How should the boards of middle-market companies operate? Babson’s Les Charm says that when it comes to middle-market firms, there’s no shame in recruiting family and friends to serve as board members. In fact, he would advise many CEOs to do just that. And as for championing good governance in the boardroom, Charm bristles at the very thought.
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MMTL: The more broad question, how should boards really work? There seems to be some general misconceptions in this regard. What are some of the ideas that you think are a little silly when it comes to boards?
CHARM: I love that question, thank you. First, I hate the word governance, because governance is not what a board is really all about for middle market companies. That’s where I’d like to begin. Governance got introduced into the Lexicon, I think, around Sarbanes-Oxley time and has led us down a bad path. I’m not talking about large publicly owned companies, I’m talking about generally middle market companies venture backed or not venture backed. They’re not about governance, they’re about advice and help to the CEO. And those two concepts are fundamentally different. As one investor said to me, every time a board where the CEO meets with the board and the CEO thinks it’s a scorecard with whatever he says gets rated by the board, then you have a dysfunctional board.