While working with emerging medtech companies, I usually report directly to the CEO (usually an entrepreneur) and in turn, the board of directors. This got me thinking: (i) What are the responsibilities and duties of board directors? and (ii) What difference does a good board make to a medtech company?
When I work with companies, its typically in a corporate or business development capacity. These almost always involve direct mandates from the board of directors. From time to time, it may even make sense to take a position on the board, particularly with a view to helping companies with corporate transactions (e.g. financings).
(i) Responsibilities and duties of Directors
While doing some research on board directors roles and responsibilities, I came across a very good summary from the ICAEW (the Institute of Chartered Accountants in England and Wales). While I’m not an accountant, the site does have quite a bit of very useful information guiding board directors. In particular, there’s a 4 page summary that covers the main areas:
While I’m not going to go into detail in here, the chapter headings and quick summaries include:
- Appointing Directors – who can be one, types of directors including shadow
- Exercising Directors Powers’ – limits of roles, degree of skill and degree of care
- Fiduciary Responsibilities – “…promote the success of the company for benefits of its shareholders”
- Duties Under Company Law – obligations under company law for which directors are personally responsible
- Other Legal Duties – employment law, health & safety, VAT, NI, other legal pitfalls
- Potential Penalties – directors can be personally liable, jointly and severally liable
- Avoiding Danger – tips on navigating director responsibilities
The main take aways are: directors are in a position of significant control in a company; they have a responsibility to do what’s right for the long-term interests of the company and shareholders; and individuals can be personally liable even within a limited liability structure. Not one to be taken lightly.
While researching the issue, I even came across a good guide for US board directors (relevant since the US is the largest source of medtech companies). This 152 page handbook is a wealth of info, though under copyright I can’t publish here. (Just google “fiduciary duties of directors donnelly” and you’ll find the link at the top). It covers many of the same topics as above, though of course in much more detail.
(ii) What difference does a good board make to a medtech co.?
I come across many entrepreneurial medtech companies. Some of them I’m privileged to work with and get to know the entrepreneur founders behind the business. I also read about companies and exits (often acquisitions of emerging medtechs by listed companies).
This isn’t a rigorous study, but by anecdote, when you look at the companies that do well over time, I mean really well, one critical factor is the board of directors. The board needs to balance the entrepreneurial zeal of the CEO (and often founder). But it also needs to let them flourish – to direct but not constrain (hence the word “director”). While its important to have good checks and balances, e.g. through good board corporate governance, what single factor makes the biggest positive difference on a board?
Someone who’s been there before.
Someone who’s trodden the same path, themselves as an entrepreneur. Someone who has been in the trenches, the wars, with the battle scars to prove it (forgive my analogies). Someone who has the contacts, who’s been there before, knows what it means to lead a capable and effective medtech team and done the types of deals you need to get done – whether financing, partnering or trade sale. Particularly someone who’s built up an entrepreneurial medtech and exited.
And I’m not talking about impressive CVs, or directors as window dressing. No. I’m talking about people who can help the CEO to GET THINGS DONE. (Some of the most powerful advice I’ve ever received from entrepreneurial mentors has taken a minute to convey, yet has led me to act in a very focused way to get things done).
You’ll also want experienced investors. These are people who’ve been there before in a different guise – looking primarily for shareholder return. And I don’t mean short-term shareholder return. No, someone who has helped steer previous companies to maximize value creation. This isn’t always the easiest path (in fact rarely).
And overarching this, your experienced board of directors should include individuals with a good deal of experience within medtech. While general business savvy is always valuable, there are many peculiarities of the medtech industry – from product development to clinical trials, from regulatory to financing, and market launch to market adoption. And it helps to know the buyers – specifically a rolodex of key senior decision makers within big medtechs that can make things move for your company when it comes to deal time.
When you break it down, it’s really just like achieving success in anything else in life: passion (or I believe, more accurately compulsion) and execution – from the entrepreneur; focus, experience, wisdom and direction – from the board.
The best companies recognize and implement this early in their boards. Do you?
This post is by Raman Minhas.