This blog is written by Samantha Truex, Atlas EIR and CEO of a stealth-stage biotech, as part of the From The Trenches feature of LifeSciVC.
In a 2014 analysis of biotech boards and a reprise analysis in 2016, Bruce Booth worked with life science recruiter Catalyst Advisors on this board talent blog. They estimated the demand for talent at >600 biotech Board Director spots needing to be filled in the few years following October 2016.
A critical question posed by Bruce and Catalyst Advisors was, from where will the talent come? This issue is not unique to biotech. According to Spencer Stuart’s 2018 board report on S&P 500 boards, 428 new directors were appointed to S&P 500 boards during the 2018 proxy year, the most since 2004. So the search for talent to fill board seats is vast.
In the original post, Bruce stated, “When I’ve brought this up in the past few weeks, some have dismissed this as a less critical issue, and that the world is full of great Board Directors waiting for their turn – including lots of folks out of Pharma and Big Biotech ranks. It may be true, but finding the right talent for the right Board is not easy and is often a months-long process.”
How have we fared so far in filling those >600 board seats? Have we recruited all those “great Board Directors waiting for their turn?” Perhaps we have expanded with more diverse candidates? Age diversity is discussed here; gender diversity is widely discussed and was recently mandated, at least for public companies in California. But I’ll leave it to Bruce and Catalyst to assess the actual data on just how the seats are being filled.
My focus here is the decision process – both by the board seeking to fill the positions and by the candidates choosing whether to join. What makes a biotech board functional and effective? I don’t claim to be an expert on these topics, but do have some relevant experience and collected advice from those with years of wisdom.
A little background: In the last 5 years, I have had the privilege to join 2 corporate boards, a non-profit board and a board of my alma mater engineering school. Prior to 2013, my official board experience was slim, yet my exposure taught me much. I had chances to learn meaningful lessons from various board interactions, including:
- Spent my 27th birthday at a board meeting of Chiron Corporation. Thought I was pretty hot stuff at the time, though I said nothing in the meeting and the deck of data-filled slides I had prepared on a deal to sell Chiron’s diagnostics business was not reviewed because the board had already read it. They delved directly into the debate on whether to sell. I was naïve enough to be disappointed that they didn’t discuss the slides. Now I realize that was a sign of a prepared board using its precious time to debate the merits of the deal rather than dwell on accepted facts.
- Made a few deal presentations to the board of Genzyme in the 1998-2006 timeframe. I highly respect Henri Termeer and believe he was a truly gifted leader that I and our entire industry still benefit from substantially. That said, my few exposures to the Genzyme board he chaired gave me the impression that the other board members didn’t challenge him much. I was naïve enough to think it was great that they seemed to go along with Henri’s suggestions without much discussion or debate. Now I realize that the role of board members is to seek to understand, thoughtfully challenge and support those decisions they view in the shareholders’ best interests.
- Made a few presentations to the Biogen board in the 2006-2014 timeframe and saw it invaded by Carl Icahn’s activism in 2007. I learned of a polar opposite culture to the one I had witnessed at Genzyme: one in which the pre-Icahn CEO and some board members seemed adversaries; one in which attendance was restricted to the elite, so employees like myself who did the ground work were allowed in only for fleeting moments; one in which board members not only aggressively challenged, but dabbled in micro-management, as well.
- Performed diligence on and acquired companies whose boards’ decision-making processes and timelines determined the fate of the deal at hand.
- Participated as a board observer representing Biogen’s interests on the venture-led board of iPierian and spin-out True North. Though Biogen’s equity interest was small, I maintained the role for my own development. Not knowing what to expect when I joined, I was pleasantly surprised that board leaders sought my view. I learned from that experience what is expected of board members and observers.
