In this episode, Bill Clendenen, Charlie Talbot, and Michael Burcham explore what makes a great board member and how Shore Capital Partners designs boards to drive value creation. They discuss the purpose of the board, the importance of diverse and relevant operating experience, and why board composition matters as much as strategy. The conversation highlights the role of the Lead Independent Director in supporting CEOs, de-risking execution, and translating between management, the board, and investors. Throughout the discussion, they emphasize that effective boards ask the right questions, stay aligned with the strategic plan, and actively help management build and scale the business.

Key Takeaways:

1. Great boards accelerate value creation by pairing clear strategy with real operating experience to help management grow and reduce risk.
2. Diverse, complementary board composition turns governance into a competitive advantage beyond financial oversight.
3. The Lead Independent Director plays a vital role in aligning management, the board, and investors through trust, context, and ongoing engagement.
4. Effective boards stay aligned with strategy, ask better questions, and actively support the company’s evolution from growth to exit.

Chapters:

1. 00:00 – Introduction
2. 01:20 – The Purpose of a Great Board
3. 09:16 – The Role of the Lead Independent Director
4. 13:11 – How CEOs Should Use Their Board
5. 18:51 – How Boards Evolve Over the Hold Period

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https://www.shorecp.university/podcasts

You’ll also find other Bigger. Stronger. Faster. episodes, alongside our Microcap Moments and Everyday Heroes series—highlighting the people and stories that make the microcap space unique.

Other ways to connect:

Blog: https://www.shorecp.university/blog

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This podcast is the property of Shore Capital Partners LLC. None of the content herein is investment advice, an offer of investment advisory services, or a recommendation or offer relating to any security. See the “Terms of Use” page on the Shore Capital website for other important information.

Welcome to Bigger.

Stronger.

Faster.

the podcast exploring how Shore Capital Partners brings billion-dollar resources to the lower middle market space.

This episode is part of a series in which I talk with Bill Clendenen, Charlie Talbot, and Michael Burham about what makes a great Shore Capital Partners board member.

This is a follow up to our series featuring Bill and Michael on what makes a great Shore Capital CEO.

Bill, Charlie, and Michael know what a good board member and a good board look like from deep experience, not just serving on boards, but working as Lead Independent Directors for numerous Shore companies, in addition to being executives who've had to manage multiple boards over their respective careers.

To lay the groundwork for the series.

In this episode, we focus on how Shore Capital Partners builds boards in terms of purpose and design, and how we consider our boards a key point of differentiation in how we invest in and build our companies.

Bill, Charlie, and Michael discuss the role of the Lead Independent Director and offer some critical advice on how a CEO can use their board most effectively.

Well, welcome Bill, Charlie, and Michael.

We're all here in a very specific context of working with Shore Capital Partners.

And so Bill, will you kick us off and just describe Shore's philosophy on board designs.

How Shore thinks about boards maybe a little differently than a lot of folks.

I'll first start generally and then kind of dig specifically into Shore, but I think the first purpose of the board is to accelerate value creation, right?

So why are we doing this?

Why are we making this investment?

How can we accelerate growth?

So that's one.

I think the second thing that board brings, and particularly ensure's context, and we'll talk about it in a minute, but really to de-risk execution.

So you put an experience board in place, it helps management see around the corner to minimize risk and the execution of that strategic plan.

And then lastly I think, which is more, I think the, the art than the science of a great board is how does the board provide advice to the CEO and Management and Shore to really help them maximize the growth of the company and the investment.

So what skills do these board members bring to help execute the strategy, you know, leads into how Shore build its board?

I think it starts first with how Shore invests.

They first identify an industry or sector that they think is interesting.

Once that sector is approved, they then identify what we call internally as the Mount Rushmore of executives.

So who has experience in this industry, who has led companies that are 3, 4, 5 times larger in size and what we think this company will grow to.

Once they've identified those partners, they then start looking at companies and they try to go find these little golden nuggets.

These micro cap companies that can really grow.

Once they do that, then they make the investment and apply the Shore business system, and then the board works with management to grow the investment for them.

So as it starts out, what does the board do?

Accelerate value creation, de-risk execution, and then provide that advice and governance to accelerate the growth.

And how?

Is this different?

Maybe Charlie, you can speak to this.

You've been around businesses of a variety of sizes, including very large businesses.

You've been an operator, you've been a board member.

How does Shore's thinking about board composition differ from what a lot of people have experienced in terms of boards?

Yeah, I think, you know, back to Bill's tenants of what we're trying to accomplish, you know, the next step is to build a board.

The key there is you want diversity of experience on the board.

You don't want, as they term, we don't want five point guards on a basketball team.

