a16z Podcast - a16z Podcast: The Truth about Serving on Boards (with Diane Greene and Marc Andreessen)

Episode Date: March 20, 2015

Diane Greene -- who is on the boards of Google and Intuit -- has some golden rules when it comes to serving on boards. No 1: “You don’t want to tell them how to do strategy, whether it’s a big company or a small company,” she says. “That’s not your job. Your job as a director is to ask questions.” Lots of questions. In this segment of the a16z Podcast, a16z's Marc Andreessen and VMware co-founder and former CEO Diane Greene have a candid conversation about their experiences on boards from the perspective of both company founders and board directors. “I’ve almost never seen a problem that couldn’t be solved by better communication and consistency,” Greene says. That's rule No. 2. [This talk took place as part of a training program in corporate governance that a16z organized with the Director’s College at Stanford on March 5, 2015.]

Good. So thanks everybody for coming. We're thrilled to have you all here. We're going to have, Diane and I are going to have a conversation this morning about, so we call it directorships in the real world. I understand that you all have gotten sort of a lot of the formal view of how boards are supposed to properly work this morning. We will try to not contradict everything you've already heard. So loosely what I'm going to do is go through kind of a set of topics, pose a set of questions, and then I have my answers to the questions pre-prepared. And I is not, which is going to work out well from... Like I'm on a game show here. Which is going to work out well for me. So let me start with this. Let me start with this. So my experience, and this is going to be a long question, but it actually is a question. So my experience with boards is that there is a spectrum of how directors think about being

on boards. And that spectrum could loosely be defined kind of to the far left as director on a startup board, a brand new startup board, where basically there's nothing to the company yet, and it's a process of a team constructing something out of nothing, right, building a new company where one didn't previously exist. And kind of the platonic ideal of that kind of board is it's kind of all hands on deck, everybody in the same team, everybody rowing in the same direction, everybody contributing as much as they can to try to build something valuable. Then you've got on the other side, the platonic ideal of a director of a large public company

that has been in existence for a long time and has a kind of a fully developed business model. And two people I respect tremendously as directors, Reed Hastings, who I serve with on the Facebook board, as well as a very accomplished executive named Ken Thompson, who I was on the Healy Packard Board, with for years kind of have the same view of the other extreme, which is they would go so far as to say

it's a mistake for directors to attempt to contribute to the company. And the reason they say that is because, especially for large established public companies, the argument goes, you actually don't want directors leaning in and trying to figure out how to contribute to strategy or how to come up with ideas, because what you really want is a very clean view of the performance of the CEO and of the sort of, you know, of the conduct of the company that you're responsible for, and you don't want to warp the company by having the director, having the CEO feel like he or she has to listen to the directors on strategy ideas or on operational ideas, because

you have the potential to warp what the company does and how the CEO operates, and that compromises your ability to actually oversee the CEO and then ultimately make the decisions about CEO hiring and firing. And so this is sort of, as you tell, that's the opposite view, which is basically you sit in board meetings and you listen and you learn and you're ready for kind of when bad things happen, but otherwise you don't really attempt to take an active role. What's your view? Like, would you agree that that's the spectrum? By the way, Diane is on. some very, very large boards of some very important companies, including Google and Intuit. And so she has experience, like I do, kind of from the full spectrum of private companies,

all the way to, you know, very large established public companies. Do you agree with that? Free startup boards, and I don't do them anymore. Okay, right. Well, including your own, including your own. Oh, not counting my own. I'll do that one. Yes, yes, yes, yes, and Vimmer, of course.

So do you agree with the spectrum, and if so or if not, describe, and then kind of where do you fall out in your experience? What do you think is the responsible way to think about this? Well, I've always thought, yes, you need to watch and see how the CEO is doing, but I think it's really great when the board members can ask questions that, I mean, the board member frames things in their mind very differently from people inside the company. And so you can often ask a question that was just coming at such a different angle from people immersed in the day-to-day that it's really useful to them.

And I think that's true in early-stage startups as well as really big companies. And then the other thing I think about big companies is, yes, you totally agree. You don't want to tell them how to do strategy. I would never do that. And they're going to be better at it. I actually like to think in an early-stage company, you shouldn't be telling them how to do strategy either because, you know, as a, you know, you're a board member. How many boards are you on? and how many other things are you doing,

whereas the people inside the company, that's mostly all they're doing. It should be all they're doing. In my case, I'm a little handicapped, but they should, you know, they're immersed. That's what they wake up in the middle of the night thinking about if they happen to wake up. And so they should be driving this strategy.

But your job is still to ask questions. But the other thing I was going to say is something I found incredibly helpful to sort of be up to speed in any company I'm on the board of is, you know, now and then you know, I'll have some kind of specialized expertise

that there's some place in the company that that might be helpful to so they'll ask me to come sit in on a meeting and ask questions and then I'll kind of have lunch with people or whatever and I get a very different view of the company that

it really informs helps me ask better questions when I'm in a board meeting. Right, right, right. So let me ask you this. So a lot of what you're saying is, you say asking questions,

it's almost like a Socratic dialogue opportunity. Yeah. Which is even if you have a point of view on something, maybe the best way to express that is in the form of questions. Because you can leave the discussion. I might be missing something, but how are you? Yeah, exactly, exactly, exactly.

