Category Archives: Board

Did Your Board Order a Proposal or a Discussion?

[Restructured.  See notes.]

I think board meetings should have more discussions and fewer proposals.  Why?

  • The hardest questions often don’t lend themselves well to proposals. Think:  global warming, cultural divisiveness.  Or, in business:  investor alignment, exit strategy, or a flawed corporate strategy.  You’re not going to solve those issues in 45 minutes by quickly reviewing three options.
  • Proposals can result in a myopic focus on approval.  Approving an operating plan can be a strategic exercise where a strategy is proposed and translated into an organizational structure and expense budget.  But it’s too often an 11th-hour exercise driven by financial constraints where everybody just wants approval.
  • Proposals usually feature limited discussion.  Both because of the format and the approval focus, discussions during proposal sessions tend to be hasty and shallow.  If everyone knows they need to leave at 5pm and that three other items are slated before the end of the meeting, you’re strongly disincenting discussion.
  • Boards know less about your business than you think. Management spends 60 hours a week at the company, while board members might spend 60 hours a year.  If you want to leverage your board’s knowledge, first spend 20 minutes simply baselining them.  It’s a great introduction to a discussion and only rarely happens in proposals.  The more they know, the more they can help.
  • Sometimes, people just need to talk.  Think of recent hard times, like the start of Covid.  Just talking about the problem with the board leveraged the knowledge of those in the room (e.g., if only to know what other companies were doing), made everyone feel better, and helped the board determine if management were taking the situation seriously and asking the right questions — even if nobody had all the answers.  The board getting together to “just talk” isn’t just a touchy-feely concept; it’s a legal one, too [1].

For clarity’s sake, I think board meeting sessions fall into one of three types:

  • A review (or, “deep dive”) where, e.g., the CRO reviews the previous quarter’s results, metrics, win/loss, lessons learned, and plans to address to key issues.  Or maybe it’s a review of the partner program.  Or the product roadmap.  The goal is deep inspection and learning.
  • A proposal, where, e.g., the CEO and CFO present next year’s operating plan, seeking board approval at the end of the session.  Or a stock option refresh.  Or executive compensation.  Management presents either one or three options and seeks an approval of their choice. Usually there is some discussion, but the goal is ultimately procedural:  getting formal approval on a proposed decision.
  • A discussion, where, e.g., the CEO leads a discussion on strategy, the CRO a discussion on sales models, or the CFO a discussion on an upcoming new financial standard.  The purpose of a discussion is educational:  to leverage the knowledge of everyone in the room so they all leave smarter on the issue than when they came in.  Discussions are also useful for consensus building.

So my advice is to look at your last few board agendas, classify the session topics by type, and analyze your mix.  Odds are, you’re having lots of reviews and proposals, but few or no discussions.  I’d say everyone would be better off if you changed that going forward.

For example, here’s a hard problem that many startups face today:

How are we going to make our cash last, while growing fast enough, so that — despite multiple compression — our next round will be an up-round?

Sure, you can run a proposal session on this topic.  You can build a spreadsheet to model a few macro scenarios (e.g., mild vs. modest recession), financing options (e.g., extension round, venture debt), and cost-cutting options (e.g., a 10% RIF).  You can make a decision on what, if anything, to do right now.  But, invariably, there will remain a ton of, “we’ll have to wait and see how things develop going forward.”

In this case, especially if no immediate actions are indicated, a discussion might be much more effective than a proposal.  I think what most boards care about right now are the answers to questions like these:

  • Is the CEO in touch or in denial when it comes to the changing business reality?
  • Does the CEO understand the new fundraising environment (e.g., multiples, constraints)?
  • Is the CEO too optimistic or pessimistic about the expected fundraising environment in 18-24 months?  What future environment assumptions are driving their point of view?
  • Is the CFO on top of cash planning and forecasting?
  • Is the CEO ready and willing to make cuts if indicated by the needs of the business?
  • Does the company have good leading indicators and are they tracking them so they can act early, if indicated?
  • What do my fellow board members think and what are they seeing in the market and with their other companies?

I think most boards would instinctively order a proposal, added to the next board meeting’s agenda.  I think smart CEOs might well convince them to order a discussion, instead.

# # #

Notes
I had planned to restructure this post in response to feedback on the draft, but failed to do so before it auto-posted earlier today.  Hence, I’ve restructured it largely in accordance with a rule from my grandmother, a high school english teacher:  most essays are improved by simply deleting the first paragraph.  I did a bit more than that, but the world’s most Irish grandmother (Margaret Mary Magadalene O’Keefe Downing Gardiner) was proven right yet again.

