
What it’s like to be on the board of a Fortune 500 company - jayshahtx
http://jayshah.me/2018/01/05/board/
======
ilamont
_And if a board member isn’t performing well, we get rid of them. I’ve been on
boards where the SEC is in there. I’ve been on boards where the Department of
Justice is involved. You don’t want that. You destroy companies when you do
that. You destroy shareholder value. So what you try to do as board is make
sure people are above board. You guard against anything that hurts the
companies from an outside perspective. It all comes back to governance and
taking care of shareholders._

This points to a problem with due diligence and/or how board members of
Fortune 500 companies are chosen. Can anyone elaborate on how this happens?

I get the impression from looking at corporate websites that many board
members include former officers of the company, investors, and experienced
leaders from adjacent (but not competing) industries. It sounds kind of
insidery, which can lead to all kinds of problems and conflicts.

~~~
Johnny555
_It all comes back to governance and taking care of shareholders._

Which explains why companies are like they are -- if the board had a fiduciary
responsibility to employees first and shareholders second, maybe workers would
be better off.

~~~
JumpCrisscross
> _if the board had a fiduciary responsibility to employees first and
> shareholders second, maybe workers would be better off_

Oh look, it’s New York City’s MTA [1] and NYPD.

Our society puts consumers first, shareholders second and workers like
fiftieth. Moving workers up seems reasonable. Skipping them ahead of
shareholders or consumers has, historically, been a predictable failure.

[1]
[https://en.m.wikipedia.org/wiki/Metropolitan_Transportation_...](https://en.m.wikipedia.org/wiki/Metropolitan_Transportation_Authority_\(New_York\))

~~~
Johnny555
Keeping the company alive would be a key benefit for workers, so it couldn't
go the way of a public agency where their funding comes from "unlimited free
money" (aka, taxpayers)

------
robotresearcher
> You know Jay, at this level – it’s the White House. Everything needs to be
> clearly documented and written down.

I understand from the Pod Save America people that taking notes is usually
avoided at the White House, since they are required to be part of the
permanent record and can be subpoenaed. Destroying notes is not allowed, so
it's best to not take them in the first place.

Naturally the current crowd have their own ways.

[http://www.cnn.com/2017/09/21/politics/sean-spicer-donald-
tr...](http://www.cnn.com/2017/09/21/politics/sean-spicer-donald-trump-
notebook/index.html)

~~~
chris11
> Naturally the current crowd have their own ways.

The whole situation with Michael Wolff is a little worse than staff just
taking notes considering he kind of just kept showing up at the White House
and got a couple hundred interviews over half a year.

~~~
robotresearcher
The link I gave is about Sean Spicer, former press secretary, who apparently
kept detailed journals.

Everyone would expect a journalist not employed by the White House to keep
notes.

------
georgeecollins
This is interesting but a bit self-serving. Imagine going around where you
work and interviewing someone about their job: "Is your job easy?" "The days
of my job being easy are over. Everyday I work very hard." etc.

~~~
aynsof
Especially when you blame your investors for how hard your job is these days:
"[It] used to be that way but its changed in the last ten years because the
activists [investors] have gotten more involved."

Those darn meddling activists!

~~~
fjsolwmv
That's unfair. He's giving credit to activists for making him do an honest
day's work.

------
imjustsaying
>And when you say board meeting, most people probably think of you taking a
corporate jet somewhere, eating a fancy dinner, and showing up to a few CEO
meetings before taking the jet back. How accurate is that?

>See Jay, it used to be that way but its changed in the last ten years because
the activists [investors] have gotten more involved. It’s a real job. You
really have to stay in touch with the company and understand what its doing.

said the guy on 4 boards

------
Animats
This guy must have been on the boards of companies that weren't in too much
trouble. When the ship is sinking, being a director can become a full time job
for a while. If the ship sinks without heavy board involvement trying to
prevent it, the board members were negligent.

~~~
dredmorbius
It's easy to manage things that don't need managing.

------
chiph
What I didn't hear was anything about the customers.

You may have heard the old saying about relationships: "If Momma ain't happy -
ain't nobody happy". I think the same thing goes for a firm's relationship
with their customers. If the customer isn't happy, there's no repeat sales and
no positive word-of-mouth advertising, leading to decreased sales and revenue,
leading to reduced shareholder value.

~~~
TheAdamAndChe
They didn't mention customer satisfaction because it's not always a priority,
shareholder value is.

A fantastic example of this is Comcast. It is regularly voted America's most
hated corporation in the country, yet because of its unique leverage in the
areas that it operates, this poor customer satisfaction rating just doesn't
matter. They're still able to satisfy the shareholders.

~~~
rb808
Incidentally I love comcast. 150mbps cable, cheap price, no outages, free hbo,
X1 remote rocks. Pricing is a bit annoying (paying extra for HD) but is a
great product. Just thought I'd mention it because it gets too much hate.

~~~
snowwrestler
I'm guessing you have FiOS and/or at least one other wireline broadband
provider in your area.

Comcast is ludicrously expensive in my neighborhood where they are the sole
broadband option. It's so bad the city council is looking seriously at muni
fiber.