And then, so let's, Let me drill in more specifically on the thing. So suppose you're sitting at the Google board meeting or the Intuit board meeting, and you actually have what you feel like as an actual legitimate idea of something that they should consider doing. That's not in the form of a question.

How often do you volunteer that versus how often do you say, you know what, that's not my job, that's not my role? To your point, I'm not immersed in the business. I probably don't understand as well as you do. I don't ever suggest something. That's like a golden rule. Okay.

But I, you know, I'll say, well, you know, when you have that event, do you do this? Right, right, okay. Which is sort of a suggestion. And do you find, without naming names, without naming names, your fellow directors, and you've worked now with a cross-section of directors on boards, where do you find that people fall out on this? And have you seen people, again, without naming names, have you seen people get into trouble, get overly involved? But I've seen people waste a lot of time at the board meeting. Right, right.

You know, I mean, every day or then you get someone that starts telling you, well, my wife uses this. She, like, thinks about it this way. You're like, that's rare. You and her go out to dinner tonight and talk about that, right? Is that the kind of, yeah, yeah, take that offline. I got to say, I struggle. So I struggle with it.

I struggle with this idea. I'm just such a national, so I'm just sort of, I'm really, really interested in the topics that are being discussed. I have a strong desire to help. We'll come back to this later, but like a big reason why I'm on boards when I'm on boards is I'm, you know, I'm trying to serve. I'm trying to serve. I'm trying to get back. I'm trying to help. I'm trying to contribute.

And then, of course, I don't know, I have like a lot of ideas. And so I really, this is something I really struggle with is that, you know, you're having the discussion. You're like, boy, you know, I've seen this, I've seen this situation before and in this other circumstance that turned out a certain way. Have you mastered how to pose your idea of the question? Well, I try that, yes. That's the goal. See what I just did? Yeah.

That was well done. That was well done. It's a real-time coaching going on right here. Exactly. The other thing I found that works incredibly well, and maybe they're just indulging me on it, but I have found that it works well, is that I just, again, in my later discipline years,

I'm trying to get better at this, is to just keep a, instead of bringing anything up in the board meeting in that department, just keeping a list, and then having, when I have one-on-ones with the CEO from time to time, you know, running ideas past them or giving them, you know, giving them things where they can take it or leave it without it being in the full board context. Oh, that's really interesting. Yeah. Yeah. Without it being something like... One of my boards, one of the people who's like, really, an incredible person is a little more

like that and can be a little prescriptive. so you need a really strong management team if you're going to do things like that you have to be really careful if the management team isn't strong enough to handle, you know, because they have even more context. It's funny, as you were saying, writing things down, I found

I had to you know, I tend to sometimes see some problem way out here, you know, and I'll go oh, but don't you think, you know, could this happen if you do that and people like ignore me and like she's crazy. So what I've learned to do is when I have one of those is I write it down and then I fill in the blanks back to today

step by step, and then I can raise my hand. I go, well, so, you know, if you do this, do you think this could happen? And if you did that, you know, that might happen. And, you know, this would be really a problem. Have you thought that through? Well, the goodness is still a question. It just has become an eight-part question.

Yeah. Yeah, right? Exactly. Okay. So let's actually jump ahead. You referenced a topic that I was going to cover later, but let's jump ahead to it, which is, what in your view, like, describe if you could. Like, what is the nature, what's the nature?

So boards, I find boards are funny constructs for two reasons. It have very little to do with the rest of how business operates for two reasons. One is it's a committee, and it's not at least typical in modern companies that there are a ton of committees running around because a lot of people have learned that committees don't necessarily make great decisions. boards therefore are set up as committees. But we'll come back to that. The other one is just is the knowledge gap,

which is you've got this. The board kind of by definition, maybe it meets quarterly, maybe it meets every two months on a formal basis. Maybe there's some level of informal interaction. But directors really are, you know, the term outside directors really is, you know, outside. Like people, you're coming in from outside. What I find is from board meeting to board meeting, you know,

with any of these companies, lots of stuff has happened, lots of stuff has changed. What do you find is the nature of the knowledge gap between the director and the management team and what's an appropriate knowledge gap? When does the knowledge gap get too broad? I believe you can never

close it because to be able to close the knowledge gap the directors would have to be involved full time in the company which would then they'd be executives and not directors but at the same time you know you have this problem of like how can you possibly have points of view on the company if you don't actually know what's going on so how do you think about that and how do you as a director what do you think your responsibility? Yeah it's been really a challenge for me I mean unless so add into it where they don't have such a broad range of products.

