving on a board versus managing is shockingly different and an unbelievable exercise in patience. When in management and serving on a board, you have to work with the board and move very carefully as you are getting inputs from all over. However, if you are seeking to serve on a board for which you are not also serving in management, it pays to be thoughtful in how you approach challenging management. When you think about the fact that the average board takes about 250 to 350 hours a year, to truly understand a dysfunctional situation requires a much bigger investment of time.
DON HAYDEN: I’d like to add to that. Depending on where the dysfunction is, the answer may differ. If the dysfunction is the CEO, then the board has to be far more active in addressing it, because the CEO is the board’s responsibility. If the dysfunction is elsewhere (e.g., CMO, CSO), and you’re happy with the work the CEO is doing, then that is more of a situation where the board will work in partnership with the CEO to try to understand and help develop a plan for how to address it. On one of the first boards I served, at the request of investor directors, I was asked as board chairman to evaluate the CEO and recommend a plan of action to the board. This was because the investors were concerned about the “disruptive effect” the CEO was having on the company.
LSL: What about the trend of corporate boards shifting their focus from governance to company strategy?
DON HAYDEN: This is a natural occurrence as boards move away from a “check the box” mentality of governance toward a more dynamic and forward-looking dialogue. This usually happens when the question “what if” begins to be posed. For example, what if we succeed? What if this works? What if this happens? What if this doesn’t succeed? Further, boards are becoming more focused on evolving and developing themselves. For example, take the question of mandatory retirement age or board tenure limitations. In my opinion, the best boards are moving away from these things as they seek to assess and address board capabilities and demographics (e.g., diversity) on a more continuous basis. In fact, over the last five years on both private and public company boards, I’ve had discussions with individual directors about how they can add greater value to the board going forward, or in some instances, how they might best serve the board by transitioning off. Such discussions around board experiences and competencies no longer lining up with where a company is going is a direct result of the dynamic work boards are doing around company strategy.
LSL: What can you share about serving on a board of a company while it is being acquired?
GWEN MELINCOFF: Deciding on if a company wants to be acquired or not is the responsibility of the board. Once this has been determined, the board then has to go through a process of determining fair value, making sure it has the right economics for the company, hires the right advisors, the right bankers, and so on. When I was in Big Pharma, we typically did not use banks to do our deals, but when you are a small public company a lot of times you tend to use a bank to help execute the deal. When Tobira was being acquired by Allergan, we had an auction (i.e., a business sale process where a group of buyers make their final and best bids and the company going to the best bid), which was very intense. In such a situation, the banker may tell you there is someone else in the auction mix, but you never know for sure. In my experience, time feels much more compressed when serving on a board during an acquisition. From start to finish, the Allergan-Tobira deal was done in approximately two months. But each deal, depending on if you are on the buy side or the sell side, is different and can come with its own distinctive pressures.
LSL: What is one tip you’d offer to those considering/ serving on corporate boards?
RICHARD BARON: Participate on boards like it is your job. You are a representative of the company, and as such you need to apply the same ethics and everything else associated with being an employee because it is your and the company’s reputations at stake.
RICH DALY: Above all, know yourself. Are you a builder or a first responder? My passion is helping companies overcome big challenges — transitioning from clinical to commercial, turnarounds, etc. Thus, I’m a first responder and energized by having an opportunity where I can make a huge difference. If you’re the type of person who is most comfortable with more than 12 months of cash on the balance sheet, then these kinds of opportunities are likely not for you.
GWEN MELINCOFF: You’re judged by the company you keep. It is really important when you join a board that you know who those board members are, what you can contribute to the company, and what they can give you.