Board Dysfunction and the CEO

Board Dysfunction and the CEO

By: Arnold Freedman and Oded Ben-Joseph

Board dysfunction is rampant in the life science sector. Boards often consist of venture capital firms and other investor type with diverging agendas and, often-times, directors have little understanding of the scientific, developmental and operational challenges facing the company. Few directors have operational experience and expertise in building companies. Consequently, we see time and again that Boards are just as likely to mis-align the company to its market segment as management.

A clear understanding of the various drivers and incentives at the board level is key, but most important is the simple realization that, as CEO, you cannot please everybody; CEOs should thus manage, not be managed. Difficult boards are the rule, rather than the exception. As such, CEO requirements extend far beyond mere operational and strategic aptitude. They also require the ability to manage and navigate often opposing forces. In truth, weak management plagues the life sciences sector, and board dysfunction is prevalent.

As a rule of thumb, we believe that the Board should consist of two key stakeholders: Investors, who have the financial ability to support the company over the long run, and industry experts, who could provide management with domain expertise, external perspective, as well as a deep network directly relevant to the company’s core business. We often encounter Board members that do not fall into either of these broad categories. As their contribution toward the development of the company is likely to be minimal, those individuals should be avoided.