Speaker 1:
From the Library of the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, you're Inside the ICE House, our podcast from Intercontinental Exchange on markets, leadership, and vision and global business, the dream drivers that have made the NYSE an indispensable institution of global growth for over 225 years. Each week we feature stories of those who hatch plans, create jobs, and harness the engine of capitalism right here, right now at the NYSE and at ICE's exchanges and clearinghouses around the world. And now welcome Inside the ICE House. Here's your host, Josh King of Intercontinental Exchange.
Josh King:
On October 4, 2022, Warren Buffet's Berkshire Hathaway, the most expensive stock in the world, trading at $424,000 a share, issued a press release committing to regain compliance with the New York Stock Exchange. Now, let me clearly say there's no way that tickers BRK.A and BRK.B will be heading to the pink sheets anytime soon, but the exchange's rules must be followed and there are no exceptions. Since 1953, the rules to list on the exchange have been found in the New York Stock Exchange Listed Company Manual. The now digital document is the backbone to ensure that the exchange keeps the high standards required to remain listed here for our 230-year-old institution.
So what rule is Berkshire Hathaway in violation of? If you scroll down to Section 3 Corporate Responsibility, you'll find a brief section entitled Section 303A.01 which states, and I'm going to quote it here, "Listed companies must have a majority of independent directors. Effective boards of directors exercise independent judgment in carrying out their responsibilities. Requiring a majority of independent directors will increase the quality of board oversight and lessen the possibility of damaging conflicts of interest." The next section is a several thousand word definition of independent director. And to be fair to your ears and your time, I'm going to assure you that it thoroughly covers any potential conflicts of interest.
So with the sad passing on September 28th at the ripe old age of 96 of Mr. David Gottesman, an early investor in Berkshire Hathaway and the founder of investment firm First Manhattan Co or FMC, the Berkshire board fell below that 50% independent mark. As the company noted in its regulatory filing, the open seat will be filled soon. But as of the time of this recording, it's not known by who. Besides passing the independent test, anyone could fill the seat, though sadly, I doubt my phone is going to ring anytime soon with an Omaha area code. And it does raise the question, what does it take to be identified by a public company as a potential board member?
To answer that question on the minds of many of our listeners is our guest today, Betsy Atkins, who served on so many influential boards that she literally wrote the book on how to become a company director. Our conversation with Baja Corporation founder and CEO Betsy Atkins on the secrets to landing a board seat and being a great director, her career-leading companies from the board table in C-Suite, and her advice to CEOs and boards navigating adversity. That's all coming up right after this.
Speaker 3:
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Josh King:
Our guest today, Betsy Atkins, is the founder and CEO of Baja Corporation. Over her career, she's served on 38 public company boards, the second most ever in U.S. history, and is a three-time CEO. She's also overseen 17 IPOs on the New York Stock Exchange of companies that she's been a director of. Betsy currently holds several director roles, including on the board of SL Green Realty Corp, which trades currently on the NYSE under the ticker symbol SLG, and a not yet public company, but one of my favorite delivery services, Gopuff, among her other duties. So welcome Betsy Inside the ICE House and the New York Stocks Exchange.
Betsy Atkins:
I'm delighted to be with you and your listeners.
Josh King:
So a couple weeks ago I saw you up on the bell podium celebrating SL Green's 25th anniversary. With all the experience that you've had in the C-suite and the boardroom, how many times have you climbed those stairs to the New York Stock Exchange podium? Have you been on the podium for all of those 17 IPOs?
Betsy Atkins:
Not all of them, but I would guess maybe about 15.
Josh King:
What's the experience like when you do it? And what's the thought of the service that you've had and the moment that these companies are at and what it represents when they go from wherever their governance and their ownership structure is to suddenly being bought and sold by public investors?
Betsy Atkins:
It's such an exciting milestone and you never don't feel a thrill. The energy of the floor, the fact that you're part of the public markets worldwide. You're on such an iconic exchange with incredible liquidity, history, values. And it's a moment of real pride. And when you hit that gavel and ring the bell, it is something.
Josh King:
You've led several successful exits over your career through IPO and acquisition as a founder, CEO, and a board member. I read that your aunt and uncle were confectioners who started their own business. So does entrepreneurship run in the family?
Betsy Atkins:
I think entrepreneurship does run in the family. As a serial entrepreneur, I have found that starting companies, assembling amazing teams, and bringing an entrepreneurial and innovative mindset to larger companies is the perspective that I find very exciting.
Josh King:
What was the background of your aunt and uncle's store and what did you take away from that?
Betsy Atkins:
My uncle was an early innovator in automating factories. So all of the new robotics and things that we see on a factory floor of manufacturing 4.0, he was a pioneer in his day. He was not a great businessman. He automated a factory. Client could not pay him. He ended up with a factory. He had no interest in anything but automating factories, not in running a great confectionary candy bar business.