And I've been on the board six years, and I know I'm all pretty inside out, and I make it a point to use them, and I make it a point to use as many Google products as I can, but I'm not launching satellites and, you know, doing these other things. and so what I find is it's important for me to have depth in one part of the company because the company has a uniform culture and so I have a context for anything I'm hearing about and in a few ways I can calibrate because when they talk about the area where I have a lot of depth the way I hear them talking about it and how that calibrates with what I know

to what I believe to be true gives me a way to calibrate when they're talking about other things and then you know sort of cultural things I see in the company are probably pretty constant across the board so that's kind of where

I've settled you know how I help myself be up at speed right right you know and then one of the things I've seen in companies with and you may not have seen this because those companies have done very well over the last during the times you've been on the board but one of things I've seen in companies particular when they go sideways, is the board, because there is the knowledge gap,

the board really is, it's very easy for the board to get in the mode where it really is learning everything it knows about the company from the management team. So one thing I do in both my companies is I sit on the audit board. I'm in the audit committee. One of the things I find about the audit committee is in the audit committee you can ask, you have a chart, like for example, the fact that there's this sort of category, one of the trendy words I hear a lot is now these days is risk management, right? which is the idea that basically all the risks can be pre-identified and then anticipated and then prevented.

Which, you know, for people who've been in business for a while, like, that's not exactly quite how it works. Well, at least you can get them in the 10K. That's true. That's true. That's true. You can load up the risk factors. But one of the things I find interesting about that is, and at risk often rolls up, risk management often rolls up to the audit committee. The auto committee is responsible for receiving risk. And one of the things I find is that is an opportunity. If there is something in the company that you're concerned about, that is an opportunity for you to do a deep dive. that is within the charter of what that committee is supposed to be doing

in a way that would be weird in a board meeting. That's exactly right. And then if you uncover something, you go, well, maybe we should also do this at the board meeting. Right, right. And that's something we do. Yeah, yeah. And then the other great thing about the...

There's a lot of downside. We'll come back to this. There's a lot of downside to being on an audit committee. Well, I would never be the chair. Yeah, yeah, yeah. We'll come back to that. But one of the upsides being on the audit committee is everybody takes the audit committee seriously. because the audit committee is where the rubber really hits the road

in terms of legal and regulatory and accounting compliance for the company and it is the committee that kind of protects the company and so it does have the charter and the requirement to actually go deep in areas of potential concern in a way that is fulfilling its duty as opposed to being kind of overly involved is what I've found.

Yeah, that's right. And then you sit in that meeting with the general counsel and the CFO. Yeah. So you get to ask a lot of questions. And it's your job to ask those questions. So, you know, I had a question for you. Sure, fire away.

So, you know, in a startup, when if it feels like there's a problem with the CEO, how do you handle it? Oh, boy. Well, so I think it depends. I think a lot of that then depends who you are. I think, so there's, this goes back, there's formal definition, like board is responsible for a CEO. and like board is responsible, board is responsible. I'll just interject. The reason I don't go on startups is my experience with being on startup boards

is either they don't need me at all because everything goes so great. Right, right. Or they really need me and they don't want to listen to me. Yeah, yeah, yeah, that's probably true. So I would say, look, I would say, so I come at it mainly these days. I used to be on lots of independent startup boards, and I kind of have the same experience I ended. You know, I'm a venture capitalist these days.

And so when we go on boards now, it's as a consequence of being, a major investor in the company. And so the way I think about being a startup board member as a venture capitalist is it is important to still be a responsible board member. You don't get off the hook of the board duties just because you're representing yourself as an investor. But what I would say is we go, we go, VCs go into investments with a particular philosophy of how companies get built. And so, and it just so happens. Our philosophy happens to be we tend to get behind, we're sort of particularly oriented around founder CEOs. Or when we don't have a founder CEO. We're particularly oriented around having a CEO who has kind of a

founder mentality. And we tend to make a pretty deep and long-term commitment to specific individuals. Like, this is kind of a speech that I give a lot of our companies who invest in, which is we're not investing in the abstract idea that there's going to be a startup here. We're investing in you. And we're getting behind you. And if you, as the CEO, if you're committed to this thing and like you're going to write it out and when the going gets tough, you're not going to give up. You know, we're going to support you to the hilt, basically, as much as we possibly can. Now, if you develop extracurricular personal habits and they're illegal and you start billing them to the company, you know, which has happened, you know, we will have a

problem, right? There are things you can do to get us to turn on you. And so those are the easy ones. The hardest situations, I think, on startup boards, which I'd be curious if you've run into this, the hardest situation is a full-fledged team revolt. And so the hardest situation in which the VCs and the independent directors on the board basically get the call, usually from, you know, a senior executive like the CFO or maybe one of the other co-founders. And the call basically is, you know, basically the entire top executive team is going to quit. And the only way to prevent that from happening is the CEO has to go. And they usually have gotten together and figured out who among them should be the new CEO. But it's not just a coup. It's not just a coup of one person against another, which is usually easier to deal with. It's a coup of the entire team. And by the way, my experience is they often have really good points. Like if it really has developed into the case where the entire team thinks the CEO needs to go, like usually the company is going pretty seriously sideways.

So let me pose the question back to you, which is I think that's the most difficult situation for a startup board member to be in. Yeah, I mean, one would hope that you would see it coming. Yeah. And, I mean, the thing I've now learned, although I still am not going to join any startup boards, But if I were on one, you know, actually, because I'm on some nonprofits that are a little bit like none, you know, can be like startups.

