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I spend most of my time in boardrooms and board meetings.

I know it’s been fashionable over the years for people to carp that most boards are comprised of old white men, who do the bare minimum to collect a check. The first part is unfortunately true. I’ve not found the second part to be true at all.

Most board members I know take their jobs seriously, they are trying to do their best, and they care deeply about the company and its shareholders.

But – and let’s all be resolutely candid – you don’t get any points in the stock market for caring and trying.

The bad news is that virtually every small-cap board I interact with suffers from the same problem. The good news is that fixing it often just requires a hard, respectful, and direct conversation.

Boards carry around dead weight like all of us carry around mobile phones. There are a few reasons why this has become the value-destructive norm, even though no one seems to want to say these things out loud.

First, people who know little about high performance governance have long perpetuated a damaging falsehood that boards should be “collegial.” In my book, collegial is a code word for sheepish and dishonest. In reality, boards should be relentlessly value-driven; they should operate more like a professional sports team and less like an antiquated social club. I wonder what most board members would feel like if their favorite football team started their 3rd string quarterback in the Super Bowl, because, “he’s a terribly nice chap.” They’d probably feel like… their shareholders.

Second, board members often don’t want to excise dead weight, because they know they could be next.

And, third, the valueless board member is a kind, smart person, who might have once created value and is getting a “pass” due to compelling time served.

So here’s an admonition to small-cap board leaders. You have directors who are creating no value whatsoever. Have a hard, respectful, direct conversation with them sooner versus later, and let them know it’s time to move on.

It’s not untoward, and it’s not Stalinesque.

It’s business.

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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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