San Diego, California. Thirty years ago, a modest grocery business was founded by John Woods. Throughout the years, his tireless effort turned a small company into a strong organization led by John and his wife. For the past ten years, their offspring Tony, Maria, and Bill have been running the company from different management positions, employing more than two hundred people with twelve stores across the city. It was a natural step for the Woods children to come to work in their father's store after they graduated. Even in their late fifties, they look back at their choice to join the business with no regret.

“Networking is the No. 1 unwritten rule of success in business”

Meghan serves as President and Chief Data and Analytics Officer at Three Arc Advisory. She also serves on the Advisory Board of the Athena Alliance, a private for-profit organization in the US. In August 2023, she joined the Private Directors Association’s Chicago Chapter and sits on the National Cybersecurity Committee and the Chicago Chapter Programming Committee.

This is the first of three blog posts that will address certain key issues that the Board of Directors of an Employee Stock Ownership Plan (“ESOP”) owned company need to focus on: (1) Fiduciary Duties and Standard of Care; (2) Conflicts of Interest and Independent Directors; and (3) Unsolicited Offers.  The focus of these blog posts is on the difference between issues in ESOP owned companies, compared to privately owned companies.

During the last decade or two, boards have become newsworthy. Questionable practices, a string of missteps and failures of various kinds, and sanguine CEOs and assertive executive teams that 'take over' have seen boards become highly topical, targets of both curiosity and criticism in the business media and, increasingly, the wider public. While public companies have garnered most attention, private companies and family firms have not been immune to missteps and failure.

Be it as a board director, advisor, or executive, it is unfortunately common to witness teams and individuals fail to put forth the necessary resources and effort to meet the full measure of expectation in their elected or appointed role. This results in a breach of the fiduciary responsibility, but also a failure to the spirit of the governance role. I believe this to be witnessed and understood as a frequent reality by many aside from myself. Boards and organizations will set an expectation for a desired outcome, then fail to fully commit the resources or time necessary to accomplish the outcome. Individuals may initially drive towards a goal, but then enthusiasm wains. This behavior can apply equally to processes as to goals. Process improvement systems have a full cycle of gaining understanding, execution, and follow-up, yet many times one or more of these steps are skipped. Why is this? Why is it so prevalent in the professional circumstances we find ourselves in?

Artificial Intelligence (“AI”) is revolutionizing the world, akin to past innovations such as electricity and the internet, profoundly impacting global society.  AI stands as one of the most transformative, beneficial, and concerning technologies of our time, and while some embrace its potential for improving humanity, others caution against its perceived threats, echoing the same debates attending the emergence of the internet and other potentially disruptive innovations.

Denney’s and Petree’s Transformative Leadership Approaches and Proven Experience in Growing Organizations to Elevate PDA’s Houston Chapter

The Private Directors Association (PDA) is pleased to announce the appointment of Kim Denney as President and Jennifer Petree as President-Elect of its Houston Chapter. With a proven track record of helping companies define and realize their next stage of growth, Denney and Petree bring a wealth of experience and expertise to guide PDA’s Houston Chapter to new heights.

The role of a company's Board in interpreting, challenging, and guiding enterprise strategy incorporates responsibilities and actions to ensure strategic success and long-term value. The Board's fundamental mandate involves providing insight, foresight, and oversight on critical issues that drive the company's governance as it advances its Strategy, operations, financial performance, and stakeholder engagement. Effective boards are characterized by a compelling mission, a transparent engagement model, and impactful information practices, forming the foundation for Board value delivery. They honor core leadership values and skills, such as solid ethics, integrity, and a commitment to progress, while embracing a learning mindset and entrepreneurial energy.

The contemporary business landscape is a dynamic arena where success is not merely a destination, but an ongoing journey marked by ever-evolving market dynamics, shifting customer preferences, and relentless competition.  As such, boards of directors (BODs) and the organizations they support need more than traditional strategies and decision-making processes.  They require a guiding force to help them set the organization’s future direction.

Questions to Ask in the Boardroom

1. What would be the benefit to the board and the members to have different nationalities on a board?
2. How has organizational hierarchy prevented the diversification of boards, and how could a well-designed organizational hierarchy support board diversity?
3. Addressing physically challenged people is the new language.  What do board members need to know about old and new baselines so they can respectfully invite physically challenged people to be on the board?

Nationality

Organizations and boards are beginning to realize that in order to be competitive in the work market, they must recognize the need to encompass customers of many nationalities with distinct cultural backgrounds.  Members of businesses need to speak about, become aware of, and know what is needed to support various nationalities in their work environments.  This is also true of board members who have oversight of these organizations.