But the thing to do is to get a coach and then get that coach to talk to everybody, talk to the board, talk to all the, all the, yeah, it gives you this level of indirection. It kind of de-escalates it because everybody feels they have a voice. and it actually gives the CEO a chance to start changing. So it's a really generous thing to do for the CEO and help them learn. And if it just doesn't work, then it's all out in the open and everybody's talking about it. And, yeah, so that's sort of a major tool in the toolkit. Right.

What's the nature of a good coach, do you think? Like, if you were going to go do that? At this point, at your career, there are specific people you would, call, but, like, what's the profile if somebody doesn't already know a good coach? Yeah, that's a really good question. I mean, because they're part therapist, part business acumen, you know, really good listeners, really well versed in how to treat people. Usually, most of the problems are someone's not communicating very well, and or being inconsistent and not communicating very well, that's even worse. And so,

So, I mean, I'm almost never seen a problem that couldn't be solved by better communication and consistency. And so somebody that can, you know, that is really astute about how people want to be treated and can really help someone become self-aware of how they should treat people. So it's kind of a therapist that's an expert at organization. And is the coach ever a member of the board of directors, always not a member of the board of directors? I've never seen that. Never seen what? Never seen a coach who's also a board member.

So you don't want to pick somebody who's already around the table. Well, I think. Or why not? I think it just depends on the person. I think you could have a member, you know, if the board member, really has the back of the CEO because the whole idea is to make the CEO successful.

You want to do everything you can to make that CEO successful and you know kind of catch it, you know, cut it off at the past if it's going south and so a board member might be there to see that and might be able to sort of take

it's but you don't want to I mean you can get in this situation where the board member is having all these offline discussions with the CEO and starting to kind of run the company that way, and that's a mess. Right, right. So I would go so far as to say it probably is a very bad idea to have the coach

be a director for exactly that reason. It's one of the interesting things you find is if, put it this way, if you're a CEO, you're highly attuned to who your board members are because they are, you know, it depends in the context, but like to the extent that a CEO has a boss, it is formally, legally the board of directors in the sense of somebody who can make

a hiring and firing decision. And so every, it kind of doesn't matter, One of the things I find is you go to his director and you want to be the CEO's friend, and you want to be like, you want the CEO to really open up to you. And in the CEO's mind, they may be very friendly and very open, but there always is a little something of like, okay, I need to be a little bit careful about what I say. And I think that's just always part of that. And by the way, appropriately so because boards have actual responsibilities.

And so what I found consistent with what Diana is saying is getting the coach who's not on the board enables an entirely, it turns out different and maybe more frank kind of conversation between the coach and the CEO and the coach and team members. And it's exactly that kind of frankness that maybe the thing is required to get to behavior changes. Right, right, because the CEO is much more likely to open up to someone not on their board, for sure. I mean, that's another reason I don't like going on startup boards.

I go, look, I can be a lot more helpful if I'm not on your board. Because you'll tell me what's going on, I can, you know. So I had one other question. Sure. So when I was building VMware for my board meetings, what I would do was back then we didn't have Google Doc, so I'd type up a little Word Doc that in the first paragraph had some metrics that showed things were going well,

and then the whole rest of it was problems I was kind of working on that I wanted some input on. and it would often be a page and a half and I'd send it out so it wouldn't take them very long to read it and then we'd come in and we'd spend two hours discussing these issues and we'd be done.

Yeah, that's right. No PowerPoints didn't always have the whole team in there didn't use the board as a way to make people feel important or anyhow, I'm just curious what you think should happen among those lines. Yeah, so my experience actually is remarkably consistent across startups and big companies. So on this, so I'll take it through my point of view.

So big companies, there is a level of formality that does you end up having. There's more detail and there's more process and so forth. But what I find is the best run big company boards. And I think in my case, both Meg Whitman and John Donahoe did a great job of this. What they don't do is sit the board down for eight hours of forced march through power, what we call forced march through PowerPoint, which is, because what you see, actually a lot of new CEOs will do this when they, when they first get in the thing is, the, the, the CEO mentality kind of is like, okay, I want the board to know everything's going on,

I don't want them to ever think I'm hiding any information. And then they also think, I want my team to get exposure to the board. I want my board to see the team. And then it becomes sort of an element of pride for team members to be able to present to the board. And then as a director, what happens is you're sitting there and literally starting at eight in the morning until six o'clock at night, it is literally like 800 PowerPoint slides. If discipline has collapsed, then everybody's just doing their email, and then the CEO yells at you because you're not paying attention. And so then you got the toothpick in the eyes. You're just trying to be like, oh my God. And so, and, you know, it's kind of, it's one of those things that feels

odd to complain about, because it's like, how can you argue against transparency? How can you argue against, you know, being kept informed? What I found is, the enlightened CEOs over time tend to get to much where Diane is. And so the way I tend to see it working well, actually, I'll go through the big company version of that, and then we come back to the startup version. So the big company version, it seems to work really well, is pre-reads. And so basically, if there are, you know, there may be 200, there may be 200 slides, but like 200 slides of pre-read. And one of the things the CEO can do, which I think makes a lot of sense, is tell the board you're expected to read the pre-reads before you show up for the board meeting. But you can, you know, you can go through it in your own time and you can do it on a plane or something.