And unfortunately, he had a stroke. And I was tapped on the shoulder by my mother and ordered to go and run this family business where everybody was employed. So I left high tech. And I had co-founded this very big company named Ascend that went from zero to 5.4 billion in revenue in a little over eight years. So I left, took over this family business and redid it, tech-enabled it and positioned it and sold it.
Josh King:
That's the business cycle I guess. And we're going to get a lot more into Ascend in a couple minutes. But to stick with the earlier part of your career, Betsy, you attended the University of Massachusetts, got your liberal arts degree there, and after, how did you break into this fledgling computer tech space where you quickly found your first chance to both develop, found, and then scale a company with what was called Interlan?
Betsy Atkins:
Well, originally I took whatever job I could get. And I was hired by GE and they informed me that I had the honor of being an affirmative action hire for a federal contract, which was super motivating. And then I was in GE and it was so structured and I was a bad subordinate. And I figured out I had to go where there was more technology and more innovation and a lot more flexibility.
So after that, I went and moved deliberately into the semiconductor industry and then into the technology systems industry and found my co-founder of Interlan when I was working for a systems company. And he was the genius with the ideas and I was the one who got to write the business plan and get the venture investment behind it. And we launched it.
Josh King:
And then what became of it?
Betsy Atkins:
As we were getting ready to go public, it got acquired,
Josh King:
Got acquired, I think, by Micom. And then you spent some time at fledgling Boston-based fintech. And then moved to Pennsylvania where you quickly rose up the ranks of Unisys, which NYSE ticker symbol UIS. Why did you decide it was time to continue your march West? You were a Massachusetts kid and you have all this connection with GE and the industrial Northeast and now it's time to head West.
Betsy Atkins:
I decided that everything that was tech was happening in Silicon Valley and I really didn't want to end my career in Blue Bell, Pennsylvania at Unisys. So I deliberately and consciously went out to Silicon Valley, reached out to my friends in the venture capital industry, and was able to get a company that needed a CEO to turn it around.
Josh King:
I mean, this is the story of Ascend. And the company caught the entire internet when it was just a glimmer in someone's eye and they wrote it, which is how you described Ascend around the time of its IPO. What was the two-year march toward that IPO for Ascend like and what were you doing?
Betsy Atkins:
It was incredibly fast march, and it required a couple of pivots. The initial idea of what we were going to make turned out to be too small of a market. So we moved it to all of the equipment that people now would recognize as bridges and routers that the big competitors Cisco did. So Cisco was around 9 billion when we were about 5.4 billion. And the first couple of years were huge growth. And we went public after about almost two and a half years. We took the company public. It was doing 140 million at the time and it got to be 5.4 billion. And then, unfortunately, when you're public, if you get enough offers, unsolicited or solicited, at a certain point you're obligated as a fiduciary and a steward for the shareholders, if the offer has a high enough premium, you have to take it. And we had to take it. And we sold it sadly.
Josh King:
But I guess it really did launch your career as both an investor and a board member. How did that come about?
Betsy Atkins:
We were acquired by Lucent. And I joined the Lucent board. And I started to look at governance with sort of an idea of is the Lucent board really adding value to the products, the innovation cycle? Are we vibrant? Are we leaning in or are we stale? And so I started to think about the role of a director and how you add value. And that got me going on thinking about governance with a different eye. Having been a serial entrepreneur and having had boards before that were venture capital boards and having been on the board of my own company, Ascend, that I co-founded, I started to think how can this be done better and differently? Also, coincident with that, I was having withdrawal from Silicon Valley, so I started a couple of early- stage seed, you would call them now angel venture funds.
Josh King:
What were some of the most memorable deals and boards over the past 30 years that helped educate you on both the good, the bad, and the ugly of serving on boards?
Betsy Atkins:
The most memorable boards for everybody who serves on boards are boards where it goes really well, and even more memorable are the ones with speed bumps that have terrible issues and problems.
So for example, I joined the Board of HealthSouth because the SEC was doing an investigation and the original board that was there, according to the Delaware courts, the Delaware Chancery courts had said that that board had not done a thorough and an objective special committee investigation. They needed new outside directors who were not affiliated with the company. So I was brought in as the chair to do that. And as soon as I got there, 16 days later, the company was raided by the FBI and the DOJ. And trading on the NYSE was suspended. And I looked around at my colleagues on the board and called them, convened them for a meeting and they didn't want to get on the phone. They said, "Well, why do we have to get on the phone?"
This was a clue that the board was not a great board. If the trading is suspended on your company and your colleagues ask, "Well, why do we need to have a board meeting," that's a red flag.
Josh King:
So that sort of brings up the question of recruitment of directors. And we may be getting into it later as well. But you are interested in the challenge of delivering health care to millions of patients across a region and HealthSouth is one of those providers. And how long is the process of people reaching out to Betsy Atkins to say, "You'd be a great director for HealthSouth?" What's your process like in saying, "I wonder if there's any hair on this company that I should be sort of aware of before I sign up as a director." And then you basically, when you have a chance to either look under the covers or be told by management that we have a problem here, it's a big surprise for you as a new director of this company.