[1] If you ever wondered why unanimous written consent resolutions needed to be unanimous:  the idea is that if there is any dissent (i.e., if even one director opposes a motion), that the board must convene to discuss it.

Preview of My SaaStr Europa Talk: The Top 5 Scale-Up Mistakes

I’ll be speaking next month in Barcelona on the first day of SaaStr Europa, held at the International Convention Center on June 7th and 8th.   My presentation is scheduled at 11:25AM on June 7th and entitled The Top 5 Scale-Up Mistakes and How to Avoid Them.  While I usually speak at SaaStr, this is my first SaaStr Europa, and I’ll be making the trip over in my capacity as an EIR at Balderton Capital.

For those concerned about Covid, know that SaaStr Europa, like its Silicon Valley namesake, is a primarily outdoor and open air conference.  I spoke at SaaStr Annual in Silicon Valley last September and between the required entry testing and the outdoor venue felt about as safe as one could in these times.  Earlier this year, the folks at SaaStr moved the Europa venue from London to Barcelona to enable this primarily outdoor format.

After historically focusing a lot of my SaaStr content on the start-up phase (e.g., PMF, MVP), this year I thought I’d move to scale-up, and specifically the things that can go wrong as you scale a company from $10M to $100M in ARR.  Even if your company is still below $10M, I think you’ll enjoy the presentation because it will provide you with a preview of what lies ahead and hopefully help you avoid common mistakes as you enter the scale-up stage.  (If nothing else, the rants on repeatability and technical debt will be worth the price of admission!)

Without excessively scooping myself, here’s a taste of what we’ll talk about in the presentation:

  • Premature go-to-market acceleration.  Stepping on the gas too hard, too early and wasting millions of dollars because you thought (and/or wanted to believe) you had a repeatable sales model when you didn’t.  This is, by far, the top scale-up mistake.  Making it costs not only time and money, but takes a heavy toll on morale and culture.
  • Putting, or more often, keeping, people in the wrong roles.  Everybody knows that the people who helped you build the company from $0 to $10M aren’t necessarily the best people to lead it from $10 to $100M, but what do you do about that?  How do you combine loyalists and veterans going forward?  What do you do with loyalists who are past their sell-by date in their current role?
  • Losing focus.  At one startup I ran, I felt like the board thought their job was to distract me — and they were pretty good at it.  What do you do when the board, like an overbearing parent, is burying you in ideas and directive feedback?  And that’s not mention all the other distraction factors from the market, customers, and the organization itself.  How does one stay focused?  And on what?
  • Messing up international (USA) expansion.  This is a European conference so I’ll focus on the mistakes that I see European companies make as they expand into the USA.  Combining my Business Objects experience with my Nuxeo and Scoro board experience with both Balderton and non-Balderton advising, I’m getting pretty deep on this subject, so I’m writing a series on it for the Balderton Build blog.  This material will echo that content.
  • Accumulating debilitating technical debt.  “I wear the chain I forged in life,” said Jacob Marley in A Christmas Carol and so it is with your product.  Every shortcut, every mistake, every bad design decision, every redundant piece of code, every poor architectural choice, every hack accumulates to the point where, if ignored, it can paralyze your product development.  Pick your metaphor — Marley’s chains, barnacles on a ship, a house of cards, or Fibber McGee’s closet — but ignore this at your peril.  It takes 10-12 years to get to an IPO and that’s just about the right amount of time to paralyze yourself with technical debt.  What can you do to avoid having a product crisis as you approach your biggest milestone?

For those in attendance, we will have an Ask Me Anything (AMA) session after the presentation.  I’ll post my slides and the official SaaStr video after the conference.

This should be fun.  I hope to see you there!

How to Lead a Strategic Board Discussion

Have you ever been to a board meeting where 60 minutes were allocated on the agenda for discussion of a strategic topic?  What happened in that session?

  • You probably started late because board meetings are hard to keep on time.
  • Some exec, maybe the CEO, probably presented a “few slides” to “tee up” the discussion.
  • “A few” turned out to be 23.
  • Two or three questions were asked by the one board member closest to the topic.  The others said nothing.
  • Time ran out because you needed to get to the administrative section, approving prior-meeting minutes and such.
  • Everyone politely said, “great job,” but left the meeting frustrated.