The prospect of a successful exit represents not just a financial milestone but a testament to the strategic acumen embedded within a company's DNA. The Board of Directors, with its collective wisdom and foresight, plays a pivotal role in steering a company towards such an outcome. Specifically, board members with a background in post-merger integrations, marketing, legal, and finance bring invaluable insights that can make a company not just ready for an exit but desirable to the best suitors. 

Questions to Ask in the Boardroom

1. As board members, what do you know about gender issues such as gender identity and expression, which relate to how people see themselves?
2. What are the facts about the number of women that are on boards today?
3. Are white males an asset to diversity initiatives, and what will they need to learn to utilize their position and knowledge to help diversify boards?

Introduction

As a consultant for organizations and boards, I combined the old baselines identified and developed new baselines.  In 2002, Frederick A. Miller and Judith H. Katz wrote the book, “Unleashing the Real Power of Diversity”, San Francisco, Berrett-Koehler Publishers, Inc, pages 82-94, they gave a more limited version of the old baselines and addressed the new baseline in the nine areas.  I have combined my list with their list since it is a more accurate way to assess a board or organization’s composition. 

Those with an investing background can help in the areas of strategy, capital allocation and the CEO relationship.

There’s a New Cyber Sheriff in Town

“Data protection” is an umbrella concept that incorporates both cybersecurity and data privacy.  The European Union has been the leader in advancing this concept first with its Data Protection Directive and now with its General Data Protection Regulation.  The influence of these laws on the U.S. has been profound.  Recently, the SEC issued guidance for publicly-traded companies mandating, among other things, notification of data breaches within four days and publication of the company’s cybersecurity risk management processes.  Such national-level breach notification mandates have appeared in other contexts in the U.S. as well as the EU.  Moreover, the advent of generative artificial intelligence has greatly amplified the power of cyber threat actors. Private companies that conduct business with public companies or may merge with a public company will likely wish to adhere to these standards as well.  Overall, data protection is now a board-level matter.

As board members, we grapple with formidable challenges in overseeing AI governance to ensure responsible and ethical implementation. Instances of biases and discriminatory outcomes in AI systems, particularly in hiring and financial processes, demand our attention to uphold fairness. The escalating complexity of AI decision-making processes raises concerns about accountability and transparency, necessitating our proactive addressal. Recognizing the urgency in navigating data privacy challenges to comply with regulations and prevent potential misuse of personal information, we must align our AI strategies with evolving global legal frameworks to avert legal repercussions and reputational risks.

Chief security officers must communicate with the Board in a risk-focused, business-aligned, and data-centric manner to inspire confidence in management.

The Consequences of the OpenAI SAGA Continue to Evolve

There has been a lot of news about OpenAI in the past few months. 

The three objectives of this blog are: to 1) share the extraordinary risks of AI; 2) give a little history on the company OpenAI, as well as the stunning ouster and reinstatement of their CEO; and 3) most importantly, explore best practices for board members in case they encounter a situation similar to the ones faced by OpenAI’s board.  We'll focus on two key aspects of board governance: first, when the board feels that communication from the CEO is not consistent and hampers their ability to fulfill their responsibilities; and second, the considerations involved in evaluating the removal of a CEO from office.

Commemorating a Decade of Enhancing Private Company Value

Chicago, Illinois, Feb. 13, 2024 – The Private Directors Association (PDA), the only national association dedicated to improving private companies' growth and sustainability through board governance, is proud to announce the 10th anniversary of its founding. Established in 2014, PDA has flourished into a burgeoning national ecosystem, counting over 3,300 business executives, corporate members, and sponsors whose shared mission is to advocate for excellence in private company board formation and governance practices. 

Reflecting on the organization's accomplishments, Elaine Eisenman, PDA's Board Chair, remarked, "I am honored to chair the PDA Board of Directors during this landmark year in PDA's history. Since our inception in 2014, we've strived to serve private companies across the globe with the resources to sustain their growth through excellence in board governance practices. The Private Directors Association extends heartfelt gratitude to the founding members whose vision and dedication paved the way for our future success." 

A Key Competency for Board and Advisory Directors

The ability to pose incisive questions is not merely a skill; rather, it is an art form.  Used in company governance, it wields transformative influence over the trajectory and vitality of an organization.  As a seasoned board director, I have borne witness to the profound impact that the art of questioning can have on steering effective decision-making, fostering transparency, and cultivating a culture of accountability and innovation.  In this article, I seek to delve into the profound importance of mastering this art for board directors, drawing insights from the National Association of Corporate Directors (NACD) 2023 Blue Ribbon Commission Report, "Culture as the Foundation: Building a High-Performance Board."