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Playing The Board Game
Advice to Entrepreneurs: Do Not Pass GO Without The Right Board 
Behind You

(Washington, DC -- January 23, 2002) Once, long ago, when Bruce Crockett was, as he puts it, “just a lowly Division Manager, knees knocking, making presentations to the board,” a wizened board member and former President of NBC told him, “Just remember young man that a board meeting is no place to make decisions.”

Since then, Crockett has himself become a veteran businessman and has made manyArt and Bruce presentations to many boards -- especially in his former role as President and CEO of COMSAT. He has also held seats on the boards of some 30 corporations and other organizations. Crockett was a speaker at this morning’s Netpreneur Coffee & DoughNets event, a panel discussion entitled, “The Board Game,” that offered guidance for entrepreneurs on how to build, use, and manage an effective board of directors or board of advisors. Joining him were Raul Fernandez, CEO of Dimension Data North America; Art Marks, Chairman of the Mid Atlantic Venture Association; moderator Jonathan Shames, Partner at Ernst & Young; and Mario Morino, Chairman of the Morino Institute.

In his wrap up to the session, Morino summarized for the audience, “Putting boards together may be one of the most important things you do.”

That’s especially true if your ultimate goal is to one day become a public company. Government regulations change many aspects of doing business for publicly-traded firms, including the roles and responsibilities of board members, which is one reason why Marks said, “I generally advise companies that the best way to eventually become a public company is to start acting like one from day one.”

How should an entrepreneur use his or her board? According to Marks, “Take all the board’s experience and knowledge, and get it to work on an issue or to help solve a problem that is hard for you to solve yourself. If you can solve it yourself, then you don't need the board.”

The speakers covered a broad range of practical topics and tips for entrepreneurs, such as the differences between boards of directors and advisors, rules of thumb for compensation, the need for Directors and Officers (D&O) insurance, the right kind of board at the right stage of growth, and much more, including tactical advice for managing meetings, communicating with board members, and building relationships.

All of the speakers agreed that the single most important lesson to be learned is to select board members carefully based on your company’s specific needs, not on their marquee value. In building his original board, for example, Fernandez realized that he particularly needed expert assistance in four key areas -- branding, technology, global expansion, and solid business contacts -- so he aggressively sought out people who brought exceptional power in those areas. Fernandez may have been both lucky and unique, however, in that the four people he built his board around had both strength and marquee value: Ted Leonsis of AOL; John McKinley, CTO of GE Capital; Jack Davies, former president of AOL International; and former Congressman and Vice Presidential candidate, Jack Kemp.

How was he able to assemble such a stellar team of advisors? Having credible financial backers is the first thing he credits, and after that he says it's a sale, like any other sale, and you have to treat it like one. He said, “You have to be prepared. You have to know the background, and you have to know what their decision-making factors are. You have to approach it that way. You are going to have to have a pipeline that is bigger than the target that you need to close on.” Other tips for attracting solid board members came from Marks, including: have an interesting company, prove that you will listen to their advice, offer an exciting opportunity, and, of course, financial incentives.

Raul answering questionsWhen you assemble a board, strive for diversity, and avoid the common mistake of adding your advisors, such as lawyers or accountants or investment bankers. As Crockett noted, you're already paying them for their advice. Instead, he said, “What you need are people who have different experiences and perspectives who can work with you, help you, and move the company along.”

There was consensus that a smaller board tends to be more effective than a larger one, that trust and personal relationships are essential, and that proper management is the key to getting the most value from your board. For example, remember that piece of advice Crockett received about board meetings not being the place to make decisions? It had a very specific meaning: there should be no surprises at the meeting. You should have been communicating openly and regularly with each board member all along. If a decision needs to be made, you should have lined up how each member will vote and what the result will be before the meeting starts. As Marks put it, “Don't get distracted and say, ‘I have to run a good board meeting!’ It’s that you have to run a good board. Some of the process takes place in the meeting, some of it takes place at coffee, and some of it is a phone call or an E-mail.”

A board has to operate as a team or a family, but not a dysfunctional one. There will be disagreements, so confront them. Respect different points of view, advised Marks, but don’t fall into the trap of letting the board of directors become a managing body. Good boards are about governance, not tactical management, and, according to Marks, “You can't focus all your energy on woulda, shoulda, or coulda. Your whole board process ought to be on what is next.”

Although good boards are based on trust and relationships, entrepreneurs have to remember that a director’s fiduciary responsibilities are to the company’s shareholders – not the CEO, of the executive team, or employees.  Hopefully, there won’t be a conflict between the constituencies, but there can be. For example, some members of the board can represent shareholders with special interests, such as venture capitalists.

Morino closed by urging everyone to invest the necessary time in assembling the right people and in maintaining productive relationships with each board member, regardless of how long it takes. It’s just that important.

“You're placing your firm and career in their hands when you create that board,” Morino said, “Especially when you hit the public markets. They are your board. You live and die with them, so you’d better have them on your side.”

Copyright 2002, Morino Institute. All rights reserved.

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