This happens a lot.  Execs who dysfunctionally view survival as the goal of a board meeting might be happy with this outcome.  Think:  “we survived another one; now, let’s get back to work.”

For those execs, however, who actually want to both tap into the board’s expertise and build board-level consensus on a strategic topic, this is a terrible outcome.  No expertise was tapped.  No consensus was built (except perhaps that the company doesn’t run good board meetings).  So what went wrong and what should we do about it?

What Goes Wrong in Strategic Board Discussions
Startup boards are a tough audience.  They are homogenous in some ways:  everyone is typically smart, outspoken, successful, and aggressive [1].  That means leading any discussion is cat-herding.

But, when it comes to strategic discussions, the board is heterogenous in three critical dimensions [2]:

  • Operating experience
  • Technology understanding
  • Financial knowledge

Startup boards are typically VC-dominated because, as a startup goes through the A, B, C, D series of funding rounds, it typically adds one VC board member per round [3].  Thus the typical, sub-$100M [4] startup board has 1-2 founders, one VC for each funding round [5], and one or possibly two independents.

Patagonia vests [6] aside, not all VCs are alike.  When it comes to operating experience, VCs generally fall into one of three different categories [7]:

  • Deep.  Former founders, who founded, grew, and eventually sold their companies, or highly successful 10+ year executives from brand-name companies.  In high school, members of the former group were in the programming club [8].  You’ll find these people working at early-stage VC firms.
  • Moderate.  People who worked for roughly 4 to 10 years, often in product but sometimes in sales or corpdev, at a larger tech company, often with an MBA sandwiched in the middle.  Often they studied CS or engineering undergrad.  In high school, they were in the entrepreneurship club.  You’ll find these people at a wide range of VC firms.
  • Light.  People who typically majored in economics or finance (sometimes CS), worked for 2 to 4 years in management consulting or at a tech firm, attended a top business school, joined a VC firm as an associate, and then worked (usually hard and against the odds) their way up to partner.  In high school, they were in the investing club.  You’ll find these people at later-stage VC firms.

Independent board members come in different flavors as well:

  • General managers.  Active or former CEOs of startups and/or business unit GMs at big companies.  These people typically have a good overview of the business and know the functional area they grew up in, these days typically sales or product.
  • Go-to-market executives.  Active or former sales or marketing leaders, i.e., CROs or CMOs.  These people understand go-to-market, but may be light on both technical understanding and financial knowledge.
  • Finance executives.  Active or former CFOs who lead the audit committee and who work the company’s CFO to ensure the company’s financial affairs are in order.  These people are typically light on technical understanding and go-to-market (GTM) knowledge (but they know that GTM is too expensive and they don’t like it).

Now, imagine having a deep conversation about {multi-cloud, serverless, re-architecture, UI/UX, positioning, pricing, branding, ABM, PLG, company strategy, category consolidation, international expansion, channels} with a group consisting of two product-oriented company founders, three VCs (one deep, one moderate, and one light in operating experience), and two independent directors (one former CEO with a sales background and the other a former CFO).

As the saying goes, “you can’t fix what you can’t see.”  Hopefully in this part of the post we’ve shined a bright light on the problem.  You want to discuss an inherently difficult issue (otherwise it wouldn’t have made the agenda).  You’re working with one heck of heterogeneous group. And, for the cherry on top, most of the group members are type-A personalities.  No wonder these sessions are hard to lead [9].

How To Lead a Strategic Board Discussion
Since this exercise is almost a Kobayashi Maru, sometimes the smartest strategy is change the rules.  Rather than teeing up an impossible discussion, instead propose to create a working group of those members who are most interested (and presumably expert) in the chosen topic.  Team those board members with the relevant executive staff, run a series of meetings that dive deep into the topic, and then report back into the larger group. Sometimes, as the WOPR computer concluded in War Games, the only wining move is not to play.

The benefits of these working groups are many:

  • You engage the board members and really tap into their expertise.
  • The smaller group size and more informal setting lead to more interesting and interactive discussions.
  • You create an opportunity for the executive staff to increase their visibility and build relationships with board members [10].

Personally, I’ve participated in numerous such working groups on various topics (e.g., pricing, metrics, GTM planning and modeling, sales process, positioning/branding, product strategy, and reluctantly, compensation) and find them invariably superior to jumping into a hard topic with a big heterogeneous group.

