My views on the market, tech, and everything else

“Bad or Good Board of Directors – You Won’t Believe What Happened Next!”


  1. Trae Vassallo (Defy): “[Be] really good at quickly identifying the big questions — the big issues — never get distracted by the small minutia. [Be] laser focused on what is it going to take to turn the business into a great big opportunity.”

Vassallo has described the process of learning to become an effective board member as an apprenticeship. Both as a founder/entrepreneur (Good Technology) and while she worked in venture capital Vassallo has had the opportunity to watch John Doerr and other experienced people serve as board members. Trying to become an effective and valuable board member just by reading is a bad idea. Certain types of experiences can accelerate the learning curve for a board member. For example, in the interview from which the sentences above were extracted, Vassallo talks about how much she learned when she was asked to step into a situation where a business needed to be recapitalized and find a new CEO. When someone is put into a crucible like that they can often learn very quickly. In that situation Vassallo was able to use skills and approaches she learned from when she was an apprentice and generate the type of feedback that accelerates learning.

Even watching ineffective or value destroying board members can help someone discover what not to do (i.e., they are anti-role models). Charlie Munger suggests:

“The more hard lessons you can learn vicariously rather than through your own hard experience, the better.” “I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting down and trying to dream it all up yourself. Nobody’s that smart.”

To slightly twist Yogi Berra’s famous phrase: “You can learn a lot about becoming an effective and valuable board member, just by watching.”

  1. Scott Kupor (Andreessen Horowitz): “The truth is that it’s hard to land your first board seat. Training helps, but it isn’t enough by itself. The network of prospective board candidates is often made up of people already serving on boards.”

People have asked me: “How do I become a board member?”  The best way start that process is to find opportunities to observe boards in action.  A person may need to do this indirectly at first by being a member of an executive team interacting with a board or by serving on smaller or less formal boards. From that starting point, the objective of the person who wants to become a board member should be to build from that set of experiences. One of the best examples of someone acquiring the necessary skill to be a valuable board member and then laddering up to more and more responsibility is Mary Gates, the mother of a very famous son she and her husband named Bill with the same last name. She passed away far too young in 1994. Mary Gates is also one of my personal heroes, a role model and responsible in a major way for the trajectory of my life. It was impossible to be around her and not learn from her example. As just one example of starting small and building on top of that experience, even as college undergraduate she was an officer in student government. The progression of her career from that starting point illustrates how skills and responsibilities can be acquired and polished step-by-step. People observed through her actions and words how effective, smart and hardworking she was as an officer and  board member. This positive impression created another opportunity, which created another opportunity, [repeat again and again]. This is a picture of Mary Gates at the university she both loved and served, followed by a list of her board positions which illustrates the progression:

Mary Gates

“In 1975, Gates became the first woman president of King County’s United Way and the first woman director of First Interstate Bank of Washington, and only the second woman regent at the University of Washington. In 1980, IBM President John Opel had already spent a couple of years on the national board of United Way with Mary. When the head of IBM’s fledgling personal-computer project mentioned Microsoft to Opel, his response was, “Oh, that’s run by Bill Gates, Mary Gates’ son.” By 1983 she’d become the first woman to chair the national United Way’s executive committee.” “She also served on the UW Foundation Board of Directors, the UW Medical Center Board, and the School of Business Administration’s Advisory Board. Her volunteer roles in Seattle and King County included serving on the boards of the Children’s Hospital Foundation, Seattle Symphony, Greater Seattle Chamber of Commerce, United Way of King County, and many other nonprofit organizations. Mrs. Gates’ leadership was not limited to the nonprofit world. She served for many years on the boards of directors of major corporations: Unigard Security Insurance Group; Pacific Northwest Bell Telephone Company and later US WEST Communications; and KIRO television and radio stations.”

Julie Daum of the executive search firm Spencer Stuart has a good description of what people want when they are looking for their next director:

“Boards are looking for first-time directors who demonstrate good judgement, intellectual agility, knowledge of technology or digital, and the ability to deal with complexity. [They] are prioritizing directors who are current and who are broader than one discipline and can think strategically as they confront new, ambiguous, and fast-changing marketplace challenges.”

 3. Sonali de Rycker (Accel): “Part of being a sophisticated board member is seeing the potholes coming. You don’t take the steering wheel, but you point at the potholes that are coming.”

Experienced leaders like De Ryker understand the importance of pattern recognition. One of the patterns that people can learn to spot is what she calls “potholes coming.” People who have been on scores of boards and have been involved in even more businesses, can start to acquire skill in spotting problems long before the founders and executives involved in a business based on patterns they have seen in the past. Some of this “pothole spotting” skill also comes from the board member having a different perspective on the situation as well as some some emotional distance. A well-known venture capitalist said to me once: “The situations and people will not be quite the same, but with enough experience you will start to see the important patterns. Some patterns describe practices that are worth emulating. Of course, you need to know which patterns that should be broken too.”