Having moved full-time in 2014 to the venture-backed start-up world, I’ve had the pleasure of interacting with several private company boards. While I have certainly heard stories of dysfunction on boards, I am grateful to say that I’ve witnessed only mutual respect and effective discourse in my private company journey thus far. In 2018, I took the next step; I sought the counsel of wise, multi-board members like Michael Gilman, Tom Hughes, Gail Maderis and Rob Perez when I had both the chance to join a private company board and the chance to begin to build a private company board as a CEO. I also attended “The Board Meeting” seminar in July focused on the function and responsibility of life science boards. Between those advisory sessions and the experiences described above, I’ll share some views.
What should a company want in a board?
It’s tempting and easy to reach out to people we know and like to fill potential board seats. Yet it’s prudent to lay out a strategy for building a board with desired characteristics and dimensions, then use that strategy as a yardstick to measure the candidates.
In general, one should seek a to build a board composed of individuals who:
- take seriously the responsibility of representing shareholder interests;
- have a set of complementary skills and experiences across the group, most likely ones that are relevant to the company’s business; (though a fresh viewpoint from a strong leader in another industry can be valuable if you have enough board seats to accommodate, as I learned when I asked Vicki Sato in 2014 how she came to be on the board of automotive supplier Borg Worner)
- have the time and interest to engage in thoughtful discussion and challenge the issues presented by the management team;
- have the disposition to engage respectfully at all times;
- have the wisdom and courage to make a change where necessary in their most important role – determining whether the CEO is the right leader for the company;
- have the self-awareness to consider periodically whether/how they continue to be a functional board and to set goals to improve as a board, where appropriate.
In seeking complementarity, one should specifically look to complement the investor board members with independent, experienced leaders. Investors themselves have varied experiences. If the investor board members are life-long VCs, it probably makes sense to complement with independents who have operating experience. If the investors are marquee deal makers, then adding an independent with transaction experience is less impactful than one with years in discovery research or regulatory or market access, depending on the company’s stage. If the VCs became VCs after 20+ years of C-level biotech/pharma experience, perhaps they serve as strong advisors on corporate leadership. That said, having an independent board member with experience in VC-backed board settings is critical to ensuring advocacy for management at the board level.
What considerations should a candidate ponder in determining whether to take a board seat?
Spencer Stuart’s suggested due diligence list for board candidates contains much of what I heard from wise advisors:
- Do I really understand the business model?
- What do I have to offer this company?
- What will be expected of me as a director?
- Do I feel comfortable with the chair? Will he/she support me and provide me with the space to contribute?
- How effective is the board I am about to join?
- What is the relationship between the board and management?
- Will I have the credibility to influence boardroom discussion?
Based on my discussions with advisors, I came away focused particularly on #2 and #7. What do I personally offer to the company and the board that is complementary to what they already have? What experience, capability and access to network can I bring uniquely to this board? Does the management team and board recognize and respect my credibility to make that unique contribution?
Some important considerations from my wise advisors that are missing from Spencer Stuart’s diligence list:
- Do I have the time to be effective in this new board role while remaining effective in the roles I already have?
- For VCs whose job is to create and participate on boards, maybe 10 boards works fine.
- For a retired executive with ample time and experience to share, maybe 5 private and 2 public boards works fine.
- For a first-time CEO, maybe one other board is ideal – brings good perspective, but doesn’t dilute attention too much.
- What will I get out of this board role? Is it more valuable than what I could get out of spending that time and energy in another way?
- In addition to providing a valuable service to the company, will I gain experience that could be useful in my daily job?
- Will I get to know a realm of people who are not in my current network and who bring different viewpoints than my current network?
- Is there any conflict of interest or a chance that this company’s activities will someday be competitive with those of my employer?
- What is the expectation for the endgame?
- Is there a term to this role? Are there term limits? Mandatory retirement age?
- What impact will I have on the company if I ever decide to leave the role? (Particularly important consideration for a public company board seat)
When considering building a board, it seems prudent to be as thoughtful about the choice of directors as we would want the directors to be about the decisions of the board itself. I feel privileged to have been invited to join a strong, complementary board at Hotspot Therapeutics and to have recruited a talented, deep thinker as an independent member of the board we are building at my new gig. More on that when we come out of stealth mode!