The Board Of Directors - The Board Chair
Continuing our series on The Board Of Directors, this week I'll talk about the role of the Board Chair.
The Board Chair runs the Board Of Directors. He or she is a Board member with the same roles and responsibilities as the other Board members. But in addition, the Board Chair is responsible for making sure the Board is doing its job. The Board Chair should make sure the Board is meeting on a regular basis, the Board Chair should make sure the CEO is getting what he or she needs out of the Board, and the Board Chair should make sure that all Board members are contributing and participating. When there are debates and disagreements, the Board Chair should make sure all opposing points of view are heard and then the Board Chair should push for some resolution.
The Board Chair should be on the nominating committee and should probably run that committee. I do not believe the Board Chair needs to be on the audit and compensation committees, but if they have specific experience that would add value to those committees, it is fine to have them on them. Either way, the Board Chair needs to be on top of the issues that are being dealt with in the committtees and making sure they are operating well.
Small boards (three or less) don't really need Board Chairs. In many cases the founding CEO will also carry the Chairman title, but in a small Board, it is meaningless. Once the Board size reaches five, the Board Chair role starts to take on some value. At seven and beyond, I believe it is critical to have a Board Chair.
It is common for the founder/CEO to also be the Board Chair. I am not a fan of this. I think the Chair should be an independent director who takes on the role of helping the CEO manage the Board. The CEO runs the business, but it is not ideal for the CEO to also have to run the Board. A Chair who can work closely with the CEO and help them stay in sync with the Board and get value out of a Board is really valuable and CEOs should be eager to have a strong person in that role.
When a founder/CEO decides to transition out of the day to day management but wants to stay closely involved in the business, the Board Chair is an ideal role for them, assuming that they were responsible for recruiting or grooming the new CEO. If the founder is hostile to the new CEO, then this is a horrible idea.
When Boards get really large, like non-profit boards, the Board Chair is even more important. I've been on a few non-profit Boards over the years. I don't really enjoy working in the non-profit world, but I do it from time to time. I have had the opportunity to watch a couple amazing Board Chairs at work and I've learned a ton from them. The partnership between Charles Best and Board Chair Peter Bloom at Donors Choose is a thing of beauty. Same with the partnership between John Sexton and Board Chair Marty Lipton at NYU. For profit CEOs and Board Chairs could learn a lot from watching these masters at work.
When it works, the Board Chair role is hugely impactful. It allows the CEO to spend their time and attention running the business and not worrying about the Board. The Chair will manage the Board and when the CEO has issues with the Board, the Chair will be clear, crisp, and quick with that feedback and will help the CEO address those issues.
Many CEOs find working with a large group of people who have oversight over their work and performance challenging. It makes sense. Who has ever worked for six or more people at the same time. How do you know where you stand with all of them? How do you know what they want you to do? How do you know what is on their minds? The Board Chair's job is to give the CEO a single person to focus on in dealing with these issues.
The Board Chair job is hard, particularly when the company is in crisis, but it is also extremely gratifying. It is an ideal job for entrepreneurs and CEOs to take on when they are done starting and running companies and want to move into something a little less demanding. I'm always on the lookout for people who can take on this role in our portfolio companies. The good ones are few and far between and worth their weight in gold.
I totally agree that the founder/CEO should not be the Chair as well. One thing I’ve always tried to do as a founder is make sure I touch base with the entire board regularly – not enough to be a chore/burden, but enough that they feel “in the loop” on the day-to-day activities. I’ve also found that each board member tends to bring something unique and valuable to the business, so I want to leverage all of that goodness as much as possible. Somebody else should be taking care of the actual “management” of the board so the CEO can focus on the business and leveraging the board for their expertise and insight.
“I think the Chair should be an independent director who takes on the role of helping the CEO manage the Board. The CEO runs the business, but it is not ideal for the CEO to also have to run the Board”Very Helpful – great insight on separation of duties b/t CEO & Board Chair
Is it workable for a Board Chair to switch to the role of CEO, and visa versa?
Are there themes in the reasons why you don’t enjoy working in the non-profit world?
this question deserves a longer response. but in general i prefer the sense of urgency, the reality checks, and the manic search for sustainability that the for profit world brings to a project
As someone who runs a non-profit, I totally understand that. I would love to read that longer response sometime.