Some people will never acquire much skill in spotting the right patterns and will see false patterns. Why some people never seem to acquire skill in improving their judgment raises complex issues that go way beyond what I am writing about here. Many people who have high IQ do not have sound judgment. And vice versa. It depends.

4. Andy Rachleff (Wealthfront; Benchmark): “[One important job of a board is] to hold the mirror up to management to assess their intellectual honesty on product market fit.”

It is easy for someone to get caught up in their work and become so wrapped up in the products associated with that work that they think: “Everyone will want this product.” Rachleff is saying that a board’s responsibility is in part to make sure “product market fit” genuinely exists so the business does not fail due to premature scaling. Since a failure to have genuine product market fit is the most common cause of new business and startup extinction, this task is critically important. One significant advantage that a non-executive board member can have is more emotional distance from the product and the organization including its business model. For this reason, an effective board member can help the day-to-day managers of business including the founders and the CEO carefully consider and honestly determine whether the product market fit exists.

5. Fred Wilson (Union Square Ventures): “A Board’s role is oversight, not day to day management. There is nothing worse than a Board which meddles.”

The founders and the executive team will know the business of the company far better than the board. The board should refrain from becoming involved in the day-to-day management of the business. Andy Rachleff puts it this way: “A board member should be aware the entrepreneur knows more than them.” It is not a good idea for investors or board members to “hire a dog and then do the barking for them.”

Charlie Munger explains why a CEO can’t be running every decision past the board and why they need to have the power to make decisions as follows:

“When you have a really complicated place and a good CEO, you want them to have power to speak for the place in dealing with outsiders…. Berkshire Hathaway of course is raised that way. Can you imagine Warren Buffett saying to somebody, “Well I’m sorry I have to go back and check with my directors?” I mean, of course he has to go back to check with his directors, but he knows what they’re going to say, and everybody knows that what he says is going to govern.”

Of course, there should be a governance system in place, but ideally it should be: (1) “as simple as possible, but no simpler” and (2) require that the person with delegated authority have “skin in the game.” Munger argues that former Columbia University professor Charles Frankel described the best governance systems when he said:

“truly responsible, reliable systems must be designed so that people who make the decisions bear the consequences. … Frankel “said that systems are responsible in proportion to the degree in which the people making the decisions are living with the results of those decisions…. So a system like the Romans had where, if you build a bridge, you stood under the arch when the scaffolding was removed—or if you’re in the parachute corps, you pack your own parachute—those systems tend to work very well.”

Munger’s approach requires that a lot of work be devoted to hiring the right CEO and other managers so they can be trusted without overly elaborate and complex governance systems. Work and time spent on hiring well can pay off since less oversight overhead must be created to manage that person in Munger’s view.

6. Brad Feld (Foundry Group): “There is a unique role for an outside director in a startup company and it’s one that can be profoundly helpful to the CEO. But that person needs to be operating from a headspace of an independent thinker, not a proxy for one of the other participants on the board…. “

Fred Wilson has served boards of scores of businesses and been involved in some way in many more. I can’t say what he says below any better:

“As a company moves from founder control to investor control, the notion of an independent director crops up. And independent director is a director who does not represent either the founder or the investors. I am a big fan of independent directors and like to see them on the Boards I am on. Boards that are full of vested interests are not good boards. The more independent minded the Board becomes, the better it usually is.

When the founder loses control of the company (usually by selling a majority of the stock to investors), it does not mean the investors should control the Board. In fact, I would argue that an investor controlled board is the worst possible situation. Investors usually have a narrow set of interests that involve how much money they are going to make (or lose) on their investment. It is the rare investor who takes a broader and more holistic view of the company. So while investor directors are a necessary evil in many companies, they should not dominate or control the board. The founder should control the board in a company he or she controls and independent directors should control a board where the founder does not control the company.”

7. [Brad Feld] “Boards should not be] just a cadre of VCs sitting around the board torturing the CEO with conflicting advice and opinions.”  

Board chemistry is a very important part of board quality. Board members getting along with and respecting each other is important. Fred Wilson writes:

“Like a well-functioning startup or a top flight sports team, the chemistry between the participants on a Board must be strong. That doesn’t mean they need to be best friends who hang out with each other outside of the job. It does mean they must respect each other and lean on each other’s strengths to get to the right decisions.”