~~~
rb808
Yes, most people are on FiOS in my area so comcast tries hard.

------
cylinder
Most ridiculous aspect of corporate American governance, or lack there of, is
making CEO the Chairman of the Board, almost always.

It flies in the face of the whole point of the Board! It blows my mind.

------
z3t4
You are basically there to approve stuff, like the budget. Only if there's
something really stupid it's your job to say no, but that rarely happens. If
it's a smaller org you also do some job, like making policies, organize, etc.
The smaller the org the more job you will do (and the less you will be paid).
Being on the board of a small org like non profit is not very prestigious so
it's easy to get in. But it can be a good learning experience. You first have
to figure out who is responsible for recruiting new board members, then you
have to get someone to suggest you. They don't want someone who actually _want
's_ to be a board member.

------
DoreenMichele
A guy who was an expert in big cats was featured on a shark show. He commented
on how polite and well behaved they were. It wasn't a _feeding frenzy._ They
got in line and took turns.

Which only makes sense if you think about it briefly. If sharks were not well
mannered, they would all be missing big hunks and covered in gruesome scars.
If two sharks fight, someone is going to get maimed.

I have no doubt these are very polite, well mannered things. But not because
they live in fear of being disagreeable. Instead, it is because if someone on
the board cocks an eyebrow, people tremble.

Kind of like military bases where people mind their manners because lots of
folks there know how to kill you. So, no, you generally don't go around being
a blatant disrespectful asshole for lulz.

------
keenrodent
This is actually a pretty decent overview of what it's like to be on a well-
functioning nonprofit board. In that case, instead of shareholder value you're
focused on the nonprofit's mission and its long-term viability.

------
balthasar
Why do you keep giving CEOs barrels of money?

~~~
hidenotslide
This person gets paid 1 million dollars per year for twenty days of not-
rocking-the-boat. It's not their money and the only way they get fired is by
asking questions like that.

Why investors put up with it is a better question. I think the implicit
antitrust of index funds has something to do with it, few investors want more
competition. [https://www.theatlantic.com/magazine/archive/2017/09/are-
ind...](https://www.theatlantic.com/magazine/archive/2017/09/are-index-funds-
evil/534183/)

------
TheAdamAndChe
Great read on a subject that I don't know much about.

For someone interested in how large corporations function and the power
dynamics among the top, do any of you folks have any other recommended
reading?

~~~
qntty
Das Kaptial

~~~
dang
You've posted quite a few unsubstantive and/or uncivil comments. We ban
accounts that do that, so would you please (re-)read
[https://news.ycombinator.com/newsguidelines.html](https://news.ycombinator.com/newsguidelines.html)
and clean up your act?

~~~
qntty
Do I need to point out the irony of the incivility of telling someone to
"clean up your act" in a comment complaining about incivility?

~~~
dang
It's true that that phrase is a bit harsher than what we usually post. I use
it in a somewhat precise situation: when an account's comment history shows
that they've been breaking the rules habitually. That's a worse situation than
a one-time offence and seems to merit a stronger tone. Also, I've noticed that
some people don't get the message unless the volume is turned up that way.
It's hard to predict whether a user is that sort, or someone who would respond
better to a softer touch. I presume you would be the latter.

If you can think of a better phrasing that I could use that covers the above
issues, I'd like to hear it. And if you'd read
[https://news.ycombinator.com/newsguidelines.html](https://news.ycombinator.com/newsguidelines.html)
and only post in the spirit of this site going forward, I'd appreciate it.
Other links to take a look at are
[https://news.ycombinator.com/newswelcome.html](https://news.ycombinator.com/newswelcome.html)
and
[http://www.paulgraham.com/hackernews.html](http://www.paulgraham.com/hackernews.html).

------
wiz21c
>>> Well the first responsibility is to ensure the company is being run in the
best interest of shareholders

Do me a favor and tell me that best interests are something else than money,
please...

~~~
function_seven
I hope it isn't. My 401(k) won't provide for my retirement using Good
Feelings. The best interest of the shareholders is running a profitable
enterprise.

~~~
forapurpose
Shareholders live in the world that the company creates. For example if the
company contributes to global warming, it doesn't affect the stock price but
it does affect the shareholders.

Money and markets are great tools, but they aren't gods; they aren't the
answer to all questions.

~~~
function_seven
Not that it's right or good, but shareholders profiting off of global warming
are probably getting a net gain on the backs of the rest of the world.

If you want boards of directors to prioritize carbon neutrality and similar
goals, you have to translate that into money. Tax the carbon and price the
negative externalities. If you don't do this, and just hope all business
people make decisions from their heart, you will always be let down.

------
forapurpose
The story depicts a lovely bohemenie and spirit of agreeableness; it sounds
like it's almost enforced:

> You need to have a cohesive thought process to move the company forward.