In a couple of cases I've actually seen, they'll actually take the, they'll actually say to the executives, you have a big chance to present to the board, you get to record a video. Number one, that sharply cuts down the number of executives who feel like it's important to present to the board. But also, it turns out, it's not that hard to plop an executive in front of a video camera for 20 minutes and just have them talk about something. And so I've even seen the videos as a way to do this. Point being, then you get into the board meeting, and then actually Meg Whitman has done the version of this that Diane is talking about. She has her version of this, which she calls highlights and low lights.

And it's basically this exact thing. In her case, it's actually a single slide. and it's literally here are the things that are going well. Here are the things that are here are the trouble spots. At eBay for many years when she was running eBay, it was five highlights and five low lights. I think

I've also found Mark Zuckerberg does another kind of variation on this where he'll do that but then he'll pick a topic. You'll pick a single topic for a deep dive for the board meeting which is a topic where he actually wants to have a discussion and so that turns and of course by definition

that's kind of the most important thing that's on his mind And so it's sort of a very high leverage thing. The other thing I would offer, and so for startup boards, I think what you're saying makes total sense. The other thing I would offer is often with these boards, the role of the board dinner, either, and sometimes you have this configuration where the board dinner happens the night before the board meeting,

and sometimes it happens the night of the board meeting. That can be a really good part. It's very easy to have the board dinner and just drink and not just tease everybody and not talk about substance. But that can be a very actual critical part of the board meeting for CEOs to use it in the right way, which is it can be the board plus the CEO or maybe plus one or two other key people. And often you can actually have the real discussion that has to happen at that dinner, which then also means when you get in the board meeting, the board meeting itself can be relatively quick.

It's also a nice way to get to know some of the exact. Yeah, that's right. Oh, yeah. So like at HP, I've got to give an example at HP, we do kind of a rotating series of dinners. And so there will be, like, half the dinners are just the board in the CEO or the board in the top three or four executives. for like working sessions, but then once a year it'll be the top, you know, basically like the top 20 executives. And then we did one six months ago where it was the top 20 technical professionals in the company. And so then you do kind of organize seating charts and so you

get, you give people a chance to get exposed. But what's interesting is it all sums up to the point, Diane, that you made, which is the board meeting itself, like length does not equal quality. Yeah. Like a high quality conversation, and again, bearing in mind that the board kind of by definition can't weigh in on everything because the board doesn't have the knowledge and it isn't the board's job to tell management what to do. But it doesn't take

20 hours once a quarter in formal meetings to discharge the responsibility even for large companies. And in fact, you actually tend to have a better functioning dynamic if they're on the shorter end. Facebook board meetings don't go longer

than four hours in total and so far so good. You know, seeing another 800 PowerPoint slides I think probably would not be helpful. Why don't we talk about the role of committees which is kind of also kind of a really critical thing because there was a big loaded assumption of what I just said, which is that you have properly run committees

that are doing a lot of the formal work. So maybe talk about your experience with committees and what role you think they play and how important they are and how directors should think about committees. Yeah, so it's interesting. In a startup, you don't tend to have committees, but, you know, there's just not much going on.

You're trying to get a product out the door, one product. And, but once you get into a big company, you have the NOMGov, which hires the new board members and oversees governance, political affairs and stuff. And then you have the audit committee, which, as we said, is risk, legal finance auditing. And he's getting to be cybersecurity, gets stuck in, I guess it's a big risk. And then the compensation. And that's kind of it. You sort of sometimes have a real estate function.

And so those are all things that the board needs to go into depth on. The board needs to set compensation and approve compensation. You don't want to spend the board meeting with everybody listening to the comp expert take you through what their recommendations are and debating that. But you do want a couple board members to uncover any issues. They look at attrition and all those different. metrics. And so all the different committees go into a lot of depth. They'll meet for two hours before the board meeting. And then each committee chair reports out to the board at the beginning

of the board meeting in a very succinct way, but raises any issues. And that, on both the boards I'm on, that's a phenomenal divide and conquer approach to doing our job. Yeah. That's exactly, I hate to agree because it makes a discussion less interesting. But, however, what I found is the well-run boards, the committees, at larger companies, committees play an absolutely pivotal role. In fact, it is, I find it to be actually a very good structure if most of the actual work is taking place in committees, because you do have a group of people who are single-mindedly focused on all the audit topics or all the compensation topics or all the governance topics. And you can really dig in. And then, by the way, you can also match directors with their areas of actual expertise,

and so you don't have people weighing in as much on stuff that they don't know as much about. And then, so that helps a lot. And then that also helps keep the board meeting from spinning out of control because you don't need to go through all these issues in gigantic detail if the committees are handling the work. And then I would also,

I would double underline the role of what's called the readout, which is one of the ways that boards build trust is that the committee chairperson does an appropriately thorough report back up to the board. And so the head of the audit committee will report out to the board, okay, here are the things we discussed, here are the open issues. Here, by the way, are the chances to weigh in on questions that we're still considering.

