Panel
a16z Podcast | Building a Better Board
- Panel Context: Andreessen Horowitz hosted a panel on board governance, inclusion, and preparation, moderated by Shelly Archambault, recently appointed to the Nordstrom board.
- Panelists:
- Shelly Archambault: CEO of MetricStream; serves on boards of Nordstrom and Verizon.
- Raul Vasquez: CEO of Opportune (socially responsible lending); serves on the Staples board.
- Geri Elliott: Former Juniper Networks CCO; serves on boards of Whirlpool, Bed Bath & Beyond, and Charlotte Russe.
- Board Diversity Statistics (Spencer Stewart Study):
- Over 50% of directors in Fortune 500 companies are retired.
- Average age of a board director is 63.
- Approximately 350–371 new board seats opened annually; 41% went to active or retired CEOs/COOs/Presidents.
- 30% of new directors in the most recent year were women (up from 24% the prior year), yet 5% of Fortune 500 boards still have no women.
- 39% of new directors were first-time appointees.
- Minority representation (African American, Hispanic, Asian) dropped from 18% to 12% in new director appointments in 2014; minority women hold only 3.3% of seats, a figure flat for several years.
- 64% of boards surveyed this year are focused on recruiting minorities (up from low 50s), and 71% are focused on recruiting women.
- The average Fortune 500 board size has shrunk from 10.8 to 9 members since 2009.
- Path to Board Seats:
- First Experience: All panelists recommend starting with nonprofit or private company boards to understand governance before moving to public boards.
- Self-Education: Panelists highlight programs at Stanford (Director's College, Director's Consortium), Duke, Northwestern, and Big Four firms (Deloitte, EY) for governance training.
- Networking Strategy: 70% of board placements come through personal networks, not recruiters; candidates must explicitly tell everyone in their network their interest and specific value proposition.
- Internal Preparation: Serving executives should present at their current company's board meetings to build relationships and gather references; securing CEO/chairman support is critical to prevent last-minute disqualification.
- Value Proposition & Positioning:
- Boards typically seek a defined skill set rather than generalists; top five requested areas are financial expertise, international expertise, specific industry knowledge, risk management, and IT.
- Candidates should articulate a concise "elevator pitch" with a maximum of three key strengths to ensure they are memorable to searchers.
- Board Selection & Due Diligence:
- Time Commitment: High-performing boards expect 80 days of engagement annually; average meetings translate to 20–40 days per year, averaging 28 days.
- Evaluation Criteria: Candidates should vet the company, CEO, team, compensation, geography, and meeting frequency.
- Red Flags: Panelists cite poor board dynamics ("evolving" board members) and excessive special meetings (e.g., 20 in one year) as reasons to decline offers.
- Strategic Inquiry: The number one due diligence question is asking about the board's succession plan to assess long-term governance stability.
- Decision Logic: Candidates should not accept the first offer but should evaluate if the role aligns with their specific value proposition and desire for growth (e.g., avoiding private boards that feel like second operating jobs).
- Future Outlook & Challenges:
- Turnover: EY projects 27% turnover in Fortune 500 board seats over the next five years, driven by directors approaching age 72 or completing 10-year tenures.
- Network Gap: 74% of current directors are white males, creating a barrier for diverse candidates who are not embedded in these existing networks.
- Compensation for Diversity: Despite studies showing diverse boards improve ROI, ROS, and return on invested capital, the pace to reach 30% female representation is projected to take 33 years at current speeds.
- Motivations for Service:
- Professional Growth: Executive panelists serve to become better operating executives by understanding the director's perspective.
- Impact: Desire to influence company strategy, oversight, and innovation as a "thought partner" rather than a passive observer.
- Learning: The role offers continuous education in complex areas like audit committees, executive compensation, and risk management.
- Board Dynamics:
- Successful boards function as a "team sport" where directors challenge management constructively; a good board should complement the CEO's team rather than feel antagonistic.
- Directors must exercise discipline in knowing when to engage deeply and when to defer to management expertise.