Betsy Atkins:
It was not a surprise in my diligence. And they were forthright. They said, "We need to redo the board. We failed according to the Delaware Chancery courts on our special investigation." So when something goes wrong on a board, you pick uninterested, disinterested independent directors, a subcommittee, and you do a special investigation. And it's something people don't know about and it's really important to do it correctly. Process has to be pristine, the people have to be unconflicted. And the bigger learning, if you haven't done one before, is you have to control the scope because all of your independent outside resources, the forensic accountants, the law firms, their business model is to expand the scope, boil the ocean.
Well, at a certain point, you can get a good enough insight to know is there fraud in your company, is there improper #MeToo predatory behavior, whatever it might be. You figure it out in a reasonable amount of time if you apply yourself. But if you abdicate your business judgment and decision-making to your advisors, which is what new directors do because they figure the advisors are really experienced, well, there's an inherent conflict in their business model. And your job as a steward to get to the bottom of it, get objective, important information, and then make a business judgment, make a decision and go forward.
Josh King:
And what's your own calculus? You're an expert at this. You can help get to the problem. You can help eliminate the conflict of interests from the advisors. And yet you're cruising along at Baja Corporation enjoying a great life and they say, "Betsy, we need you at this place called HealthSouth to be a disinterested independent director." You've got your due diligence and you say, "I don't know when the problems are going to come up or how public it's going to be, but there are going to be problems." What is your personal motivation to take this on?
Betsy Atkins:
I had been on boards that had done special committee investigations before, so I'd learned about the process on other boards because there's really no handbook, there's no way to learn this. You have to live it. So I had seen them done well and not well, on boards like Lucent and other boards public boards that I'd previously served on. So I thought, okay, I bring a viewpoint and a set of pattern recognition and learnings, one of which is you get a fixed price, you limit the scope, you have a limited charter for the committee, and you move through the process and you get to an outcome and you make a decision.
So I understood it was going to be a little bumpy. I didn't expect to find out that five CFOs had cooked the books in a row and that the public accounting firm partner had cooked the books in a row so that there was massive fraud. And I certainly did not expect that because it was a fraudulent director and officer application to the insurance company that the insurance company was going to cancel the insurance. So there you are in the zone of insolvency with no insurance. That I didn't expect.
I expected it to be an investigation into the CEO, had he had advanced information on new Medicare reimbursement rules and had he front-run the rest of the market and sold his shares with insider information. That was the investigation. So I expected that. I never expected the other stuff.
Josh King:
How did the story end?
Betsy Atkins:
The company made it through. It's a thriving, well-run company today. For me, as the new director in the zone of insolvency, what that means is you have no shield. The company, their indemnification is worthless because you're insolvent and the creditors then can reach and actually take your personal assets. So when the insurance policy got canceled, the D&O, I rotated off. That was way too much risk. I was not willing to risk my life savings and my house.
Josh King:
With so much of this experience, Betsy, you are an expert on corporate governance and have championed that aspect, corporate governance, as really a competitive asset for a company. Was there a particular director or entire board that you interacted with as CEO that crystallized the importance of this discipline to you?
Betsy Atkins:
Having been on the receiving end of directors that you had to have because venture investors put their directors on, early-stage entrepreneurs will resonate with this as well as private equity entrepreneurs where you get assigned the director and they may or may not be helpful and they may or may not understand oversight versus overstep into the operations. And I thought being on the receiving end of this, gosh, every director ought to take the hippocratic oath, like do no harm to the patient. And at a minimum be a neutral and hopefully a value-add.
And I had the chance to serve with really talented people on a range of boards. I thought at Schneider Electric my colleagues were extraordinary and the CEO was extraordinary and the engagement model was great. At SunPower, which we took public, you were thirsty for your colleagues words, you were leaning in and just so eager to hear their ideas, they were so bright. I thought the Volvo board was extraordinary.
So there have been some really standout ones. And what makes it work is when you can create that magic where you can process as a team, where you can knit together and actively listen, and where the CEO wants the board to be a resource.
Josh King:
As you look back at your time as a director and the people that you learned from, who would you say are the mentors and people who've shaped your philosophy when you walk into a boardroom as a director?
Betsy Atkins:
I had the privilege of working with General Jack Chain. And he was a great chairman. And he demonstrated how you get the best out of everybody around the table, how you engage everybody, you make sure everybody speaks. Today, as a board member at Wynn Resorts, our chairman, Phil Satre, extraordinary chairman, really brings the best out of the discussion, keeps everything at the right level where we're focused on the main levers of the business. Our CEO at Wynn Resorts is really transparent, open, wants to stress test the ideas and the logic.
So it can't be only the board. You need the CEO to want the board and you have to invest to build the trust with the CEO. If you aren't really putting your time in to become a thought partner and a cone of safety for your CEO to ideate and think out loud, and I know I've made it when I'm somebody's Starbuck commute partner on their way into work and they actually really don't want to do anything except just speak out loud.