So you're always looking for complimentary skill sets, diverse set of backgrounds that can add value to growing the business and can provide unique experiences based on their pasts as well as, you know, sort of the things that they've gone through in growing companies to help leverage and the management team to grow faster than they would be otherwise.

Michael, will you add a maybe a little bit of color?

I think a lot of people who have experienced boards and private equity are otherwise, they often have experienced the perspective being primarily the financial perspective, the board being made up of financial partners and being more oversight.

What Bill and Charlie are describing is diverse set of viewpoints, industry experience, and so forth.

How does Shore go about thinking about size, composition, or otherwise when they're standing up a new board for a new platform?

There's typically two partners in the room, the partner who's leading the deal, and then a second Shore partner.

The members of the investment team that support the lead partner are usually in the room, so there'll be four to five Shore representatives in the room, but two key partners who are engaging in the board discussion that's mixed with three to five individuals, a few of which may be early founders who have been acquired.

You see, there's one to two founders who are first in on the board.

One of the boards I sit on, we have four founders, so it's very founder friendly, and then there's usually a few folks with industry expertise or scaling expertise, and then the management team.

Having all of those perspectives, the perspective of Shore's investment team, founders, industry experts, and management in the room really helps create a very balanced conversation.

While finance is important, obviously it's, those are the sort of measures of success that will determine ultimate valuation.

The how we go about building the company isn't limited to what we can see in a spreadsheet.

It actually comes from the years of experience of the founders and the industry experts around the table and Shore compliments that with their knowledge of what has financially worked over the last 15 years.

That recipe really helps a new management team know how to navigate growth and scale.

Leaning on the expertise of all the other parties in the room.

I think that makes Shore pretty unique in that approach.

So in my experience with various other private equity firms, we typically had much smaller boards than Shore's.

In my other experiences, we typically had three to four, five, maybe at the most member boards.

As CEO, I was a board member.

We typically have two people from the private equity firm.

Then maybe one, what I'd say, friend of the firm, so an operating partner plus maybe one outside expert who was a friend of the firm, maybe they wrote a big check as a part of the investment thesis.

But that smaller board, I found that when I was in the room, that I had the most knowledge and experience and skills in my industry.

And so from that perspective it was somewhat limited.

And as Shore builds this basketball team where we have a, you know, point guard, a shooting guard, a center, a power forward, a wing forward.

We have these people to come to bear.

So when Shore asked me to join Community Care Partners as CEO, I had very little experience in not only urgent care, but in a physician provider practice management.

What got me to accept the job was the power of my board.

I had six people who I could count on for various expertise within that board, so I had a Chief Operating Officer of one of the largest multi-site, multi-state medical businesses.

I had the physician, CEO of the industry's largest electronic medical records company.

I had two physician PA providers to provide me advice and guidance on medicine.

I had a revenue cycle expert.

I had all of these experts to come to bear that could help me operate the business as CEO.

And so not only did that board provide me with skills, knowledge, and experience beyond my own, but they also became a tremendous resource for me to lean on as we were setting upon this value creation growth strategy.

And so not only did that help me operate the business, but it also helped me recruit other executives so that I could accelerate the growth of the firm.

And so that board was really key to the success of this investment.

Yeah, and I think, you know, just to add to the conversation a bit here, you know, some of the boards that were more of a challenge for me were, as Bill describes previous private effort, experience.

You know, folks who didn't have recent relevant experience to what we were trying to do was, I found not very helpful in the context of these meetings.

And so, you know, having Shore put together people who have direct experience that's recent, that's relevant and are there to, for one purpose, which is truly just to support the company and the strategy that they're employing is really very different than anything I've ever experienced in my other boards outside of Shore.

Having the industry expert in the room will help either validate or management is taking the company or ask the right questions so the management team can assess perhaps some unintended consequences of what they plan to do.

It's really rare you have that kind of operating knowledge among a private equity investment team, because most of them either come up through iBanking or they came up through the firm itself, but have actually never operationally run a business.

So while their questions are thoughtful from a financial point of view, they're not terribly helpful from an operating point of view.

So having someone with that industry expertise in the room to ask really good operating tactical questions of the intended and unintended consequences of actions either management is wanting to take, or even sometimes the deal team is suggesting, we can save ourselves from a lot of pain by listening to the wise insight of someone who's actually operated in the industry and not simply look for an answer in the sale of a spreadsheet.

One of the key roles that Shore has created in the board context is this role of the Lead Independent Director.

Each of you is a Lead Independent Director.

Maybe Charlie, will you start and then you guys can jump in.

What is a Lead Independent Director and how does it function day-to-day differently than perhaps other board members as it relates to the CEO?

