by David DeJean
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Whether you run a startup or a Fortune 500 stalwart, your company is only as strong as its board of directors, says entrepreneur Mark Eppley. Serious sentiments from a guy ZDnet once called "computing's clown prince" for his promotional stunts and parties.
But for 18 years, with a few years off, Eppley has run his own software company, LapLink Inc., maker of the PC-industry standard product for transferring files between computers. He's a blues-bar aficionado whose most famous photo shows him wearing a Mohawk wig, but his titles include president, CEO and chairman of the board. His class-clown reputation notwithstanding, he's serious about the importance of mastering corporate governance.
"As CEO, you have to put the time into building and managing a board of directors exactly the same way you put time into building and managing your executive team," says Eppley.
"If you're a startup, you'll have a board composed of the company founders and your venture backers. That's well and good, but as the company grows you need to broaden the experience represented on the board. Venture capitalists sometimes share the same background. When you build a board, you want diversity of experience and skill sets that are germane to the business you're building. And you don't want to get heavily overloaded in any one area."
When you recruit for your board, look for sound business experience, he says, not just a big name or a great resume. He cites his own board as an example: Tim Choate is chairman and CEO of Aptimus, formerly FreeShop.com, and has extensive entrepreneurial experience in Internet marketing and online media. Perry Steiner is president of Digital River and a former investment banker. Brian Dixon is vice president for operations at F5 Networks, with a strong background in finance and accounting.
The newest director, William Jasper Jr., is president of Dolby Labs. "Bill has been with Dolby for the last 20 years. He helped develop the licensing model that business is built on, and he will play a role with some future product directions at LapLink," Eppley explains.
Louis Kapcsandy is chairman and CEO of Baugh Enterprises, one of the Northwest's largest construction companies. "He's my outside-the-industry director," says Eppley. "His experience is very germane because of the construction industry's focus on project management. Managing change orders in construction is the key to success, and it's the same in software. There are a lot of parallels, and I get a lot of fresh insight."
Managing the Board
Board members contribute insight and ideas, and it's up to the CEO to make the board as productive as possible. "Managing a board is different from managing employees," says Eppley. "The board keeps the CEO accountable, but the CEO has to keep the board members accountable as well. It's your responsibility to keep them educated about your industry and the details of your business. In return, it's their responsibility to give you the bandwidth you need. If you have a particular issue, task or question, you have to be able to call on your directors. Being a good board member is definitely a time commitment."
Eppley has seen this from both sides. In 1997, after running his company for 14 years, he brought in a president and retired to be chairman of the board. It didn't work out. The company went into a tailspin, and part of the problem was a lack of effective board governance. Eighteen months later, the founder moved back into the corner office.
In the two years since, Eppley has restored LapLink to an even keel, but the experience opened his eyes and inspired his missionary zeal on the subject of board-CEO relations. He now prizes discussion of all viewpoints and says a rubber-stamp board is a CEO's worst enemy.
Eppley says he holds a formal board meeting at least once a quarter and telephone meetings more frequently. He talks to one or more of his board members every week. "You go to individuals for advice in their areas, financial issues, facilities questions, or contacts inside of companies," he says.
Sometimes the help is more tangible. "I've got a director who's spending 12 hours a week with us right now because we needed his particular expertise. I've also used directors to help with recruiting."
The CEO Leads Multiple Teams
Business is a team sport, says Eppley. But, of course, there's more than one team, and the CEO has to be a key player on all of them. The CEO coordinates the efforts of the board and the company's employees.
"For example, while you may involve directors in recruiting and even interviewing candidates, particularly if it's for a position that works closely with the board, you don't run every candidate for a high-level job past the board," says Eppley.
And how should the CEO handle the board if he's failed?
"Face the music, be an adult and admit your mistakes. If it's not a fatal error, pick yourself up and do it right the next time, correct the situation. Relationships with the board can help greatly in those situations. That's why you need close and effective working relationships."
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