That said, once in a while you do need to lead such a discussion, so in that situation what should you do?  Do these five things:

  • Make a deck.  If you start the discussion from scratch without a tee-up, it will likely be a mess.  Use a deck to frame the topic and maintain control.  However, that deck is not a presentation.  It should be built specifically to lead a discussion.  Don’t just cut and paste slides from your internal meetings.
  • Baseline the audience.  Writing for the person in the room with the least expertise and familiarity with the topic, write 3-5 slides that describe the challenge you are facing and the decision you need to make.  Try to decompose the overall question to three sub-questions about which you will lead a discussion.  This will likely clarify your own thinking on the question greatly.  If it’s a one-hour session, this part, including explanatory Q&A, should take 10 minutes.
  • Ask three questions. The final three slides should each have one question in the title and blank body.  Stay on each one for 15 minutes.
  • Balance participation.  Remember your goal is to enable a discussion, not necessarily to make the final decision.  So lead a discussion.  It’s not a discussion if you and the alpha board member are the only people talking.  (That’s called watching two people talk.)  Keep track of who’s talking and do so naturally, i.e., without “going around the room” (which also isn’t a discussion, it’s a serial Q&A).
  • Summarize what you heard and either promise to get back to them with your final decision, propose splitting off a working group, or some other concrete action so that they know the next steps going forward.

Remember if you’re clear on the goal — to have a good discussion — and you build the deck and lead the group to stay focused on that goal, you might not arrive at an easy decision in 60 minutes, but you will indeed have delivered on what you promised — a good, board-level discussion about a complex issue.

# # #

Notes

[1]  As is well known, they are also often homogenous in other, undesirable ways (e.g., race, gender) that I will acknowledge but not address as it’s not the purpose of this post.  For more on this topic, you can start here.

[2]  This is why pattern-matching across portfolio companies, executive staffing, and compensation are popular topics with boards.  They are safe topics, in the sense that everyone gets to participate in the discussion.  On the other extreme, it’s why product and major engineering decisions get so little time relative to their importance.  Go-to-market lies somewhere in the middle.

[3]  This is somewhat less true in today’s markets because (a) many VCs are more willing to invest without taking a board seat and (b) some, more indexing-oriented, later-stage VCs do not as a matter of practice want board seats because their business model is about deploying large amounts of capital across a broad range of companies.

[4]  Around $100M they may typically start reconfiguring in preparation for an upcoming IPO.

[5]  Where that number, using an Excel formula, is = code(uppercase(last-round-letter)) – 64.  You’re welcome.

[6]  A little satire from Fortune and/or my favorite scene from The Internship, which is about academic elitism in Silicon Valley in general and not VC in specific.

[7]  These buckets are definitionally stereotypes with all attached strengths and weaknesses.  While I was tempted to write “typically” and “often” before every sentence, I elected not to for word parsimony.  Place accept in the spirit given.

[8]  I add this colorful detail, which will invariably be wrong a lot, both for fun and to help paint the picture.  In each instance, I know at least one person, and usually more than one person, who fits this profile.  But no, I don’t always ask people what clubs they were in during high school.  To ensure contemporary naming (e.g., back when I was a member, it was called “computer club”), the club names come from the list at the high school that most of my children attended.

[9]  This why boards frequently talk about “safer” topics (in the sense that everyone can more easily participate) such as pattern matching across companies, executive staffing, and compensation — and a key reason why major engineering and product decisions get low airtime relative to their importance on many boards.

[10]  One of the smartest things e-staffers can do is to build relationships with their VC board members.  This isn’t always easy — everyone is pressed for time, sometimes it can make the CEO uncomfortable, and it’s not strictly necessary — but five years later when the VC is looking for a CXO for a hot portfolio company, whether you get the call or not may well be a function of that relationship or lack thereof.

The Triangle of Director Protections: D&O Insurance, Indemnification Agreements, and Charter Provisions

A corporate lawyer friend once told me to think about director protections as a triangle with three legs [1]:

  • D&O insurance, which stands for directors and officers insurance (and with which most people are familiar)
  • Indemnification agreements (with which some people are familiar)
  • Charter provisions (with which it seems almost nobody is familiar)

Why does this matter?  If you want to attract strong, experienced individuals to your board of directors, they are going to ask your company to provide reasonable and standard protections from potential liability associated with that work [2] [3].  The same holds true for corporate executive officers, though they are often less aware of the exposure.

And, by the way, as a founder/CEO you should want to protect yourself.