After describing what can create positive board chemistry, a Harvard Business Review article discusses a period of time in the history of Pan Am as an example of on how it can go wrong as follows:

“[Boards with positive chemistry] seem to get into a virtuous cycle in which one good quality builds on another. Team members develop mutual respect; because they respect one another, they develop trust; because they trust one another, they share difficult information; because they all have the same, reasonably complete information, they can challenge one another’s conclusions coherently; because a spirited give-and-take becomes the norm, they learn to adjust their own interpretations in response to intelligent questions.

… A common point of breakdown occurs when political factions develop on the board. Sometimes this happens because the CEO sees the board as an obstacle to be managed and encourages factions to develop, then plays them against one another. Pan Am founder Juan Trippe was famous for doing this. As early as 1939, the board forced him out of the CEO role, but he found ways to sufficiently terrorize the senior managers at the company and one group of board members that he was returned to office. When he was fired again following huge cost overruns on the Boeing 747 the company underwrote, he coerced the directors into naming a successor who was terminally ill.”

8. Sonali de Rycker: “Sometimes the baton is handed to the board.”

I found this sentence in an academic paper while looking for a simple way to describe one of the board’s responsibilities:  “One of the most important tasks of the board is to appoint and, if needed, replace a CEO. Directors are elected to the board to represent the interest of the firm’s shareholders.” This board responsibility is a core part of “governance” which is a complex and often boring topic (until something goes wrong). Michael Mauboussin writes: “Corporate governance is a system of checks and balances that a company designs to ensure that it faithfully serves its governing objective.” There is no way the topic of governance can be discussed in any detail in a single 4,000 word blog post. But it is an interesting one that I may write about more in the future.

The best way to learn to be an effective board member during a crisis is to watch and read about effective boards in action in that setting. Buffett and Munger had just such an experience when they had to step up and “take the baton” when Salomon found itself in a bond trading scandal that nearly forced the firm to file for bankruptcy in 1991. Buffett felt compelled to transition from being a passive investor to being chairman of board of directors. Munger was also a Solomon director during that period. Having the right governance system in place is never more important than in a crisis like Salomon faced when Buffett stepped in to the role as Chairman.

An academic paper describes the challenge and one approach to dealing with it in this way:

“The need for a governance system is based on the premise that individuals working in a firm are self-interested and therefore willing to take actions to further their own interest at the expense of the organization’s interests. Most large corporations today have adopted governance systems that include extensive incentives and controls. Charlie Munger, however, contends that it is unreasonable to expect such a system to work equally well in all settings. He points out that many successful organizations, including Berkshire Hathaway, operate under a model that relies on fewer rather than more controls. This system can be described as a trust-based system.”

No governance system is perfect and there are inevitably trade offs involved n each approach and humans who can get in the way of proper execution of any system.

9. Mark Suster (Upfront): “In some ways being a board member is like how I’ve heard people describe learning to become a pilot: Many hours of boredom followed by some brief moments of absolute panic and fear.” “Most early stage startups having monthly board meetings. I normally recommend eight meetings per year. It makes no sense to meet in August or December due to travel schedules of most investors. You can do calls if need be. And I often recommend that board meetings be every five or six weeks rather than four to give enough elapsed time for stuff to actually happen between meetings. Quarterly is too few for an early stage business…. most companies don’t do enough between board meetings.” 

Suster and Fred Wilson have done an amazing job writing blog posts on how to be an effective and valuable board member as well as posts on the right board structure and governance processes and objectives. Other people like Brad Feld and Jeffrey Graham have written entire books on boards and governance. You will find links to many of these posts and books in the End Notes below. A full discussion of the mechanics of a board and its operations is also a topic for another post.   

10.  Jon Callaghan (True Ventures): “Creating a high-level agenda is a useful tool for gathering your thoughts and identifying areas where you need help most. High-level agendas also give you a jumping off point for starting and leading dialogue. Once a healthy discussion starts, consider your agenda’s job primarily done. The last thing you want is for a room full of incredibly talented people, all of whom care tremendously about your success, to merely read your slides or follow along.”   

The process of preparing for a board meeting ideally forces the management team to think through what is important. If the team preparing for the meeting can’t create a simple and understandable presentation, they have not fully thought it through. If there are gaps in plan and processes revealed in that preparation an effective board should be there to close those gaps by asking the right questions. Time spent going through the board presentation slides line-by-line is not the best a terrible use of time.

11. Fred Destin (Stride): “What I do know for sure is that this old Silicon Valley proverb is grounded in age-old wisdom that still applies today: ‘Good boards don’t create good companies, but a bad board will kill a company every time.’”