> if a board member isn’t performing well, we get rid of them

> [I’ve] sat on boards with some amazing people who have done some amazing
> things in the world.

What a wonderful club. It doesn't sound like one conducive to dissenting
opinions and disagreement. With so much at stake - so many jobs, so much
money, and such an impact on communities - it seems that harmony would take a
back seat to asking difficult, challenging, critical questions. The
interviewee doesn't mention any of that happening. Also:

> Each year, all of our names are put up for voting by the shareholders.
> Shareholders say yes or no and vote [to keep the director]. If the
> shareholders vote yes, we have automatically put our name in for resignation
> and the board determines if they are going to accept [the resignation].

Shareholders almost never vote no. Effectively, the system above means that
the board determines its own members. Again, the board member who challenges
consensus or engages in threatening oversight might not last long (or be
invited to join another board).

It confirms other things I've read about boards, but certainly someone knows
more than I do ...

~~~
droopyEyelids
C'mon man. This is like a kid asking their parents how the marriage is going.

You're not going to hear about the affair or addiction or whatever dirt you're
looking for. But it'll still be educational just to know the time they spend
on things and what perspectives people try to maintain.

Honestly, this area is such a crazy mystery to the working class (including
most white collar workers like myself) that I'm grateful to the mystery guy
for giving the interview.

~~~
forapurpose
I found the interview to be valuable, too, for the reasons you say. I should
have mentioned that; good point.

> This is like a kid asking their parents how the marriage is going.

Only to a limited degree. A good journalist asks challenging questions and
gets their interviewee to talk. The board member was anonymous, after all, so
they could have spoken more openly and even generally about these kinds of
problems. The interviewer asked easy questions and the board member painted a
nice picture. (In fairness, I don't have a right to expect more (or anything
at all) from some guy's blog; it's not the NY Times; so a genuine thank you is
owed to Jay Shah!)

------
cmtk04
interesting insight from inside the bubble

------
myaso
It's always fun to learn about the workings of small systems that have such
disproportionate effects on larger systems -- the random articles and comments
flowing through HN gave me a better education than what I got in public
schooling and university.

------
tomc1985
Death to maximizing shareholder value above other concerns, like customers and
employees

~~~
briandear
If shareholders aren't getting value, the company dies.

~~~
tomc1985
Only because we cultivate a culture that prioritizes them.

The role of shareholder should be that of stewardship for the steward (the
CEO), and both the board and their charge are in positions of servant
leadership towards customers (first priority) and employees (second). Focusing
on both those points creates the financial success needed to recoup
investments.

~~~
sytelus
In old times, you took money from investor, built a company and finally
returned them their principal + interest. You then went your way to care about
whatever values you held close about your business. In new times, you become
their employee permanently (as in CEO _works_ for shareholders) and hence your
goal is to increase their value.

I guess it’s because the level of capital that is required for modern
endeavors is such that it is usually impossible to do full buyback like Dell
did, for example. In part, it’s also because we have designated the investment
itself as an _asset_ as opposed to a _loan_. So even if a company wants to do
full buyback it’s market cap is a moving target usually prohibiting that.

To understand this, imagine you got loan from your uncle for $100k to buy a
house. But then your uncle sells _your liability_ to another person for $200k
because house prices are on the run. Now suddenly you must pay $200k if you
really want to own the house. But then the cycle continues with people selling
your liability at higher and higher price so one day you wake up and be happy
that your house is now $10M but you can never truly be its owner unless you
actually pay $10M. This is the magic and power of capitalism.

In antiquity, it was sometimes loathed upon even demanding interest on a loan
because it was like stealing from someone else’s fruits of labor and making
income through no or little effort of your own (aka passive income). But that
prohibited the utilization of capital and people saw that there was nothing
sinful in collecting interest on your capital as a reward for taking risk.
Capital is an _asset_ just like your house is an asset and demanding rent on
is perfectly legitimate.

But then people with capital took one step further. Instead of demanding just
interest, they started demanded _ownership_ share of _your_ endeavor as well.
This was again loathed upon as the people landing money now also got all the
rights and privileges in the creation of a person who actually did all the
work. But soon people saw that this increased flow of capital even more.
Investors now were suddenly more willing to participate in risky propositions.
An entrepreneur can raise order of magnitude more capital than any other of
time in history.

But then people with capital took one step further. Why can’t they sell your
loan liability as an asset to someone else? This meant that original principal
given to an entrepreneur as a loan now had undefined value. It was only
determined by the wish and whims of buyer of his liability. This also meant
that entrepreneur was freed up from any expectations that original loan would
be paid up. Investors would instead be just happy with continuous flow of
dividends and speculating how he will do in future. The loan became thus
permanent. Soon need for larger and larger capital grew such that majority of
ownership ended up with investors and the entrepreneur become the employee of
the investor. This again allowed even higher order of capital collections. And
that’s how we got here.

