Private Companies Need Directors, Too
from May/June 2003
Privately held outfits don’t have to worry about all those burdensome regulations on board configuration imposed by NASDAQ, the New York Stock Exchange, and the Securities and Exchange Commission—much less the dozens of new governance and auditing rules enacted last summer in the Sarbanes-Oxley Act. Right?
Not quite. For one thing, many private companies hope to go public once the IPO market pulls out of its long slump, and having strong, independent directors already in place can make the transition smoother. And executives and directors of other privately held companies aim to make their boards as professional and independent—in fact and in appearance—as those of their publicly traded brethren.
Rob Dickerson, president and CEO of Pacific Edge Software, a Bellevue, Washington, business-software company that started up in 1998, decided to add an outside director last year. “We take our books very seriously and need to have the same kind of oversight a public company has,” he says. Dickerson wanted that most elusive of all director candidates, an active CEO. What’s more, he wanted one who had led a tech company in difficult times. “Things have been changing so dramatically in our business in the last few years that a CEO who’s been retired for two or three years might not have the right instincts about growing a small company in this environment,” he says.
Dickerson spent six months talking to CEOs he knew and admired, and to candidates recommended by other board members. He picked Dale Fuller, president and CEO of Borland Software Corp., who has led a turnaround of his company that’s bucked the downbeat Silicon Valley trend of the last few years—returning the software corporation to profitability, pushing up the stock price (34% since the NASDAQ peaked in early 2000), and boosting revenues to about $250 million. Fuller, 44, also has strong operating experience from earlier stints at Apple Computer and NEC Technologies. He joined the Pacific Edge board in December.
The prime attraction for outside directors at an outfit like Pacific Edge, says Dickerson, “is that you have a company that’s interesting, exciting, and in a high-traction market.” But although directors face fewer liabilities than those on public boards, he notes, “everyone wants to see the D&O policy.”