And you'll find that sometimes the readouts are like, you know, 20 seconds long, and you're like, okay, something, you know, there's information hiding going on here. I'm being cut out. And then sometimes, you know, they're 45 minutes, and you're like, my God, I didn't think I'd ever learn as much about accounting. And then sometimes they're like 15 minutes of, like, all the important stuff. And you're like, you know, wow, this is a great board to be on because we have somebody who's like super experienced,

the super professional in this area, clearly discharging the responsibility on behalf of the board of the committee, and then reporting up to us the things that we need to know to make sure we can discharge our responsibilities. I find that balance, when you achieve that balance, it's really, really helpful. And then often at the breaks, if something came up, everybody will kind of dig into it a little bit, you know, it's pretty good. What about another one is, I like a VMware, I fired a board member.

Yeah, yeah. And how do you want to tell, I mean, without naming names, do you want to say how you did it? Well, I had this guy that's one of my other board members had recommended and acquiesced, and they were going to bring financial expertise to the board, to the board. And right after his first board meeting, he joined a VC firm, and I didn't have any VCs. And I said, and I wasn't really interested in taking money, and he's like, he starts trying to get me to, take money from his VC firm.

And then he said, well, I want to have a breakfast with you. And I said, well, I don't want to discuss this funding issue. He said, don't worry. And I went to the breakfast, and three of his partners were there. Yeah, yeah. And so then I said, let's have lunch. Yeah. And that was that.

I gave him some stock. Yeah. Because of that, people think I don't like VC firms. I do like VC firms. Thank you. Thank you. I resemble that remark. So the version of that that I saw was an operating executive who had a very stellar track record who got fired from his job while he was a director on the company I was involved in, who then started lobbying vigorously to become an executive in the company. And that was a similar breach.

And so my answer to your question is the good news is in cases like this, I think it's very clear, which is it's actually like it's a some level it's a breach of their responsibility. It's a conflict of interest. like they clearly have developed a conflict of interest and like that clearly can't stand. Yeah, that's an easier case than an incompetent boardman. Incompetent or the other one is just disruptive. Or disruptive, yeah. Right.

You know, just sort of sideways personality, derailing things. And so that one is, I think, harder. I do think I have an answer to that, which is that's when you can use the social dynamics of the board to your advantage. So one of the problems that people point out with boards and the activists always talk about this is the sort of concept of the board as a club, which is like the board, it is a group of people. They do get together.

They do have to communicate. There is a natural human tendency for most of us to want to get along. And so one of the things that apples of boards is they kind of get too clubby, they get too kind of comfortable with each other and so forth, and they all want to, you know, and then you get people, you know, when things get tough, people don't want to speak up because they don't want to be the person who's kind of disrupting the social dynamic. That could be a problem. That works to your advantage when there's a board member who has become clearly disruptive

or non-value ad or incompetent, which basically is people don't really want to belong to a club that doesn't want them as a member. And so if three- The autoimmune reaction. Yeah, yeah, exactly, exactly. And so if three or five or six or seven of the directors are kind of all agree on this, and they're kind of like, yes, this board would be better if this person were to quietly exit, it can generally be communicated to that director, you know, in an offline conversation,

like it's probably time to step down. And people almost always take that hint because they don't, you know, again, the social dynamic, they don't want to show up the next board meeting knowing they're not welcome. The thing is that you make sure, and I did this in my startup, and I don't know of startups do this, but I adopted the big board practice of you resign every year. You will offer your reservation every year. Right, right. And it's never too soon to start that, well, I guess you can't do it with an investor, but you can do it with other people. You just have to bring that up during the negotiating process on the deal. Yeah, and in fact, that brings up a related point.

Then we'll let's open up for questions, but the related point actually is a different variation on that has started to kick in, which is there's a huge movement in public companies. for the entire board to be reelected, actually legally reelected every year. Yeah. And so there's actually this increasing... And now they want to put it to a proxy vote. Yes, which brings a whole other level of bizarreness

to it. But there is a, this assumption that directors are on the board and kind of implicitly, once they get on, they're on for many years. One gets the feeling like that's not necessarily the way this is all headed. It may be more contingent, both for reasons that have to do with...

Now that's a little scary, I think. For those of you who study this stuff, there's this literally, it's this actually completely bizarre thing. There's an academic project at Harvard where literally like the class project is to go get Fortune 500 company bylaws changed in order to have, and their big cause is to have the entire board get reelected every 12 months. And it drives me crazy because it's literally like applying a pure academic view into the real world as implementation without, you know. And these are people that have tenure that are doing this. Yeah, yeah, yeah. It is literally a tenured, tenured professor

at Harvard Law School. So anyway. I think you should start. We should pause on that topic. I'm going to start to foam at the mouth. So given that you don't want to be an independent board member of a startup, as a CEO, why and in what circumstances would you value an independent board member of a startup? Well, for instance, when I was building VMware, I had Larry Sonsigni. He was my first board member, and Larry is managing partner at Wilson Sonsini, Goodrichson, and Rizade. And he's a very business-minded attorney, and we were like trying to wedge this, of software between two monopolies, Intel and Microsoft, and I was, and we wanted to partner

with IBM and HP, and I'm like, man, I've never done deals with these kinds of people, and so I, you know, convinced him to join the board for that reason. And, you know, to have his undivided attention once a quarter for two hours, you know, to talk about the deals I was working on and whatnot was just invaluable. Yeah. You know, because he has, I mean, Basically, it's this breadth of experience because you as a CEO are so narrowly focused on your company, and then you hear what's going on out in the world from someone that's much more, much broader. And a VC is usually a lot broader than the CEO, too. So it's the broadness, you know, relevant broadness.

