Understand Who Should Be on Your Board? “I Don’t Think You Do…”


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A memorable moment from the iconic television show, Seinfeld:

Agent : I’m sorry, we have no mid-size available at the moment.

Jerry : I don’t understand, I made a reservation, do you have my reservation?

Agent : Yes, we do, unfortunately we ran out of cars.

Jerry : But the reservation keeps the car here. That’s why you have the reservation.

The disconnect between Jerry’s expectation of what having a rental car reservation means versus the perspective of the rental car company that had the reservation – but no car – always makes me think about a similar disconnect that plays out daily in the capital markets.

On the one hand, there are the nominating and governance committees of countless boards of directors who collectively spend thousands of hours and millions of dollars a year trying to convince investors that they absolutely have the right people on their boards.

On the other hand, there are the institutional investors that manage trillions of dollars. They incessantly write and speak about how much money they are losing, because their portfolio companies definitely do not have the right people on their boards.

And a similar dysfunctional zeitgeist plays out in the pre-IPO ecosystem where companies like Zenefits, Theranos, and Uber strenuously purported to have the right people on their boards until it became astonishingly clear… they didn’t.

From a buy-side perspective, many of their portfolio companies are the outwardly polished rental car companies that have great reservation systems, but no cars to drive.

Agent : I know why we have reservations.

Jerry : I don’t think you do. If you did, I’d have a car. See, you know how to take the reservation, you just don’t know how to *hold* the reservation and that’s really the most important part of the reservation, the holding. Anybody can just take them.

I’m constantly asked by confused founders trying to prepare their companies for public company life: “Adam, every constituency I ask – lawyers, VCs, bankers, professors, governance experts – tell me ‘this is who should be on your board.’ But here’s the thing… none of the advice lines up. And I’m definitely no closer to figuring it out. It seems like there has to be an easier way.”

After hearing this repeatedly over the last several years, I definitely agree with them: there has to be an easier way. After all, if the current national dialogue regarding board composition were effectual, then clearly it wouldn’t still be a universal source of investor ire.

So, in the spirit of simplicity and clarity, what if the dialogue employed a different vector. That is, why not start by confidently answering a different question: “Who should definitely not be on your board?”

Naysayers will potentially dismiss this approach as just “semantics.” But wait until you hear my list on November 28th before you make up your mind.

Here’s one entry:

  • Famous people/celebrities who aren’t experts in your product or service should definitely not be on your board. (And if they are experts in your product or service, there needs to be an exceptionally good reason why they are the best choice, versus someone who has a lot more time to dedicate to your board.)

The sound you hear in the background, incidentally, is hundreds of fund managers nodding in unison, and thinking about how much money that single rule regarding “who should definitely not be on your board” could have saved them.

I look forward to continuing this dialogue after the webinar.


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A globally recognized small-cap expert, Mr. Epstein has advised, governed, and invested in hundreds of small-cap companies. His capital markets and corporate governance acumen are products of a singular perspective – a former corporate attorney, operating executive, institutional investor, and, now, board advisor. As Bloomberg Businessweek commented regarding Mr. Epstein’s category-defining corporate governance book, “attention, directors of small-cap companies. Help is on the way.” 

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