“We’re all mad here.”
— The Cheshire Cat in Lewis Carroll’s Alice in Wonderland
The board of directors is critical to a company’s organizational structure. The board is a collective body of individuals elected by shareholders (typically the new investors plus sometimes some key team and founders figures) to oversee the management and protect the shareholders’ interests.
In a science-driven company, the board’s role extends beyond traditional business and financial oversight. Integrating scientific expertise within the boardroom not only brings a nuanced perspective to strategic decision-making but also holds paramount importance in driving innovation, managing scientific risk, and ensuring adherence to ethical standards in scientific pursuits.
THE ROLE AND PURPOSE OF A BOARD OF DIRECTORS
A board of directors plays a pivotal role in shaping the trajectory of a company. Its primary responsibilities revolve around corporate governance, strategic guidance, and oversight of management activities, ensuring the company’s adherence to legal standards and ethical norms. In its capacity, the board approves budgets, establishes policies and procedures, elects the CEO, and makes significant decisions pertaining to mergers, acquisitions, and other large-scale business endeavors.
A company’s board of directors is a critical component in guiding its strategic decision-making and value creation. The board is primarily composed of board directors who possess voting rights and hold the authority to make crucial decisions regarding the company’s direction. However, the governance of a company doesn’t rest solely in the hands of these voting board members.
Often, other non-board members, known as “guests,” or sometimes more formally as “observers,” also participate in board meetings. Although they do not have voting rights, their presence and contributions are highly valued. These individuals can include advisors, key executives, or representatives from significant stakeholders or investors. They offer unique perspectives, insights, or expertise that can greatly assist the board in making informed decisions. Their participation enhances the breadth and depth of the discussions, allowing for a more holistic evaluation of the scenarios the company faces. Consequently, even without a formal vote, these non-board participants play a critical role in shaping the company’s strategy and driving its value creation.
In the context of a science-driven company, the board’s role takes on an added layer of complexity. The rapid pace of scientific discovery and the intricacies of translating scientific knowledge into marketable products or services necessitate a board that understands the scientific underpinnings of the company’s operations.
Here, the board aids in strategic planning by considering the business and scientific implications of their decisions. They are tasked with evaluating scientific risks, the potential return on investments in research and development, and the impact of evolving scientific and technological landscapes on the company’s competitive positioning. In this milieu, the board acts as a bridge between the scientific and business realms, ensuring decisions are balanced, risk-informed, and future-oriented.
BOARD COMPOSITION: UNIQUE ASPECTS OF A SCIENCE-DRIVEN COMPANY
A typical board of directors includes a diverse mix of individuals, each bringing a wealth of experience from their respective fields. This diversity ensures a comprehensive understanding of different aspects of business, from operations to science, from finance to business development. In biotech or science-driven companies, this mix may or may not include specialized roles such as the chief medical officer (CMO), chief science officer (CSO), and chief technology officer (CTO). Even without a formal seat, the CMO, CSO, and CTO may play critical roles within the board as guests.
Chief Medical Officer: The CMO is an invaluable player in the biotech space, tasked with ensuring that medical perspectives, including patient care and safety, are prioritized in all decisions. They use their medical expertise to offer strategic direction in clinical development, focusing on the design and implementation of clinical trials, the evaluation of safety and efficacy data, and regulatory strategy for product approval.
The CMO often serves as a key intermediary between the company and regulatory authorities, medical professionals, and the broader healthcare community. Their primary objective is to translate the company’s scientific and technological endeavors into clinically meaningful advancements that improve patient outcomes.Chief Scientific Officer: The CSO is the linchpin connecting the world of scientific research with the strategic aims of the company. They bring a comprehensive understanding of the scientific principles that underpin the company’s products or services. Their key role is to evaluate the scientific merit of potential ventures and ensure that the company remains at the cutting edge of relevant scientific advancements.