So I think the reasons to, on the other side, the reasons to do it, I mean, the reasons to be on a, you know, why to be on a board in general, but why to be in a startup board in particular. You know, one is to help, and especially, like I said, like I think the younger of the company, like I think Larry, with your board has been an example of this. Like, the younger of the company, arguably, the more helpful the board can actually be. Because you really are, it is a small team of people.

You know, the executives in the company, plus the employees, plus the board is still a small team. And you are building something from scratch. And so you can kind of scrub in a little bit more and actually help. Second is just I find very helpful, or I find very kind of my philosophical view is, it, you know, being a good board member is a way to contribute. It's a way to contribute. It's a way to contribute to the industry. It's a way to contribute to the ecosystem. It's a way to contribute to the

development of the next generation of people. And so it's not philanthropy per se, but like it's like there is an aspect to it. At least I view it as like there's an aspect to it of giving back to the community. And then when I find the other enormous, the thing I really, really like about being on boards that I really look for just out of my personal self-interest is just an opportunity to learn. an opportunity to learn from people who know, you know, are smarter than me, or know different things than me,

or opportunity to be exposed into industries or businesses that I'm not in every day. And to me, that's the fringe benefit. Like, I would, like, you know, relatively speaking, you get, you know, a little money in the context of, with the careers that most of the people in the room are going to have. But, like, the boards that I'm on, I would do for free, even the more difficult ones. Because it's just, it's a learning opportunity. And I'll bet you, if you talk to Larry Sincini, I bet you he'd tell you the reverse on VMware.

I'll bet you he learned a whole bunch being on your board about things, you know, maybe not timeless things, but like things that were happening in the industry at that time. And so it is an opportunity to learn. And in a lot of ways, I mean, a friend of mine actually said, in a lot of ways being on a board is like being on, you know, especially a big board, it's like being in grad school. He got so, the reason he joined was I told him what was happening with Intel

and it made him so angry, he's like, okay, I'll join your board. Yeah, yeah, exactly. You mentioned that you're on good boards. You said my boards are good boards. What are the characteristics of a good board? It's a really good CEO, a very well-run company, and then the board itself has all the different areas of expertise that you would want on that board,

depending, you know, the company will have, you know, each company would want maybe a different selection of expertise, but a very complementary set of expertise. So, for instance, on the Intuit board, there's a board member that she was the vice chairman at Goldman Sachs for a number of years, and she's on a number of international, big financial companies. And she just brings this perspective about risk

and financial things that I always find fascinating and I never would have brought those things up. So it's really wonderful to be on a board with her, to have her there on the board covering that and all of us learning from her. And then it's also a board where nobody's trying to prove themselves.

It's a very confident group of people that are their agenda is to be as helpful as possible to the company and not to impress anybody? Which does happen. Yeah. A form of dysfunctionality is when the directors feel like they have something to prove. Yeah. So if everybody's just really excited about making the CEO successful and, in turn, the company, successful.

So I would say I would offer that that is one axis, which is that's sort of the stuff that you have control over. Then there's the other axis, which is the stuff that you don't have. have control over. And so what I would offer is, the other access is, are things going well for the company or not? And you have starkly different experiences as a director when things are going well versus when they're not. The metaphor I use is pilots, a famous line about the airplane pilots is it's hours of boredom punctuated by moments of terror. And arguably, boards are like this, which is if the company's going well, like the director job is a relatively easy job. Like,

you show up for the meetings, you have the conversations, you help where you can. But like, things go. Like things, things happen. When things go seriously sideways, then it becomes, in my experience, a completely different job. If things go sideways enough, it becomes a very different job. Yes. And in particular, when the company goes into, and you can almost feel it in a company, and somebody probably has been through this, is companies every now and then they will go into like the equivalent of cardiac arrest. Like they really will, like the entire company will like seize up. And generally that, you know, when that really happens, it's around some crisis around the CEO, right? And so, you know, just act of God, the CEO gets sick,

or if the CEO does something like seriously wrong, or if some other enormously bad thing develops. By the way, there is a correlation. The strongest, most famous kind of CEOs where everybody wants to be on their board are often the ones who are least likely to do succession planning internally because they're the most likely to not want there to be an internal successor who can take over.

And so one of the things I've been through is a very strong, dominant CEO who literally blows up and then there is nobody else to take the company over. And that is what, I've been on two boards that went through a CEO transition. And after the first one, when I joined the next board, that was like, my biggest question, is there any chance you're going to leave, you know, is there any chance there's going to be a CEO change? I just didn't want to go through that. And the first board meeting, as soon as the CEO leaves the room, everybody goes, well, we're going to be doing CEO transition.

Really? You promised. And so it is worth saying, and I bring this up for a number of reasons, including, I'll just make two points on this. One is, for me, part of signing up for the board is to be with, you know, it's a little bit like getting married, like it's to be with the company through thick and thin.