Totally agree. I am on a few non-profit boards but I view my time spent there as giving back for the benefit I receive (my kids’ schools, etc.). One thing that does make it better is that I feel like I can make a contribution by bringing a perspective that wouldn’t have been there otherwise. For example, one board is made up primarily of people from wealthy families who own their own local, small businesses (all in the same industry). It’s a different perspective from someone who grew up in a bigger company with experience managing and working with multiple people and global perspectives.
I get what you’re saying and think there’s some truth. I also think a great deal of nonprofits have a ton of urgency — many are working with the most vulnerable in our society.The sustainability issue is tough. Most nonprofits exist because of a market failure or a lack of a market-based answer — so sustainability is inherently a big challenge.As someone who started and leads a nonprofit, it’s frustrating that impact is not directly tied to revenue. But that’s what it takes to solve pressing social problems, which should concern us all both personally and economically (i.e. when 1 millions kids dropout of school annually, they don’t have careers and money to buy things).
i challenge every “social entrepreneur” i meet to think about creating a sustainability model, just like a for profit would
If we apply a profit mindset to non-profit, all benefit.Trouble with government is so many therein have no experience of P+L basics.
Absolutely. I think Room to Read (www.roomtoread.org) is a great example of this mindset. Raising big $$ and kicking major goals. Helps when you are ex-Microsoft!
I agree and am putting this into action in a new company I’m founding. I’ll be chair (actually managing partner since it’s an LLC) and we’ll have a full-time CEO. Not what I did last time I founded a company when I was both CEO and Chair. That was convenient… but not ideal.There is – or at least can be – a creative tension between CEO and Board when funneled through an effective Chair, as Fred said, which helps assure that ideas are though out albiet quickly and that negative news is properly recognized and dealt with.
i am so excited to see you getting back in the game Tom.
Thanks, Fred. Has been so all consuming that I haven’t even been blogging. But will write from the PoV of a non-CEO founder and chair. And about the differences between starting a company now and fifteen years ago.
I think the idea of the CEO/Founder transitioning out of the Board Chairman role or keeping the Chairmanship and opting out of the CEO role is an interesting one. You touched on the motivation for the later as wanting to stay involved, but not running the business. That’s typically a straight transition. However, relinquishing the Board Chairmanship position is a more delicate undertaking for the CEO/Founder. Many more variables may come into play, including the size of the organization at that time, and the competencies of the person. There are some examples of founders/CEOs that were simultaneously successful Chairmen for a long time, e.g. Michael Dell and Bill Gates. But these are large companies. I’m curious to learn about other examples of exceptional startup founders that were able to carry both roles well?
Fred, I think your qualities are likely the ones for a typical Board Chair. Someone who’s willing to zig zag in the process of moving a company forward (as opposed to driving everyone in a straight line direction which rarely works)… someone who’s hard on interests, soft of people. Good post.
Nice way to put it, Robert. Saw your note about Birmingham. It was probably Cleo you spoke with. Maybe I’ll see you when I’m down there next.
it was someone else in “marketing”… I do like Cleo though : ) Maybe we can grab coffee/a drink the next time you’re in town. I know a couple of hip places : )
Another great post, the early stage perspective is particularly useful. Yes i think the independent director (see earlier post regarding the value of having an independent director, before OPM comes in) normally makes the best board leader. I would expand on the role definition to stress the chair should have excellent facilitation skills – the ability to keep the meeting on track, build consensus, and surface ideas and concerns. And lead the agenda setting process, starting with the CEO and involving all board members. The Chair should also strive to maximize the ratio of discussion re presentation so that most if not all time is spent discussing issues. This requires the CEO to create and distribute meeting materials (aka board packages) no later than the Friday before the week fo the board meeting
yes, yes, yesgreat comment, great advice
And for a Monday meeting, I still say that’s too late. I shoot for 5-7 days in advance for the board pack.
I’ve seen guys hand them out right before the meeting.
I always insist/ed on at least ~7 days in advance of next meeting.
“This requires the CEO to create and distribute meeting materials (aka board packages) no later than the Friday before the week fo the board meeting.” < Well said. So essential, so basic. So often neglected or done in a cursory manner!
