Washington Post: Burden of the Board

This article describes how many venture investors are re-thinking their involvement as board members in this post-Enron world.

Lew thinks the concern over board seats will push venture capital firms to appoint more “designated hitters” to boards — that is, people who are affiliated with the firms and act on their behalf, but who aren’t full-time venture capitalists.

General Atlantic of Stamford, Conn., for example, has asked philanthropist Mario Morino to represent GA on the board of Ai Metrix in Herndon, and Proxicom founder Raul Fernandez to do the same for Critical Path.

Fernandez, who recently gave up his day-to-day responsibilities at the Reston office of Dimension Data, the company that bought Proxicom, said he’s expecting compensation for outside board members, including venture capitalists, will go up. “You’ve got to be active in every board because of the increased liability,” Fernandez says. “The number of people willing to do it is dropping and the time commitment is increasing.”

Part of the concern, of course, is with litigation, from shareholders and employees alike. “If you have a distressed company, and the founder is threatening a lawsuit, the shareholders are not feeling the love,” says Lew. There will be greater accountability, Lew predicts, whether VCs like it or not.

“The era of private clubbiness has moved on to an era of greater transparency,” she says. “It’s almost like you have a target painted on your back.”