My goals for this post are to:

  • Put this topic on your radar, framed not just as “D&O insurance” but the “whole package” of director protections (i.e., the “triangle”)
  • Share what I’ve learned as a brief introduction and provide links to more authoritative posts (e.g., from law firms)
  • Remind you to seek legal counsel in addressing director and officer protections because the topic gets complicated fast, as the embedded links below demonstrate.

D&O Insurance
Most startups purchase some sort of D&O insurance fairly early in their evolution; VCs often require it.  Per this The Hartford post, “D&O insurance protects the personal assets of corporate directors and officers, and their spouses, in the event they are personally sued by employees, vendors, competitors, investors, customers, or other parties, for actual or alleged wrongful acts in managing a company.”

Woodruff Sawyer outlines Eight Reasons Private Companies Should Buy D&O Insurance:

  • Attracting new directors
  • VC requirements
  • Emerging risks
  • Regulatory exposures
  • Bankruptcy
  • M&A
  • Shareholder lawsuits
  • IPO considerations

Per this site, startups typically purchase between $1M and $3M in coverage and the median annual cost of a policy is $3,800 for companies having raised <$5M, $9,600 for those having raised between $5M and $20M, and $17,000 for those having raised >$20M.

Despite the acronym proximity, D&O should not be confused with E&O (errors and omissions) insurance, which protects your company from lawsuits claiming mistakes in professional services, and which many startups also often purchase.  Beyond the scope of this post, Silicon Valley Bank has a nice overall startup insurance primer, Everything Founders Should Know about Protecting Their Property, that also discusses business property and general liability insurance, employment practices liability insurance (EPLI), and with links to other types of commonly purchased insurance.

Indemnification Agreements
In my experience, indemnification agreements are important, but generally less well understood than D&O insurance.

Let’s start with defining indemnification.  Per this Cornell Law site:

To indemnify another party is to compensate that party for losses that that party has incurred or will incur as related to a specified incident.

So, in our context, indemnification means that if a director is sued as a result of their work with the company that the company will compensate them for any losses they sustain as a result.

An indemnification agreement is a contract that specifies that, provided the director meets a minimum standard of conduct (e.g., acted in good faith, acted in a manner reasonably believed to be in the company’s best interests, had no reasonable cause to believe they were acting illegally), the company will defend the director against the cost of certain claims, including legal fees, litigation awards, and settlement costs [4].  For an example, see this model indemnification agreement from The National Venture Capital Association (NVCA) [5], which provides a detailed introduction in its preface as well as detailed in-line comments.

As with all things legal, the devil’s in the detail on indemnification agreements.  Some of the bigger issues include:

  • Advancing expenses.  There’s paying your costs at the end of the process and then there’s paying them along the way.  To understand the need, imagine a case that costs $250K to defend over four years.
  • Specific circumstances.  In the indemnification mandatory or permitted?  Does it apply to all claims or only certain types?  What are the procedures and default presumptions to determine if the director is entitled to indemnification on any given case?
  • Duration.  Is the indemnification only for active directors? What if a director no longer serves on the board, but is sued in a claim related to work done in the past when they were active?
  • Choice of counsel.  If the company’s paying, does it get to pick the law firm?  What if the director wants to hire the most expensive firm in town?
  • Pathological cases.  I’m not 100% sure about this one, but I love corner cases so — what if the company is suing the director?  Does it have to indemnify them in that case as well?

When it comes startups, it’s important to remember the Achilles’ heel of indemnification: an indemnification agreement is only as good as the company’s ability to pay.  In situations where a startup goes “cash out” (as in, out of cash), that ability is zero.  Hence the need for the full triangle of director protections, including D&O insurance.

Charter Provisions
The last leg of our triangle is Charter provisions.  A corporate Charter, also known as a company’s Articles of Incorporation, is a document that establishes the existence of a corporation, is filed with the government, and that lays out the major components of a company including its objectives, structure, and planned operations.

When it comes to director protection, I believe the best practice is for the Charter to contain both (a) exculpatory charter provisions that limit or eliminate directors’ personal monetary liability and, (b) indemnification language that says the company will provide directors with the fullest indemnification allowed by law (e.g., “indemnification to the fullest extent permitted by [Delaware] law.”)

Apparently, a certain amount of indemnification is automatically provided by statute (in some states) and the “fullest indemnification allowed by law” language supplements that where necessary, allowing any specific indemnification agreements to kick in [6].  I know this point is technical, but I also know that the corporate lawyers with whom I’ve worked emphasize that D&O alone is not enough, you need to look at the whole triangle of director protections — and that Charter provisions are one leg of that triangle.