Last year, I was Board Chair for the community college board of trustees that I sit on and it was a fascinating and impactful year to do so. We dealt with a CEO search, and the announcement of our selection. And we had a board vacancy which we had to appoint a replacement for. All of this while operating under California’s Brown Act, which requires almost all board deliberation in public. That law requires the Board Chair to make judgment calls between meetings, without the benefit of picking up the phone and finding out where other board members are on an issue. Contrast that with my board at @Riskalyze:twitter where I’m on the phone with my two board members at least once a week if not more, and we move much more swiftly as a result.
non profits vs for profitsthat’s a blog post if not a book
True…some great parallels but great differences and I share your appreciation for the “manic push for sustainability” of private sector boards.
I love the “designations” on discuss. Just imagining you serving a beer to the waiting masses is amusing.
What an incredible experience, Aaron. I worked in non-profits for years, and just thinking about chairing that kind of board makes my head hurt. By the way, the photo on Twitter of your 5-y-o’s birthday party was priceless. A different (better) kind of crazy than running a non-profit board!
I categorically deny that serving as board chair in California’s public sector, and corralling a bunch of five year olds at a Taekwondo party, have any similarities. 😉 I am very blessed to be a dad and we had a great weekend celebrating. Crazy indeed!
Why can’t you talk between meetings?
Under California’s Brown Act, the board is prohibited from forming a consensus or making a decision outside of a duly noticed public meeting. Daisy chaining phone calls is also prohibited as a “serial meeting.” Duly noticed public meetings take roughly a week to schedule, so it ends up vesting the Board Chair with a certain level of executive responsibility whether they like it or not. The law of unintended consequences…
My only experience with a non profit Board was not a happy one.Lots of politics, LOTS. Factions, side agendas. I fled as soon as I could.
Excellent assessment Fred. You make the dynamics clear, and add a lot by this. I have seen dysfunctional boards ruin companies. And I have seen CEOs that spend far too much of their time managing their board.It is rare to see the situation you describe in my opinion, because Boards often get put together in random ways (whomever invested the most, the founders of the last two acquisitions, etc).I think that the careful selection of the Board is absolutely critical.
Fred, first, your post has lots of nice insight into Boards. Thanks.But, second, in a larger sense, from all I can see your post is in the context of something that is a very sad story for the businesses of central interest, that is, from startup to major IPO.For such businesses, there is a fundamental problem: The goal is some success from a really good lifestyle business up to a business value over $1 billion, $10 billion, or $100 billion. The fundamental problem is that so far for our economy such success is necessarily rare. In particular, and as seems to be clear enough from recent US technology startup history, only a small fraction of business leaders can look at a list of candidate business directions, pick a good direction, and achieve the desired success. Really, discounting luck, the crucial key to such a success is nearly always between the ears of some one person (or a small founding team), typically the founder, CEO; the success needs such a CEO; only a small fraction of such successes happen without such a CEO.So, without such a person as CEO, f’get about the business and let economic Darwinism take over.But WITH such a person as CEO, what the heck are they going to do with a Board such as assumed in your context? Or,> Many CEOs find working with a large group of people who have oversight over their work and performance challenging. It makes sense. Who has ever worked for six or more people at the same time. How do you know where you stand with all of them? How do you know what they want you to do? How do you know what is on their minds?No kidding! You exaggerate not!Moreover, where the heck is a CEO going to get “six or more people” who actually understand the crucial, key work the CEO has done between his ears? And if those people don’t understand, then they can easily trip over their fiduciary and public responsibility and their experienced, mature, business judgment and business acumen, fall face down into the mud, and take the company with them.In a music analogy, where the heck was Jascha Heifetz going to find people to help him decide how to play the Sibelius concerto? In an art analogy, where was Michelangelo going to find people to help him do better painting the ceiling? In business, where was Bill Gates to find people to help him in the crucial thinking that had him cut a big part of the guts out of IBM and its business as if all of IBM was anesthetized (Lou, that’s exactly what Bill did; I know that even if you don’t; sorry ’bout that). And where was Steve Jobs going to get help for the bright ideas he had?From all I can see, e.g., how rare is the crucial, key work the CEO did between his ears and how rare are others who can understand such work, for such a CEO the Board has nearly no chance to ‘get it’ and, thus, will be for the CEO and the company from a waste of time down to a ball and chain down to disaster.There’s a story that Stravinsky had finished a piece and showed his usual beautifully precise and polished score to someone in the New York City music business and got back that there was a good, really good, arranger whom Stravinsky definitely should contact to further improve his work! Disaster. Pouring sewage into the consomme. Mounting diamonds in cardboard. Passing off gold as copper for house wiring.Thus, for a CEO who actually has between his ears the crucial, key right stuff for the desired success, they should be Chair of their Board, and hopefully everyone else will be a plump lap kitty cat, a sleepy Golden Retriever, a highly contented, somnolent, floppy eared Cocker Spaniel, and maybe a few relaxed, distracted Collies.With irony, for how hopeless Boards are, we need look no further than your:> The good ones are few and far between and worth their weight in gold.In other words, don’t bet your business on having a Board Chair that is “few and far between”.But, yes, with a big company with over 100,000 employees and millions of stockholders and entering corporate old age, sure, bring along the full catastrophe of nearly brain-dead rules, roles, responsibilities, reports, legalities, committees, etc. as with great prudence and maturity they guide the business into a graveyard.Gee, they can have essentially everything in computing — fundamental science, development, marketing, brand, hardware, software, manufacturing, patents, customers, revenue, margins, earnings. Then the Board can bring in a really experienced, stable, prudent marquee business executive. At an early staff meeting he can hear about APPC, CICS, CMS, DB2, IMS, JES, MVS, SNA, TSO, VM, VNET, VTAM, and on and on, walk out worn out, give up on the business, and return to a part of the business he knows as a former customer — IT management consulting, facilities management, help desk, and service bureau.So, he gives the hardware business to Intel, the hyper-visor business to VMWare, the networking business to Cisco and Juniper, the small printer business to HP, the large printer business to Kodak, the hard disk business to Seagate, Maxtor, and Western Digital, the storage subsystem business to EMC and Network Appliance, the relational database business to Oracle, Sybase, Microsoft, and MySQL, the workstation business to Sun, the operating system business to Microsoft, Sun, and Linux, the personal productivity business to Microsoft, the document preparation business to Microsoft and Adobe, the desktop business to Gateway, Dell, and Apple, the motherboard business to the Taiwanese, the display business to the South Koreans, the wearable computer business to Nokia, Motorola, Samsung, and Apple, the browser business to Netscape and Microsoft, NSFNET (the Internet) to the world, the on-line media business to AOL and Yahoo, the ISP business to AT&T and missed out on the search business, the social media business, the tablet business, and the on-line ad business. But they had a great Board!A big public company needs a Board, but such companies have gotten into serious trouble — Kodak, US Steel, Bethlehem Steel, AT&T, GM, DEC, IBM, etc. — for a long time, and I don’t see much hope for anything different.But for the context here of startups to a major IPO, I have to conclude that when success happens it is due to luck or what is between the ears of the founder or small founding team and that a Board has essentially no chance of ‘getting it’ and, thus, bluntly but realistically, is a big threat to be handled, circumvented, avoided, controlled, marginalized, etc. as necessary. Sorry ’bout that.To be more clear, if a startup company Board would follow the medical “do no harm” and be content to help occasionally, where they can, then they might be helpful or just a waste of time but not worse but they can’t because they have their fiduciary responsibilities to exercise “oversight”, etc. If a startup CEO is going to bet his business on what is only between his own ears, and for the desired success he must, then he needs a lap dog Board because only an irresponsible Board could give the CEO the freedom to bet the company on something the Board didn’t understand.A real irony is, there are plenty of irresponsible Boards but too infrequently when a CEO really needs and deserves one!It’s super tough to win an Olympic downhill skiing race, but six guys strapped together never will. The best violin music is from a great soloist, and a string quartet can never be that good. There was only one person in the world who understood how Heifetz played the Sibelius concerto, and no committee ever could.