Josh King:
I mean, you bring up Wynn Resorts. You and I are both, hail from the Boston area. We know that Wynn in its expansion plans has opened a major new casino just north of Logan Airport in Boston. Massachusetts and the Boston area, certainly very storied and legendary in terms of government involvement and looking at companies that are trying to do business there. What was the importance of the cohesion and independence of the Wynn Board as the state of Massachusetts and the city of Boston was looking at you and granting its license?
Betsy Atkins:
The gaming regulators of Massachusetts, this was going to be their first close to the city of Boston new licensed gaming company. And we were coming off of a transition from our founder. I was not a board member when Steve Wynn was the founder. But we'd had a bumpy transition. He'd had to exit and we had a new CEO. And the gaming people, licensers were very, very concerned about our culture of our company. There was a lot of scrutiny and inquiry. We had done a special committee investigation to understand if the culture at Wynn had an endemic problem or a couple of individuals had a problem with predatory inappropriate behavior.
So that was all very fresh. And they did a lot of inquiry, direct. Each of the directors had to meet with and be in a public hearing scenario where the gaming regulators were looking at were we going to do the right job as oversight and was our leadership the right leadership and would they grant us a license? So it was a lot of scrutiny, a lot of preparation, and well done by our chair, by our CEO in getting us prepped, aligned so that we were able, I think, to do a very good job with the regulators. They granted us the license.
Josh King:
Did your local roots help with your fellow board members and management to say, "This is the Commonwealth of Massachusetts, guys. We're going to have to manage this pretty carefully"?
Betsy Atkins:
I think that being a local Bostonian helped and it certainly helped on where to get the best cannoli in the North End.
Josh King:
And I understand the restaurants in the Wynn Resorts are awesome. I've never been there yet.
Betsy Atkins:
Spectacular. And it's beautiful. And it is such a gorgeous facility with a little mini yacht that will pick you up in the North End or in Government Center so you get to ride through Boston Harbor on your way there. And it's a beautiful, exquisite facility with a big sportsbook. It's a great place.
Josh King:
My next trip into Logan, I'm going to go. Let's switch gears a little bit, Betsy. Over the summer, you wrote an article on what Web 3.0 might mean for directors. It's an explainer on the technology that technologists expect is going to have transformative effects on society, businesses, and the companies that operate within them. Let's hear a quick preview with a conversation that Gary Vaynerchuk had with Mark Zuckerberg about the metaverse just about a year ago. Let's listen.
Gary Vaynerchuk:
As somebody that I feel has always had a disproportionate understanding of communication, consumer, human behavior, give me your first hot take. I know you've had this big announcement the other day. What is your just kind of macro thesis of the Web 3 place we're going, whether it's the metaverse, the NFT stuff? What are we on the precipitance of and how similar is it to the time right before Facebook was launched?
Mark Zuckerberg:
Yeah. So the metaverse to me today feels like the next frontier in social connection in much the same way that social networking did when I was getting started back in 2004. And that's a big reason why we wanted to change the brand of the company is that today I think most people think about us as a social media company, but in our DNA, we're a technology company that builds all kinds of different technology to help people connect and tries to advance human connection. And of course, social media is one important part of that. But I think increasingly it's going to be about building platforms and experiences that deliver the sense of presence, like you're right there with another person.
Josh King:
Right there with another person, Betsy. Do you see a day in the near future where your board meeting will be around a metaverse board table?
Betsy Atkins:
I think that it's always better in person. The connection, the ability to do active listening, and really see what is said and what is unsaid and what someone is about to say, that level of nuance, it happens in person. I think we're all going to use more and more tools. And I think every company has learned that if you lean into tech and you innovate early, you're a top decile performer and those that are laggards end up as legacy companies.
So I think there's no doubt if we look back, internet Web 1 was catalogs, email, Web 2 was mobile first, E-commerce, and Web 3 is digital assets, Bitcoin, stablecoin, NFTs, it's gamification and augmented and virtual reality. And the metaverse social media piece I think is going to lag a little bit. But I do think where we see distributed contracts using blockchain, I think that this is a macro trend that is going to be real. It's not a fad. And I think companies that dabble early and lean in, whether it's to use NFT to expand their brand halo and engage with the Gen Zero and the Millennial cohort, anybody who's consumer facing, I think should be actively looking at it.
And there's even applications where you see NFTs being used as service award recognition and certification. So you are now a Java programmer, a Python programmer, and it'll go on your LinkedIn. So there are business- to-business applications, not just business to consumer.
Josh King:
How do you think both current and potential board members, how can they make sure to be up to date on, whether it's Web 3.0 or any other disruptive technology that's shaping the current and future world? And what depth of knowledge do they need when they walk into a board and management says, "We've got to get our tech stack more in order?"
