Last week, we published an article related to how board members can be sure to earn and hold on to their board seat.  This week, we shift focus back to the CEO perspective and discuss who should be invited to board of directors meetings.  There are many schools of thought on whether or not management team members should participate.  The below article highlights several reasons to keep such meetings strictly to board members and investors.

Below is a condensed and edited version of a dialogue between Kineticos Founder and CEO, Shailesh Maingi, and Kevin Hampton, Chief Commercial Officer at Kineticos.

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Kevin: We recently outlined a few things board members can do to ensure they are adding value to a biotech board but let’s shift back to the CEO’s perspective and talk a bit about who should actually be included in quarterly board meetings.  From my experience, there are different approaches when it comes to the involvement of management team members in a board meeting.  Clearly, every board member should be required to participate but what about the heads of various critical functions within the organization such as sales, marketing, ops, finance, etc.  I could see scenarios where it’s helpful to have them involved, such as letting the board get a feel for the key stakeholders, and I can also envision situations where a more exclusive board meeting could prove to be more productive.  What’s your perspective here, Shailesh?

Shailesh: The way boards have been managed has become more and more lax over time. Especially with private companies, it is more common to invite management teams to these meetings. This could mean the private equity company or VC company that has a financial interest in the organization wants to know everything and wants to talk and hear from all the key stakeholders. However, I’m pretty old school and think management should not be invited to most board meetings. This is, or at least was the standard.  There are times where an exception can be made but by and large, the management team shouldn’t be invited. In my personal experience, it’s typically the CEO and the CFO with the CFO running through the numbers and the CEO talking about the key strategic issues that are facing the company. However, if the CEO has a finance background, the CFO doesn’t need to be there.  In many startup biotechs, the CEO is an entrepreneur, so they are likely going to have a science background, medical background or commercial background but often not a finance background. Similar to the CFO example, if a CEO needs help explaining a key business issue that is on the meeting agenda, that’s a good reason to invite the functional lead. They don’t need to be there for the whole meeting but there could be a lot of value in having them lead a discussion specific to their function.

For me, the biggest reason to keep management out of the meetings is because it can be difficult to have candid discussions with the CEO about the performance of the company if board members and investors have to worry about what is said.  The reason it’s hard is because you never want to make a CEO look bad in front of their subordinates and potentially damage their credibility. Remember that it’s a board meeting for board members and participants should be limited because it makes it easier to have open discussions about the performance of the management team, the CEO, and the company.  If a board is interested in getting to know the management team members, which is a good idea, they should invite them to the board dinner the night before.  Those dinners are more casual and are a better venue for people to get to know each other.

Kevin: That makes sense, Shailesh. I’ve been invited to present at board meetings for just an hour slot and then leave. Is it common practice to bring in a functional head for an hour or so to either present or be involved in a discussion specific to their function?

Shailesh: It’s very common and that’s what I was alluding to earlier.  If the CEO needs help explaining the details of a specific functional topic, then bringing that person into the meeting would make a lot of sense but inviting them just so they can be there is not a good idea.  Board meetings are not for management development or to reward for doing a good job. That’s just not what these meetings are for so keeping them more exclusive is best.

Kevin: To summarize, your suggestion is to have independent investors, board members, a CEO, and maybe one other person in the room during the entirety of these meetings and the management team would only participate on an as-needed basis?

Shailesh: Yes, non-board members shouldn’t be at the meetings unless they’re an investor. If they’re not a member, they can’t come. The only people that should be at the board meeting are official board members, invited guests and any board observers. Board observers do not have voting authority and they don’t make decisions, but they should be in the room.

Kevin: We haven’t talked about the role of a board observer.  Can you elaborate?

Shailesh: Their primary role is to listen, understand what’s going on and then report back to their investor but they don’t have a voting interest within the company. Many times, a board observer will be a minority investor. For example, there could be a new investor that has only 1% ownership and, in this scenario, the CEO and the board may decide to give that person a board observer role with the idea that if he or she invests substantially more, they would be good to get a board seat.

Kevin: The structure of these board meetings can get complex but it’s important for CEOs to remember that these are board meetings, not management team meetings.  It’s the CEO’s responsibility, with support of the board, to determine meeting objectives and then develop an agenda with an attendee list that will give him or her the best chance to achieve the meeting objectives.  In that sense, it’s pretty simple.  Now, actually executing and running effective board meetings is another tough task for a CEO. We have talked about it anecdotally, but in our next discussion, let’s dive into the nuances and details of what it takes to come out of a board meeting with a feeling of accomplishment.

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