Wow… a comment longer than the actual blog. I bet you have a history and story to tell 🙂
As I tried to explain, and as you noted, used a lot of words trying, for the desired startups the issues are fundamental: The desired success is rare and needs a CEO, no more than a small team, that is betting the company on thinking mostly only between the ears of the CEO and that a Board will have next to no chance of understanding. So such a Board will want to exercise their fiduciary responsibility and oversight on a CEO whose crucial work the Board doesn’t understand.For the desired success, it will be necessary for the CEO to bet the business on thinking that only he understands, and then the Board won’t know if what the CEO is doing is stupid or brilliant, a disaster or magnificent, to be a failure or a success — they just won’t know. The Board won’t know if they are seeing the CEO bet the company on snake oil or penicillin.Sure, we know that an irresponsible Board can oversee a disaster, but, sadly, for a startup the desired success likely needs an irresponsible Board. The usual business prudence, maturity, and acumen promises to be as much of a disaster as lack of adult supervision; there are many ways to be wrong and only a few to be right.This line of argument is intended to be quite general and not particular to me.Have there been startup successes with responsible Boards as Fred outlined? Likely. Still I claim that the fundamental problem I described remains important. If I’m correct that the problem is fundamental, then, first cut, we need to recognize this.In particular, I would argue that a CEO who really has the necessary right stuff for the coveted success needs to be COB and to control his Board, in practice is better off with just a lap dog Board that will “do no harm” and not hope for more.Can a Board really be responsible and still support a CEO, pursuing the desired success, doing crucial work and executing a vision, due to the rarity issue, nearly necessarily the Board doesn’t really understand? I claim, fundamentally, usually no.The big recent example, of course, is Steve Jobs: Who on his Board really understood what he was betting the business on, what he was thinking? Or, if his Board really understood what he was doing, then likely many others could have done that work and Apple would have had too much competition.Or, if a good Board could really do a good job in oversight, then how to explain the historical, world-class extraction of defeat from the jaws of victory I described?Again, yet again, to mention again, the work for the desired success is so challenging it is almost necessary that a Board won’t understand it and, then, won’t be able to provide responsible “oversight”.This isn’t about me or at least not just about me: Any startup seeking the desired success would be in deep trouble if it could find a Board of the usual suspects that could actually understand the crucial, core content of the necessary work. I can’t believe Steve Jobs, Bill Gates, …, ever had a Board that could exercise competent “oversight” of the work.Other parts of our society have addressed related problems: Suppose highly qualified person B works for person A. How is person A to oversee what person B is doing? In law there is a rule: A lawyer doing legal work must be supervised by a lawyer. In a research university, no way does a department chair, college dean or university president try to oversee the work of a research professor. If person B is in medicine, person A can rely on an MD degree. a residency in a specialty, Board certification, and work track record — that is, person A gets to rely on some aspects of professionalism.Alas, there is next to nothing about professionalism, peer review, or anything else a Board can use to oversee a Steve Jobs, Bill Gates, ….
I can’t believe Steve Jobs, Bill Gates, …, ever had a Board that could exercise competent “oversight” of the work….Alas, there is next to nothing about professionalism, peer review, or anything else a Board can use to oversee a Steve Jobs, Bill Gates, One of the problems with writing such long comments is that people will tend to scan what you say. And if they do they will stop and take in that example (because Steve and Bill are eye candy) but probably only bits and pieces of the rest of your argument.Anyway Steve and Bill are outliers obviously and as such are not typical of the intellectual distance between a typical board and the CEO. So I don’t think using them as examples supports what you are trying to say.