Betsy Atkins:
I actually think that pretty much most boards are lagging in having that knowledge in the boardroom. They might have one director who's a little bit tech savvy. But technology is broad. There's all of the big ERP systems that operate the company, the Oracle, the SAP. There's the application software. There's AI and ML. There's so many pieces of it, social media, business information systems.
So the macro trend of using tech to automate things and drive efficiency to delight your customers on their customer journey and take friction out of the experience. That's why everybody loves their iPhone. The consumerization of even business to business, customer experiences, the ability to drive efficiency, whether it's doing a reverse auction for something in the supply chain on the internet. So I think it's imperative that that perspective be increased in the boardrooms if you're really going to make your companies be the leaders.
Josh King:
We started this bit of conversation you saying that you think some boards are lagging in the technology expertise among the members who are serving them. I think in terms of our research, Betsy, the average age of board members in 2021 was 63. Does the impact and potential cybersecurity liabilities of using Web 3.0 or other innovations make an argument for bringing in younger or more diverse candidates to help companies flourish through disruptions?
Betsy Atkins:
I do think it's really important to bring new cohorts into the boardroom. So for example, at Wynn, we went and brought Darnell Strom, who came from the talent world. And he's just 40. So he is a born digital or a digital native that we characterize our Millennials as being digital natives. I actually think Gen Zero is born crypto. And I think the gen behind Gen Zero is going to be born metaverse. So you need that perspective.
I think that the best boards have very different skills around the table. So there's gender, there's ethnic, but how about national, international? Most companies are doing half of their revenue outside the U.S. and they don't have an international representation for their other big GOs in Asia Pacific and Europe. The whole point of diversity is diversity of thought and diversity of experience so that you stress test each other's logic and can be supportive of management and offer ideas that might help them in their decision-making.
So I do think yes, age, but there's more importantly diversity of experience and diversity of thought. And I think that tech is woefully underrepresented and it's key for a company's competitiveness.
Josh King:
I mean, speaking of diversity in all of its forms, the New York Stock Exchange Board Advisory Council was founded in 2019 to help bring new people into consideration for board positions by building connections between companies and candidates, asking CEOs to look within their management teams and say, "Is it good for people in my C-suite who I've helped groom, are diverse? Do you think they could help other boards? Do you think I would be comfortable with having some of my senior teams serving on boards?" How important is a strong personal network to becoming a board member?
Betsy Atkins:
I think that a strong personal network is critical. I think that ultimately people want to work with people who are vouched for by somebody they trust. So you're looking to see if somebody brings IQ. Do they bring EQ? And I think the third one that no one ever talks about is FQ, which is follow-up quotient. If IQ is intelligence and EQ is emotional intelligence, how about follow-up follow through, FQ?
Josh King:
What do you mean by follow-up quotient?
Betsy Atkins:
When to speak in a boardroom, think of it like a baseball game with nine innings and you should chime in maybe three or four times.
Josh King:
Yeah.
Betsy Atkins:
You can't be commenting all the time, there's 10 people there. But if you say you're going to do something, you have to do it. If I say I'm going to be available and I'm going to go and make visits with the institutional shareholders, I come to New York and I come to Boston and I spend two days and I meet with the institutional shareholders. You have to do your work, you have to follow up.
And we all know those people, those colleagues who say things and then actually never do it. And so soon you don't ask those people to do stuff because it mostly just doesn't happen. And in anything you do on your inner relationships with your colleagues, you need to find a way to add value. That's what you're there to do. You're not just there to kind of brush your corporate teeth and do your committee work and oversight. You're there to hopefully add some value.
Josh King:
Talking about adding value, Betsy. Shortly before the launch of the Board Advisory Council, you were asked by the former Chairman of the Securities and Exchange Commission, Arthur Levitt, about how boards should define diversity. And you said, I'm going to quote you here, "Diversity should be the diversity of backgrounds in the boardroom, diversity of domain experts in the company's industry, and diversity of functional experts, such as financial experts for the audit committee, digital experts, and geographic diversity." In your opinion, in the aggregate, how have boards done to create this other phrase that we haven't talked about yet, cognitive diversity?
Betsy Atkins:
You're right. Cognitive diversity is what it's about. It's different thinking. And it's easy to be prescriptive and say, "I'm underrepresented in this ethnic group." "I'm underrepresented in this gender." And the most important thing you're seeking is the cognitive diversity, is the different experience and how they saw something that worked really well and there's a good model to emulate and learn from, or they stepped on a landmine somewhere else and you've got pattern recognition that says this may end badly, we should get in front of this. And I've been breached, I've experienced a ransomware attack. Here are the things that worked really well. Here are some of the steps of having white and gray hat penetration testing groups. Here's what worked well on ransomware in terms of whether your company in the past had Bitcoin to pay it off or now there's really excellent software out there that does better at intercepting it.
So cognitive diversity of your experiences, how you problem-solve, how you collaborate, that's really what you're there to do.