I hope you enjoyed this rather in-depth primer and that I successfully put this issue on your radar.  If you’re unsure about where your company stands on director (and officer) protection, you should give your lawyers a call.  I’m sure they’d love to hear from you.

List of Best Links I Found
I did a lot of web surfing to support this post.  Many of the pieces I found were not focused on a given subtopic, but the whole thing.  That’s good to the extent my primary argument is “look at the whole package,” but it was bad for my hyperlinking because it was, e.g., hard to find articles that discussed indemnification agreements without also discussing charter provisions.  Ergo, I recommend using control-F to scan through these articles if you are looking for one specific topic of interest.  In rough order of accessibility:

# # #

Notes

[1]  I am not a lawyer; just a business person doing his best to try and figure things out and share what I’ve learned along the way.  See my FAQ and the blog’s license agreement for additional disclaimers as well.

[2] I am writing about for-profit enterprises, though those interested in non-profit boards also face potential liability issues.

[3] I have skin the game here; I serve on the board of directors of several companies.

[4] There is an argument that startup executive officers who are not directors should also have an indemnification clause in their employment agreement.  See your lawyer for more.

[5] The NCVA provides a great collection of model legal documents, including a voting agreement, a term sheet, a stock purchase agreement, and many others.

[6] I am at/beyond my legal depth here.  All I know is you should ask your lawyer what needs to in the Charter to provide for maximum director protection.  See the Skadden Arps two-part series linked above for more detail on this specific topic.

“The Board Brought Me In” Telltale

There’s only one executive who should ever say, “the board brought me in,” and that is the chief executive officer (CEO).  Yet, you’d be surprised how often you hear other executives — chief revenue officers (CROs), chief marketing officers (CMOs), chief product officers (CPOs), and most often chief financial officers (CFOs) — say, “the board brought me in.”

It usually comes up in an interview, with a candidate running through their background.

“Well, I was at XYZ-Co, and things were going great, but at PDQ-Co they needed some help, so the board brought me in to help get things back on track.”

A+ on storytelling, but (usually a) C- on reality attachment.  “And where,” methinks, “was the CEO during all this board bringing in and such?”

(And if things really were going so well at XYZ-Co, tell me why’d you jump ship to do a fixer-upper at PDQ-Co again?)

I always view “the board brought me in” language as a telltale.  Of what, I’m not entirely sure, but it’s usually one of these things:

  • Self-aggrandizement.  Sometimes, it’s just the candidate trying to sound larger-than-life and they think it sounds good to say, “the board brought me in.”  In this case, the candidate’s judgement and credibility come into question.
  • Innocent miscommunication.  Perhaps the candidate knew an existing board member and was referred into the position by them.  OK, I suppose technically they could think, “the board brought me in,” but didn’t the CEO interview them and make the final call?  Did the board really bring them in — as in, against the CEO’s wishes?  Maybe it’s just old-fashioned communications confusion.  Maybe.
  • Genuine confusion.  Or, perhaps the candidate is under the illusion that they somehow work for the board and not the CEO.  This can happen with CFOs in particular because, unlike all other CXOs, there is something of a special relationship between the board and the CFO.  But in tech startups, in my humble opinion, the CFO works for the CEO, period — not for the board.  They may have a special relationship with the board, they may meet with the board without the CEO being present (e.g., audit committees).  But they work for the CEO.  If you feel differently, great.  If you feel like I do — best to use this as a telltale of a potentially huge problem downstream.
  • A placeholder CEO.  There is always some chance the CEO is somehow a placeholder (e.g., a founder who’s lost all but positional power in the organization and acting in some lame duck capacity).  In this case, the CXO in question might just be saying the truth — perhaps the board really did bring them in.  But then the candidate’s going to need to explain why they jumped into such a mess [1].

I’m sure there are other possibilities as well.  But the main point of this post is to say that your ears should perk up every time you hear a CXO [2] candidate say, “the board brought me in.”  Mine do.

# # #

Notes

[1] And I suspect the most common answer will be, “and they were planning to make me CEO in X months once they worked on the transition.”  In which case, I’d want to understand why the candidate is so trusting (or naïve), what written assurances were given, and why they would take a CXO job with a dubious call option on CEO as opposed to taking a straight-up CEO job.  (To which the best, but still somewhat unfortunate, answer is — it was the only available path I had at the time.)

[2] For all values of X != E.