In this thread there is a crucial issue: Should the CEO seek a good Board as Fred describes or be CBO, control his Board, and seek a lap dog Board that will do no harm? I argue the second.Yes, one of the problems with writing a post as short as I wrote is that there is not much room for good data!I tried hard, over and over, several ways, to explain that in the context of this blog, the main goal is a startup that has success that is necessarily rare. So, we’re not considering a “typical” company, startup, or CEO. So, the “outliers” Jobs and Gates are the goal. Or, instead of Jobs and Gates, could have two guys who arrive at work on skateboards and are worth $14 billion, each. Do they, as their Board concluded, need an experienced, mature, marquee, computer science Ph.D., computer industry executive as the public face and source of adult supervision? Not really!Again, the problem with lack of “distance” between the CEO and Board is, if the Board can ‘get it’, then too likely so can too many competitors.While the “distance” between the CEO and the Board might be “intellectual”, the key right stuff between the ears of the CEO might be emotional or social insight or something else and not really “intellectual”.Yes, there is a case when a founder, via whatever right stuff, before a Series A has built a large and rapidly growing network of engaged users. Then we could argue that that state already achieved can be understood by a Board and still have a severe barrier to entry for competitors. Alas likely for continued success and growth, those past efforts of the CEO will not be sufficient, and more between his ears that only he understands will be needed. That is, likely again (and again) the CEO will have to bet his company, and the Board won’t understand and, thus, won’t be able to execute effective oversight.E.g., via whatever, Gates had a nicely successful company before he got into Office. Then he rushed to get Office done. We can rattle off a long list of reasons his Board might have claimed that the work on Office was hopeless and a waste. Or he was fighting against WordPerfect, Lotus, and more. Soon enough IBM had about 500 people in CT on OfficeVision. Still Gates won. So, how’d he do that? Not just luck.By Windows 3.1, OS/2 was still a better PC operating system than anything Microsoft had, and the average PC being sold then had plenty of resources for OS/2. Still, Gerstner concluded “I’m not going to drop $1 billion into another PC operating system” and let OS/2 languish while Gates raced ahead with Windows.”Lou, meet Linus; he can do a competitive desktop operating system for much less than $1 billion.”Actually, Lou, your company is the unique, world-class grand champion in operating systems, has the best people in the world, has the best hyper-visors in computing, including for PCs and even OS/2, and can also do the world’s best PC operating system for much less than $1 billion.”Indeed, you have, actually, running, software for a good file system, comparable with NTFS, maybe better, with journaling and more; you knew that, right? For disk subsystems, you have some gorgeous dynamic positioning of physical records: So, heavily used files automatically get their physical records spread across separate hard drives and, thus, achieve parallel performance and eliminate hot spots from busy files and improve average disk subsystem performance; you knew that, too, right? For graphics, you have a hardware shading engine. For TCP/IP, you have that in firmware, on a chip. Lou, you’re ahead.”Moreover, operating systems are important, even crucial, for the future of computing, and from now on the most important operating systems will be on microprocessors and desktops. In fact, the winning desktop operating system will be a Trojan Horse to take over your cherished glass house.”Moreover, as microprocessor hardware takes over the glass house, there will be massive parallelism and, then, a big issue about consistent time and date stamps, locking, etc. across the server farm. Lou, you have the unique, world-class solution to that problem ready to go. You’re ahead.”You can knock the socks off Redmond.”Clearly neither Lou nor his Board understood that, but Gates did.By Windows 95 and NT SP3, OS/2 was still ahead. Finally by Windows XP, OS/2 was dead and buried.How did Gates do that?IBM had DB2 on OS/2 early on. So, how did Gates beat DB2 on PCs with SQL Server? He did, you know.And at one time, OS/2 had a superior list of developers and applications; how did Gates win over the developers? He did that, too.Gates is a bright guy who worked hard and smart and was much more than “eye candy”.Similarly for Jobs.Net, whatever the right stuff is, it’s rare so that it’s tough to expect that both a CEO and his Board will understand it so that, then, “oversight” will be tough for the Board to exercise well. Then a Board that does not understand and wants to exercise their fiduciary responsibility and do oversight is a threat to the CEO and the company. Finally, since a good COB is as rare as “gold”, the CEO and company can be better off with the CEO also COB with a lap dog Board that “does no harm” and, yes, unfortunately doesn’t much to help the company.So, I claim, for the companies of interest in this blog, Boards are a fundamental problem.
Gates is a bright guy who worked hard and smart and was much more than “eye candy”.Similarly for Jobs.You misunderstood my reference to “eye candy”. I wasn’t implying that they are not worthy of their places in history for what they have done. In no way.By “eye candy” I meant to someone reading a blog comment in the same way that NY Post will sell papers if Donald Trump is on a cover story. Ears are perked up and people take notice. More than they will if you mention Fred Smith or Dave Thomas.