Josh King:
What do you think is the number one thing you look for when seeking out new people to add to a board? And what do most people not get about the process for interviewing and onboarding as a company's newest director?
Betsy Atkins:
I think the most important thing that I look for is how active and broad are the candidates work experiences and current experiences. So for example, I'm passionate about technology. I'm an entrepreneur and a technology geek. So I spend time with entrepreneurs, early-stage entrepreneurs, and venture capital companies and private equity and market research firms. And I try all this weird stuff to see how it works. And you have to be active in what you do. You can't be a great director and you were retired for four or five years and you're no longer active in the business community, this is something that's a trophy that you talk about on the 10th golf hole.
You have to be 100% in and always learning and deeply curious. And whether it's your domain expertise, whether it's specific industry or functional expertise, whatever it is you are doing, you have to be really leaning in, really curious, and really at the edge to bring your knowledge and not just be looking at your old playbook, because the rate of change is so extraordinary now that your playbook that was great in the 90s and great in the first decade of 2000s, it's completely not that relevant anymore. And even two or three years of having been retired, the rate of change, I used to think of it as geometric, now it's exponential.
Josh King:
After the break, Betsy Atkins, CEO of Baja Corporation and I are going to discuss what CEOs and boards should consider during a time of crisis and adversity. That's all coming up right after this.
Speaker 7:
And now a word from Genpact, NYSE ticker G.
Speaker 8:
We are currently encountering delivery delays.
Speaker 9:
Genpact is transforming supply chains using real-time data to help manufacturers keep goods flowing from the warehouse so cupboards are never bare at their house. We are in the relentless pursuit of a world that works better for people.
Josh King:
Welcome back. Before the break, I was talking to Betsy Atkins, CEO of Baja Corporation about her career and passion for corporate governance. I want to listen to a recent interview by Bloomberg's David Weston with KPMG's U.S. CEO Paul Knopp.
David Weston:
Tell us top line. I was particularly interested in the likelihood of a recession and how bad it might get.
Paul Knopp:
So 91% of U.S. CEOs surveyed said that they believe there'll be a recession in the next 12 months and only one-third said it would be mild and short. And 51% of CEOs talked about the possibility of job force reductions in light of a potential recession. So while those are the headlines, it's also really interesting to note that 95% of CEOs are still very optimistic about growth prospects over the next three years. And they're thinking about transformational M&A. They're thinking about changing their organizations through significant acquisitions and continuing the digital journey they've been on for the last two and a half years.
Josh King:
Betsy, the last recession and sustained period of market turmoil was nearly 15 years ago. A lot of companies on the stock ticker today didn't exist back then and few management teams were in top positions back in 2008. Is this when having a strong veteran board is most important, people have seen this before?
Betsy Atkins:
I think it is valuable because I think that people don't react quickly enough. And you now have air cover that the economy is slowing down and the recession is coming, yet all of business, their actual revenue has not necessarily slowed down that much. So it's time to make the hard calls early. Look at your team and figure out who has the resilience and the grit and who is a wartime leader. And encourage your CEO to look at their executive leadership team because they may not have been through adversity. And figure out who are going to be your lifeboat picks in this bumpy time.
And it's very important to make the big, hard decisions early. And it's important to lean in because when you make cuts or restructuring, it destabilizes the whole employee base and they get nervous. So you have to lead from the front and be out there and reaffirm the vision and the values and why your company is special, why it's going to win because you have to resell them. They're frightened. And you have to be present with them in person. And it's time to shake off the COVID cobwebs and get back out there.
Josh King:
I mean, you're on the board of one company, SoftBank, funded Gopuff, which was valued last year at $15 billion. It announced a big partnership with Grubhub yesterday to take advantage of Gopuff's infrastructure and logistics and technology capabilities. The company has great ambitions and a pair of co-CEOs in Rafael Ilishayev and Yakir Gola, who are both about 30 years old. And even as households of all ages, from college students in Boston to the King family in Manhattan, use the service to satisfy their late-night ice cream cravings, these are tough times to oversee a workforce that has grown manifold in recent years. How does your experience, expertise, council channel Rafael and Yakir to get the most out of what they've built even in these uncertain times?
Betsy Atkins:
They are amazing operators. You would never expect from the outside in, looking at two co-CEOs to have such operational knowledge, depth, focus on profit, unit economics, building the right infrastructure to scale what is a pretty big business, well over two billion growing at a very high growth rate. And I think why it's so particularly exciting is that they're such curious, avid learners and they look and seek from not just the board, but a wide range to see models.
And part of what you can do as a director with talent is use your relationship network, introduce them to other CEOs, introduce them, whether it's for a business partnership and a relationship with Heineken beer, put them in touch with the CEOs there, or leaders in programmatic marketing and direct-to- consumer outreach and the design houses that do customer journey, customer experience, whatever it might be that you can bring. I think it's important to invest proactively in finding a way and figuring out how you can add value.