By fostering a strong research and development culture within the organization, the CSO ensures that the company is not just a participant in the scientific landscape but a key contributor and innovator. In biotech, this role may be assigned to one of the founders.Chief Technology Officer: The CTO’s role is integral to the company’s technological progression. They provide strategic leadership in understanding and navigating the technology landscape. As the technological landscape evolves rapidly, the CTO guides the board on technology adoption and helps address the technological challenges that the company may face. They ensure that the company’s technology strategy aligns with its business objectives and that the company remains technologically competitive. In biotech, the CTO might be responsible for overseeing the development and application of novel technological platforms, ensuring data security, or leading digital transformation efforts.
Independent Directors: In a science-driven company, an independent director provides impartial and objective guidance to the organization. They are not directly involved in the day-to-day operations of the company, which affords them a unique perspective and allows them to focus on broader strategic and business development issues. An independent director’s contribution is particularly vital in the context of a science-driven company, where the technical and scientific complexities of the business can potentially obscure the overall strategic direction.
They are experts in the company’s field, and with their external perspective, they can scrutinize the company’s scientific strategy in the context of market trends, financial sustainability, and long-term business goals. Moreover, their independent status allows them to monitor the company’s scientific integrity and ethical conduct effectively. They help ensure that the science underlying the company’s products or services is sound, transparent, and ethically conducted. In addition, they play a critical role in managing conflicts of interest and safeguarding shareholders’ interests.Chairperson: The chairperson in a science-driven company is usually a seasoned professional with a robust network of contacts within the pharmaceutical industry, venture capital firms, and other relevant individuals and entities. Their extensive experience often includes participation in liquidity events, initial public offerings (IPOs), and successful exits from past ventures.
The chairperson’s breadth and depth of industry connections can be pivotal for the company. They can facilitate valuable introductions, forge strategic partnerships, and attract potential investors, all of which can significantly influence the company’s growth trajectory. The chairperson’s understanding of the intricacies of IPOs and mergers and acquisitions activity can also provide vital guidance as the company moves through various stages of its lifecycle, from initial funding rounds to potential exit scenarios.
ROLES AND COMMITTEES OF THE BOARD
A board of directors may include several committees, each responsible for a specific aspect of the company’s governance. These may include an audit committee and a compensation committee, among others. The audit committee ensures the company’s financial reports are accurate and compliance standards are met, while the compensation committee sets the pay and benefits for company executives.
In science-driven companies, these committees may sometimes operate slightly differently; for example, the audit committee may need to scrutinize research and development expenditures more closely, or the compensation committee might have to deal with issues related to incentives and packages for key employees. This specialized structure ensures the board is equipped to guide the company in navigating the unique challenges of the science-driven industry.
ADVICE FOR FIRST-TIME BOARD MEMBERS IN A SCIENCE-DRIVEN COMPANY
Stepping onto the board of a science-driven company for the first time can be a daunting experience. The decisions made at this level can significantly affect not only the company but also public health, patients, research directions, and even industry standards. Here are some key points of advice for first-time board members in such an environment:
Transparency and Proper Reporting: Always maintain the highest level of transparency in your communications with the board. Accurate, thorough, and timely reporting is crucial in fostering an environment of trust and facilitates better decision-making. Understand the reporting procedures and follow them meticulously.
Value Addition from Your Vantage Point: Each board member brings a unique perspective and set of skills to the table. Identify your strengths and look for opportunities where they can add the most value. Whether it’s industry connections, scientific expertise, or strategic planning skills, leveraging your unique skills can significantly contribute to the board’s effectiveness.
Strong Ethical Stance: Serving on the board of a science-driven company requires a commitment to uphold strong ethical standards. Decisions made can have far-reaching implications, affecting not just the business, but public health and patients.
When serving as a board member, always consider, “What would the patient think if I make this decision?” Always keep the patient and the greater good in mind, adhere to the highest ethical standards, and never compromise your integrity.
In summary, as a board member in a science-driven company, your role is to contribute your unique skills and knowledge to the board, always with transparency and a strong ethical compass.
Excerpted from Fast Forward Thinking: 40 Rules for Entrepreneurs and Investors in Medical, Science, and Biotech by Luis Pareras, MD, PhD.