LE: Sorry, I wasn’t thinking about the approach to media eyeballs of the New York Post! They get eyeballs from stories about true romantic confessions or some such? Could have some eye candy there!Yes, I could have used Fred Smith as an example. While FedEx remains one of the most successful venture funded companies, it is a bit far from the information technology concentration of this blog.While I don’t know much about Dave Thomas, since for a while I was in Ohio, I have a friend there who served on some charity Boards with Thomas and has some Thomas stories. Thomas and Wendy’s are still farther from information technology.But for Smith: (1) He saw early on that he needed to cut an airplane like a sausage but in thick slices. So he needed ‘containers’, one per slice, that could roll on and roll off a plane. Then he needed a special truck that could head up to the side of the plane and get/put the containers. To this end he got on the phone with a guy in CA; they designed the truck on the phone; and he built the truck and drove it to Memphis. As soon as the Board saw the truck, the Board was horrified. The truck was a little early for the pressing operational needs where the packages were still being handled essentially just in bulk by hand. But the truck was just fine at least as a prototype, and the main idea was rock solid and has become standard in the industry. And, with the right financing, the truck would not have been too soon. Besides, when playing around with airplanes at $2+ million a pop, what’s maybe $50 thousand for a truck? It was just a standard bare chassis and engine with the seat and custom stuff welded on. That it was driven on the public roads from CA to TN is a bit amazing!(2) One guy on the Board had had a lot of passenger airline experience, had noted how difficult it is to have the plane schedules reliable enough for reliable connecting flights, and concluded that the FedEx central hub sort in Memphis was a grand case of such connecting flights and, thus, could never work. The concern was strong enough that the Board was afraid, and $55 million in funding was at risk.Then a guy got an account on a CP67/CMS system, typed in 6000 lines of PL/I quickly, and wrote some software that printed out a detailed schedule for the full, planned 33 planes and 90 cities. Two guys from Board Member General Dynamics reviewed the schedule in detail and announced to the Board, “It’s a little tight in a few places, but it’s flyable”. Smith’s remark was, “Amazing document. Solved the most important problem facing the start of Federal Express.”. Yup, saved the company. Turns out, there’s an ORSA/TIMS ‘Interfaces’ article on that work and its consequences for more in FedEx fleet scheduling.Gee, why PL/I? And why CP67/CMS, a.k.a., later long VM/CMS? And, where’d Smith find anyone who knew PL/I? He was motivated with FedEx stock, about $500,000 worth, that he never got, that today would be worth $50 million to $500 million, give or take.So, after (1) and (2), not so easy to think too highly of a Board.FedEx came from between the ears of Smith. He had it right, right from the beginning. He’s continued to have it right. And he was long, usually, or always his own COB.There could be other examples: IBM’s work, via Blasgen, etc., on R* and DB2 was terrific, and relational database remains a crown jewel of computing. With DB2, SQL (comment delimiters same as in PL/I!), etc., IBM was WAY ahead. Now? Ellison’s Oracle is a big player. How’d he do that? Before we look it up, want to bet a beer on who the Oracle COB has been?
I think the advice of having a balanced board as the company grows up from the stuff between one person’s ears is solid. Steve Jobs and Bill Gates didn’t build companies on their own, the lead them.Your comment could have been boiled down into a single concept, “brilliant CEOs are more hindered than helped by board oversight”.If you could tack on a simple summary on the top of lengthy comments it would provide value to folks who aren’t sure if they want to commit 5-10 minutes to read and think carefully about your comment. I enjoy many of your comments but don’t have time to dig into them all.
> “brilliant CEOs are more hindered than helped by board oversight”I didn’t and wouldn’t say “brilliant”. I did say “rare” “right stuff”.It’s not that “oversight” itself is bad. Good oversight would be good. The problem is, as I explained several ways, for the intended successes, fundamentally a Board will have difficulty understanding the crucial thinking of the CEO and providing good oversight.> If you could tack on a simple summary on the top of lengthy comments …Early on I gave a summary:”The fundamental problem is that so far for our economy such success is necessarily rare….”And if those people don’t understand, then they can easily trip over their fiduciary and public responsibility and their experienced, mature, business judgment and business acumen, fall face down into the mud, and take the company with them.”The rest was to add supporting detail and be more clear. Apparently I wasn’t clear enough.For the threats of the Board’s experienced, mature, business judgment and business acumen, elsewhere in this thread I gave an example from FedEx that nearly killed the company.
Thank you so much for posting this.I am a founder/CEO that is also the default board chair. I kinda suck at the Board Chair role. It is a 5 person board with myself, a seat I chose (domain expert), two investors and an independent. I am going to figure out how to separate the CEO and Board Chair positions.
How do you feel about investors acting as chair?
i’ve done it. it is not ideal.
A concept that seems to be unsaid is that the board is above the CEO, even if the CEO works on day to day – how much is the board supposed to be involved? Where do powers really lay?
i addressed that last week
*headthunk* I was so tired when I wrote that original comment
There is a really nice history show on the BBC called “The History of the Home”, which is only relevant here because through it I learned the origin of the term “chairman of the board”. Apparently, in medieval england, when people lived together and spent time in communal areas, there was always a large table made of a wooden board, (and thus those tables were literally called ‘boards’), with long benches on his sides, and only a single chair at the top. That chair was kept for the richest/most important person, which was aptly called the “chairman of the board”.
When do you need to put a board together and when should the board grow? Are there milestones associated like revenue?
Great article! If you want to learn more about board of directors, I suggest to read this article : http://bit.ly/Board_of_Dire…There are some resources about boards and governance.