Look where you are in the life cycle of the company and know that it's going to keep changing and figuring out what experiences, relationships, insights, resources, consultants do you know who can be an asset and a resource. And figuring out the right timing so that you're not interfering with operations to add value and building the trust. I think that that's the role of a board in hyper growth.
Josh King:
That's the role of the board in hyper growth. A CEO that is the person that investors, employees, and customers look to in time of uncertainty. But because of this, do you believe that a CEO should also be chair of the board as well? And has your thinking about the overlap between these two roles evolved over the course of your career and your board services?
Betsy Atkins:
That's always an interesting topic. If I'm remembering correctly, I haven't gone back and looked at the data, it's about 50/50 order of magnitude of companies where the founder and CEO is chair and where there's an independent chair. I think that governance groups prefer a separated model. I think that having a strong lead independent director in that role is the counterbalance to the consolidation of power in the CEO and the chair role.
I think that it's so individual. If you have an iconic-rate CEO, for example, and the model that was in place was the combined CEO chair, if it's a new CEO, sometimes you see it get separated. But over time, as that CEO really does an extraordinary job, they want that title that the previous CEO had earned. So we did that model at Schneider Electric. When Jean-Pascal Tricoire first became CEO, it was separated. And then as it was proven that he was an extraordinary CEO, we combined the titles. So it's very almost individual specific.
Josh King:
We were talking about this separated model of chair and CEO. You mentioned earlier the idea of in times of adversity the need to find wartime lieutenants, wartime commanders rather than peacetime commanders. What do you think are the different qualities needed to be successful as a wartime leader versus a peacetime leader?
Betsy Atkins:
I think a wartime leader has to have grit, has to have hustle, has to have the ability to galvanize everybody behind them, and be charismatic while being authentic and truly caring about your people. Your people will follow you into a burning building if they know you love them and care about them and that you would go in for them. They will go in for you.
So I think that the EQ is especially in tough times important and you need to do things like skip level breakfast, go out there and be with your people, get your leadership team out there. And I think you need clarity and specificity on a few important things. It's like a laser beam. What are the most important things that you're going to do? Don't diffuse the beam, have clarity, and drive alignment around what are the most important objectives.
Josh King:
Wartime or peacetime, one of the macro trends that really can't be ignored is the pressure on companies to respond to highly charged social, political issues in the U.S. and really across the globe. I mean, last year in response to ballot access legislation at the state level, perennial board members, like Ken Chenault, Ken Frazier, Roger Ferguson, Mellody Hobson, all vocal in their view that corporate America should take a stand. It's just one of the many issues that have got board members to speak out.
From a board-level perspective, what is the process when it comes to deciding whether companies should comment on an issue that's making headlines at that moment?
Betsy Atkins:
I think the first thing that the CEO needs to do with their leadership team is create a policy, when we speak internally, when we speak externally, and why. And then back it in to what are your various constituencies? You have your employees, your investors, and your customers. And you have to speak where it's germane to your business. So if I'm Patagonia and there's some big deforestation going on and I'm all about the environment, then it's reasonable and we should speak.
The difficulty is that we're starting to see things get conflated on the role of the corporation. And your goal is to keep an open and inclusive environment in your values, your vision, your mission, and your purpose. The problem with social issues are they're political, they're not policy. So you need to have an open, inclusive policy to get the best out of everybody and keep everybody together on what you value. When you get from policy to politics, becomes divisive and you're going to polarize people. And in certain industries, for example in the tech industry in Silicon Valley, the employee cohort is pressuring CEOs to take a position on every social issue. And then the question is where do you stop? George Floyd? Ukraine? Well, what about the floods in India? Should you speak about this?
So I think that it is important to know when you speak and why, how it relates to your business. Is speaking out going to improve your business or is there a downside? And then you need to have alignment around the leadership team and explain it to your employees who likely are a big pressure point. You really want to drive unity and you really want to avoid things that polarize.
Josh King:
On the one hand, those companies in Georgia, like Coca-Cola, Delta Airlines, felt like they had to speak out. On the other hand, out in the valley, CEOs like Brian Armstrong of Coinbase drew a very strong line in the sand to say, "What we talk about here at Coinbase is really about the mission that we're on to create a new form of currency and manage crypto assets going in the future, and if you want to speak about politics or policy, you should work for another company." And a lot of people took Brian up on that offer and Brian was pretty much fine with that. Was that on your radar as you were watching the performance of internal versus external communications? Because Brian did that in the form of an internal blog knowing full well that it was going to be in the newspaper the next day.
Betsy Atkins:
I watched it. And I think that it's a very courageous thing to do. I think when you're building a startup, the intensity of all hands on deck at all times, that's the culture he wants to build in that company. And so consistent with the qualitative, soft cultural attributes that you're building in your company, he wanted to make that statement. It's difficult when you get a very vocal minority that pushes a company. They had that happen at Netflix too, where they were pushed to create content for one political viewpoint, and finally, they were missing so much of the market, they had to make a massive change.