Theranos is a classic example of a “bad” board of directors. John Carreyrou, the author of the new book on Theranos entitled “Bad Blood,” describes the genesis and the progression of the problem:

“The main way that she got away with what she got away with is that she surrounded herself with larger-than-life figures. Early on, she met Don Lucas, Donald L. Lucas, who …became chair of her board, I believe, in 2006 after he invested. Really Lucas in the early years gave her credibility. Then Lucas, unfortunately, got Alzheimer’s disease, and so she turned in 2011 to George Schultz, whom she met through someone at Stanford. She managed to wow George Schultz, who I happened to know through my reporting is passionate about science. Pretty soon, they were meeting on a weekly basis and he was joining the board. Then she used her budding relationship with Schultz to meet all these other very famous ex-statesmen and military commanders.”

As people sometimes like to say: “What’s wrong with this picture?” The answer is obvious.


The New York Times describes the tragedy and some of its causes:

“The first line of defense should have been the board, and its failure was shocking. Some of the directors displayed a fawning devotion to Holmes — in effect becoming cheerleaders rather than overseers. Shultz helped his grandson land a job; when the kid reported back that the place was rotten, Grandpa didn’t believe him. There is a larger moral here: The people in the trenches know best. The V.I.P. directors were nectar for investor bees, but they had no relevant expertise.”

Investing outside of a “circle of competence” is a terrible idea, but at least you should be in the side car of some who is inside their circle of competence if you still do invest. No one who was skilled in the domains relevant to business of Theranos was an investor or on the board. The CEO (Holmes) and her “number two ” (Balwani) did not have the necessary domain expertise either. There were many obvious “tells” that something was wrong in the case of Theranos. The failure “was strong with this one.”

A board applying the right skills and even a reasonable degree of effort should have been triggered into action by one of the many warning signs at Theranos including, but not limited to, the absence of peer reviewed papers about the products, extremely high employee turnover and terminated pilot programs with established health-care businesses. The list of clues that the board had at their disposal is long, as New York Magazine describes in this passage:

“Holmes didn’t have any medical experience, and for years neither did her board, until former heart surgeon and Senator Bill Frist joined in 2014. “Sources who worked with her, even some recently, said that she never really showed any curiosity about what was going on in academia and industry,” Carreyrou told me. Balwani, who ran operations at Theranos day-to-day, “was essentially a computer programmer at first, and then mostly a salesman. And he had zero training or knowledge in medicine or blood diagnostics.”

12. Diane Greene (Google): “Your job as a director is to ask questions.”

When board members don’t ask the right questions, terrible things can happen to shareholders, employees, customers and to the board members themselves. One of the great experiences in the development of a professional skill set is to have the opportunity to observe people who are skilled in using the Socratic method. The University of Chicago Law School describes this approach: “Socrates engaged in questioning of his students in an unending search for truth. He sought to get to the foundations of his students’ and colleagues’ views by asking continual questions until a contradiction was exposed, thus proving the fallacy of the initial assumption.” In the same conversation in which Diane Greene made the statement quoted just above, Marc Andreessen said that asking questions as a board member is a Socratic dialogue opportunity. He also said: “Even if you have a point of view, maybe the best way to express that is in the form of a question.” By asking the right questions, board members skilled in using the Socratic method can help the management team find whether there are gaps, broken assumptions or weaknesses in their analysis and plans and more importantly help the management team find the right solutions.

Board members who do not ask the right questions can end up being personally financially responsible for adverse outcomes. As just one example, WorldCom was one of the greatest business frauds in history. This fraud was enabled by a weak and poorly structured board not asking the right questions. An investigative report concluded that while WorldCom’s management team was responsible for driving the fraud, WorldCom’s directors “served as passive observers” and “did not exert independent leadership.” A report prepared by a special committee of new directors with the assistance of a law firm concluded:

“The Board — and in particular the Audit Committee — played so limited a role in the oversight of WorldCom that it is unlikely that any but the most flagrant and open financial fraud could have come to their attention. [The audit committee] devoted strikingly little time to their role, meeting as little as three to five hours per year.”

Anyone who believes that serving on a board is a perk with no downside should consider the WorldCom case as evidence that directors may incur personal liability for their actions:



This post is well over 4,000 words so I need to cut the discussion off now and promise to write more at a later time.

End Notes:

Fred Wilson:















Mark Suster:















Brad Feld:




Andy Rachleff:



Scott Kupor/a16z  




Ram Shriram, Founder and Managing Partner of Sherpalo Ventures


Fred Destin:



Jon Callaghan:


Jeff Gramm:


Brad Feld:


The optimism joke: “How Ronald Reagan Changed My Life” by Peter Robinson

Generally on boards:
























Trae Vassallo:


Sonali de Rycker:


Mary Gates:



Charlie Munger on Governance:


























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