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Voice of Denver: NACD Marks its First Decade in Colorado

Since its establishment in 2004, Colorado's state chapter for the National Association of Corporate Directors (NACD) has set the national pace for corporate board best practices.
Ten years ago, the Washington, D.C.-based National Association of Corporate Directors (NACD) established its Colorado Chapter. At the time, new regulations and scandals threatened the very existence of many businesses, and directors on corporate boards back then were often preoccupied with complex compliance, governance and executive pay challenges. Many directors and officers found themselves at a loss, cutting costs to the bone and clinging to the little public trust that was left.

The traditional roles of directorship remained in place amidst this chaos, as boards were expected to apply a clear, long-term vision to the corporation’s strategic direction at a time when even the shortest-term snapshot was blurry at best. Most boards met only a few times a year, and many directors sat on multiple boards beyond their demanding day jobs -- meaning they had little time to manage the problems stemming from the dot-com bomb, 9/11 and Enron.

Fortunately, things have settled down, and, thanks to the NACD, much of the evolution of professional directorship over the last decade has taken place right here in Colorado. With our unique entrepreneurial heritage, we have relatively few public or Fortune 1000 companies, but we have built some of the nation’s most successful enterprises that began as small startup companies. As a statewide business community, we gained deep experience in the ‘80s and ‘90s by applying public-company best practices to the private ventures whose backers rallied around the IPO as the exit strategy of choice.

With few established practices to follow, our homegrown officers, directors and managers wrote the “how-to” manual as they went. Most Colorado directors were technologists and specialists and less the generalists found on more traditional boards. Governance and compliance issues remained relevant, but were often secondary to generating the highest rates of return for demanding, venture-class investors.

Fortune 500-level fiduciary responsibility, the segmentation of advisory roles and the education applied to board leadership have trickled down into many of the management teams and boards of small-cap and midmarket Colorado companies. Conversely, the hands-on management expertise required by nimble, fast-growing, capital-hungry tech companies has trickled up to the nation’s largest publicly held corporations.

NACD-Colorado has helped set the pace by sharing these new best practices with 21 NACD chapters around the country, focusing on strategic positioning, risk management and executive oversight. Colorado’s high-tech, high-risk heritage has helped further refine protocols that have become key priorities for the boards in today’s most established industries.

“The roles, the importance and the skill sets of directorship have increased with legislation -- Sarbanes-Oxley, Dodd-Frank and others -- and the ability to think through the key areas of strategy, risk and executive management have been fine-tuned as a result,” says NACD-Colorado President Bill Heck, Managing Principal of the Harlon Group, a performance and compensation consultancy. “We continue to set examples by producing directors that have, for the most part, put governance and compliance issues behind them and are focused today on running successful, ethical businesses.”

As were the venture capitalists, technologists and legal experts of Colorado’s private boards back in the ‘90s, today’s corporate directors are involved on a much more regular basis than attending a few quarterly meetings. The chairman of the board and the CEO are rarely the same person. Executive compensation is tied more to investor success and less to peer group benchmarking. Strategic planning has become dynamic and continuous. Audit committees are more independent, board terms are typically shorter and directors have become more responsive to investors as transparency rules the day.

“Board members’ roles have changed, and the time commitment has effectively doubled and even tripled from 10 years ago,” notes NACD-Colorado Chairman Mary Beth Vitale who has served as corporate officer or director with a number of companies including AT&T, U S WEST and Colorado Business Bank. “The requirements for board education have increased dramatically as well. If you’re not keeping up with the pace of change, you’re not doing your job as a director.”

Many of today’s NACD-Colorado members have stuck with the strategies developed during the hard times. They developed a track record of successful companies by figuring out where the guardrails were, aligning their risks and managing within them.

“Ten years ago Enterprise Risk Management wasn’t even on the table, and IT security was never addressed at the board level -- it was just something that the CIO dealt with,” says NACD-Colorado Sponsor Chair Larry Jones, who has served on 12 corporate boards and is currently Executive Chairman with Coalfire Systems. “Now, risk mitigation is integral to strategy, and with the threat of cyber attacks, boards have put IT security on their agenda.”

Board responsibilities are becoming more granular, and as a result, board composition is starting to change not only in terms of diversity and ethnicity, but also in terms of areas of expertise. Candidates often have IT skills, social-media policy experience or healthcare expertise.

“Almost all companies are facing down new risks associated with employee healthcare costs,” says NACD-Colorado Program Chair Mark Soane, Managing Principal at Appian Ventures. “NACD-Colorado is helping in the education process with an issue that has never really been addressed at the board level. This is about to change dramatically as many boards are going to be forced into making crucial decisions about where nearly 20 percent of their companies’ resources are about to be spent.”

Every company is different, but most observers agree that the tone is set at the top, and boards around the country have adapted to the new role as keepers of the corporate culture along with the C-suite executives. Whether it's spearheading governance and compliance, managing healthcare costs or defending against hackers, directors are helping their companies establish the right culture throughout the ranks.

The goal is to succeed in an ethical manner, and not just survive and follow procedures. Effective corporate boards have proven to increase valuations and bottom lines for both public and private companies. As the landscape continues to evolve, the National Association of Corporate Directors will continue to look to Colorado for leadership. In the meantime, our local chapter is thriving, and proud of the role we have played over the last decade.

Taylor Simonton, CPA, is a Director, Past Chairman and Past President of the Colorado Chapter of the NACD. He is an NACD Board Leadership Fellow and a retired PwC LLP National Office SEC Partner, who is serving or has served on the board of directors of five Colorado companies, usually as audit committee chair.

Voice of Denver is a featured post from Denver's entrepreneurs, experts and raconteurs. Contact us if you'd like to stand on our soapbox.
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