So I think you have to remember what is your true North? Is it your customers? Your business? Your revenue? Or your employees? Or your investors? You have to balance all three. All three are needed. But when you get a very, very loud voice from one group, you have to consider and balance the other two constituencies.
Josh King:
How do you coach a CEO to find their true North if you get into a boardroom and you feel like their compass is a little back and forth, they don't quite know? I mean, is your job as a director the things that you say around this table, your interjections around one person of 10, or are those moments at the board dinner or the retreat when you take a walk in the woods and you have a more personal conversation?
Betsy Atkins:
That kind of conversation is one on one, and you can only have it if you've established trust. If you've invested your time to go above and beyond to prove that you're a trustworthy, in the cone of silence, you can have this conversation which is fraught with a lot of pros and cons and personal views and privately held thoughts. So you have to invest the time to get there with somebody. And it's a true testament. And that's my psychological paycheck that I've done my job. I feel so happy when I can have that kind of discussion.
Anything that's highly controversial that is going to cause private or loss of face, those kinds of things, you want to try and do that ahead of or after in private. It's not the best way to do it in a big group setting.
Josh King:
What's your prep for any sort of average board meeting? You meet in person four times a year typically or more, and how many days in advance do you get your book and how many hours do you spend researching, reading, doing sort of extracurricular stuff before you show up in that boardroom?
Betsy Atkins:
I continuously prepare. I don't do it like cramming for the midterm. I'm reading articles. I'm listening to podcasts. I'm meeting with entrepreneurs, investors, institutional investors. I'm going to various events. And I'm capturing information and ideas and I'm organizing it by the boards I'm involved with. What practice would be really helpful for them? How has company A solved something that I've seen, whether it was a startup or a late-stage company or a turnaround company? What are the learnings?
I organize it. I have a team that backs me up that I've had for 15 years and allows me to really build my own playbooks and systems so that hopefully when I get to the board meeting, of course I've done read the board materials and I've looked at sort of the market research and the analyst reports and the competitive industry landscape, but it's all of the other business practices that are working really well or should be avoided or how people are doing different types of financial structures and different innovations that they're being able to have work in their company. Those are the things I try to organize and throughout the quarter. And if I'm doing my job right, I'm in touch with the CEO. Hopefully, if the CEO wants to bounce ideas off of me, I'm really gratified when there's an outreach or when the CEO says, "Can you help with this particular senior executive? Can you mentor this person? Can you help this person in their career?" Those are really wonderful opportunities to actively listen and absorb more of what's going on in the company.
Josh King:
I mean, in that vein, what role should a board have in sort of outside the boardroom employee management and creating a strong workplace culture?
Betsy Atkins:
I think that the role of the board has to align with management. You have to have conviction and support around your CEO and what they're doing. And you have to find a way to offer insights or help that support the cultural goals of how the company thrives. And there's no clear playbook except spend the time, have the passion, have the conviction, and be careful that you're invited in, that you're not overstepping.
Josh King:
As we look toward 2023, Betsy, do you have any recommendations or conclusions that you'd like to leave our audience with?
Betsy Atkins:
Yes. I think the most important things going into a bumpy time are to top grade your team, have the courage to move on the B players. You know when you've got an A player, you know when you have a C, move on the B, There's a lot of talent out there now. Be in person as much as you can and lead from the front. Everybody got used to being remote, and I think it's not as effective as getting your team back together or getting your team out in the field with your customers, with your employees, with your investors. I think those things and looking at who has the grit to get through a bumpy time, and lean into technology.
Josh King:
Final question. We mentioned at the beginning of our conversation, your book Be Board Ready: The Secrets to Landing a Board Seat and Being a Great Director. Where can our listeners find the book and learn more?
Betsy Atkins:
Well, actually, from you here in the notes. I'm happy to make the digital copy available for free. Or on Amazon.
Josh King:
Well, thank you very much on behalf of all of our listeners, both for the journey that you've taken us on in this last hour and for the extracurricular and advanced learning they're going to get in the book. It's been great to have you Inside the ICE House.
Betsy Atkins:
I really enjoyed it. Thank you.
Josh King:
And that's our conversation for this week. Our guest was Betsy Atkins, founder and CEO of Baja Corporation. If you like what you heard, please rate us on iTunes so other folks know where to find us. And if you've got a comment or a question you'd like one of our experts to tackle on a future show, email us at [email protected] or tweet at us @ICEHousePodcast.
Our show was produced by Pete Asch with production assistance and engineering from Ian Wolff. The director of programming and production for the New York Stock Exchange and ICE is Marina Stanley. And I am Josh King, your host, signing off from the Library of the New York Stock Exchange. Thanks for listening. Talk to you next week.
Speaker 1:
Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates make any representations or warranties, express or implied, as to the accuracy or completeness of the information and do not sponsor, approve, or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security, or a recommendation of any security or trading practice. Some portions of the preceding conversation may have been edited for the purpose of length or clarity.