Like, I think it's very unfair to join a board when things are going well and then things go sideways and the board member just says, you know what, I'm out of here, I didn't sign up for this. Like, I think, I think you do have to. That's a major commitment. It's so hard to get off the board once you're on it. There's that.

And then the other is time, as you think about time, you know, calibration of time commitment, like I said, they don't take along when they're going well, and then if they're going poorly, they take a lot more time. And again, it's the kind of thing where it's like surge pricing or something. You need to actually, it is very tough. By the way, this is the other thing you find on boards is current sitting CEOs on boards, you know, independent board members who are CEOs of their own companies, cannot take time

when a company goes in a crisis for a company they're on the board of and so they don't show up which means... Although I have to say Brad Smith and Yahoo you know

when he was on the board of Yahoo when Marissa before Marissa got brought in and he was the CEO of Intuit at the time. And he was the CEO of Intuit as he was doing his board duty and he became the lead director

during that period. It was amazing. I don't know how he did it because Intuit didn't skip a beep but he was definitely there for them. Yeah, yeah, that's good. I would say, in my experience, that's a rare. Yeah.

It's a rare contribution. We were all just blow it away, and then we were like, don't you think it's time to get off that board, you know, once everything was... Yeah, exactly. And so more often, it's, if you're not a sitting CEO and you're on a board and that something goes in a crisis, if you're not a sitting CEO, you probably are going to get called up to spend more time precisely because most people won't do what Brad did in that case.

And so it is worth thinking ahead. You know, it's like, it's, you know, of course, the boards that are attempting to go are the ones in which everything is going great. But it is worth thinking, yeah, okay, if this thing goes seriously sideways, like I am probably going to have to step up and put a lot more time into it. Yes. I was wondering, for those of us that are giving some thought to whether we would want to serve on a public company board or a private board for our first directorship,

if you could kind of talk a little bit about some of the major pros and cons, whether that's, you know, the value that you would bring in terms of how much assistance Insta Management or time investment that you would be putting in those types of attributes. The single most important thing is to

look at the CEO and how you think they're managing the company and how likely it is they're going to be there for a while. And if you really believe in, you know, you want to support that CEO and you think the company has a lot of potential and a great

CEO, that's a that's a perfect board to join and of course then if you feel like you have something it doesn't feel good to be on a board if you're not bringing anything to the table I have to say my first year at Google it was just so much stuff I felt like

I didn't have anything to offer because I was in such absorption mode and you know it just it almost took a whole year to get up to speed but so anyhow, for me that would be exactly how I look at it, and I think that could apply to a startup or a public company. I mean, I should never say never.

It's possible I wouldn't today because I'm too busy, but, yeah. The public boards are, I think, it's fair to say, they're just they're harder. Like they're harder, they're more intense. The legal accounting and governance issues just rise much more to the fore because you have all these public reporting responsibilities. The committee has become much more important, so the committee work becomes much more time-consuming.

And then just the stresses, public companies are under stresses, the private companies just aren't under as a consequence of being public. And so it's a more intense experience to be on a public board. There's more things that can go wrong. But there's more you learn about the world. Absolutely. Yeah. You're in it.

That's sort of a huge advantage of you're in, you're swimming with a big fish at that point. and because it's also true, right? The largest and most important companies in the world generally are the public companies. And the public company ecosystem is where the largest and most important companies are. And it's where all the issues of running at scale.

And, you know, the companies, you know, tend to be, you know, global. And so they tend to have all the global issues. And so you learn about all kinds. This is a big thing I've learned by being on board. So, like, one of my things is, like, I don't travel, like, very much, or people in the room who know me in the back would say at all.

We gave him the, the queen. Elizabeth Price for engineering and he didn't come. I turned on the queen. Yeah, it is true. Yeah, the queen was going to give it to him. I turned on the queen. I turned on the queen. Now, my argument was that's why we fought the war of 1776.

So we don't actually. So we don't actually have to show up when the queen says come to the castle. But that was, no, that was not a popular view at the time. Then I would say also the other thing I just said, Diane's kind of talked about this, but private company boards, like startup is really different than big private company. like, you know, it's almost hard to draw conclusions about private just by itself. Public companies tend to be alike in terms of the board experience. More than private companies tend to be alike because they do vary so much in size and configuration.

Yes. Let's take one more question. Diane mentioned earlier that at times you're hesitant to actually make a suggestion to the CEO of the company. And I'm curious in the context of the committees, particularly when you have to lead readouts and that sort of thing, How do you actually quell the urge to want to make a suggestion, particularly if things are not going well? You know, like in the audit committee, when you see something not going well,

it isn't really a CEO thing. It's a company thing. So you're not, you know, when you're doing the readout, you're just saying, we see this problem at the company. You're not saying the CEO is messing up. You're just saying, wow, this problem has surfaced, we better get some attention on it. And usually the CEOs like sitting like this

going, yip, yep, yep, yep. And so it's, you just call out, that's all you have to do is call out the problem. And if you're really concerned about it, you say, and we're going to review it at the next board meeting. And people don't like to be invited

to the board meeting to review a problem. You know, they like to come and talk about their departments, but they don't, like to come and explain a problem. Yeah, I think that's right. So we've reached the end of our time. Thank you very much, everybody. Yeah.