Yeah, I think it's a critical role in the context of these microcap investments and then the Shore ecosystem and how they build things.

You know, the LID effectively sits between the CEO and the management team, Shore Capital and the investment group, and the board.

From my perspective, one of the biggest jobs of the LID is to connect dots and at times translate for all those different parties who come from different perspectives, different backgrounds, et cetera.

You know, it's super important to build relationships as part of this role.

So as Lead Independent Director, I spend a lot of time with the CEO and the management team directly on the ground with them.

And I also spend a lot of time on the phone individually with other directors of the business, just again, trying to connect dots, answer questions they may have generally or very specifically about the business and what's happening.

And that way when we get to board meetings, there's context, there's relationships, there's information that's been shared that helps guide the board meeting to the appropriate type of discussion and hopefully the appropriate outcome.

Bill or Michael, anything you'd add just in terms of helping any of the listeners understand this unique Lead Independent Director role.

So as I think about it, because the Lead Independent Director is so close to management, they participate in the weekly calls between management and Shore, the investment team.

The Lead Independent Director, is able to provide what I'd call an inside view of management teams strengths, weaknesses.

They're able to help Shore and the board see around the corner to identify risks that may need to be mitigated.

And so that experience of an LID to guide both the board management and Shore through this journey is critical because these LEDs are typically operators, so they've run businesses of a similar size, similar industry.

They're able to give operational perspective to Shore, but also to the board.

So what are this team's capabilities?

Are they going to be able to achieve the strategic growth plan that they've set out to do?

Because oftentimes you can appear like you're doing the right things and so the LID, because they have the special relationship, can identify issues before they become issues.

I think something to keep in mind is that the Lead Independent Director gets to spend disproportionately more time with the company, with the CEO and their direct reports.

They often are a way for the rest of the board to be even more informed about the company and what's happening, because the time we're together in a board meeting is pretty scripted.

I mean, it's a four hour marathon of a page turn that if you're lucky, you get to spend time looking at the quarter and then looking ahead.

But there's a lot of more detailed nuance things you wish you had time to discuss that you just don't.

Most of our Lead Independent Directors are interacting with the CEO, at least by phone, weekly and in person monthly and often on site as well.

So what they learn about the team, the team structure, how well they work together, sort of the nuance issues of operations are going to be dramatically more detailed and more insightful than any other board member is going to have, even someone from the industry.

The Lead Independent Director over time will become from a pure board perspective, the most informed person in the room outside the management team.

That creates a massive value to Shore to have someone with that degree of insight so that if there are ever questions or uncertainty or are we thinking this right, doing the right thing, often the Lead Independent Director can bring a degree of insight and knowledge that wouldn't be found on the deal team and certainly wouldn't be found with the rest of the board.

In that same spirit, Michael, what are some of the patterns or misconceptions that you see with a new CEO, a new platform about how to engage or not engage with the board as you're starting to build this business together?

So it's a great question.

I've made all these mistakes myself.

The first is just getting too granular and tactical.

Boards are there to ask good questions, share strategic insight and lessons learned.

But when you get so tactical that you're defining step-by-step processes, you're inviting the board to basically design the detail of the business, and they'll certainly go there with you but for most CEOs, that's not what you really want.

You want some guidance around directionally where you're going and good measures of success and lessons learned.

You're not wanting somebody to basically design step-by-step of a process.

So I think one thing every CEO should understand is the right degree to which you share detail based on what you want.

Now, occasionally you may want that level of granular point of view, but make sure that's what you want before you structure your sharing in that way.

I think a second thing is often new CEOs try to do all the talking.

It's a classic mistake.

Sometimes you're afraid your team won't say the right thing, or you want to be so carefully scripted, but honestly, this is a powerful opportunity for your team members who are in the room with you.

To interact with board members and level up their own strategic thinking.

If they're just watching from the cheap seats and you're the one as the CEO doing all the talking, their opportunity for lessons learned and to strategically grow simply don't happen.

So I would say that's another common early error of A CEO is doing something like that where they feel they have to do all the talking.

Then I think the third, and then I'll turn this over to Bill and Charlie for their points of view, is that if you're gonna ask the board a question, make sure you're prepared for the answer.

When you challenge a board with a question, they assume you don't know and you want to find out.

Sometimes it's better to say, this is our direction, this is my plan.

Have any of you done anything like that?

What were your lessons learned?

And if you're doing it again, what would you do differently?

By asking that way you get a whole different set of insight from a board member than if you simply say, what do you think I should do?

Yeah, I would completely agree with Michael on that and one of the things that I would say is don't present the board with that type of question.

You should know the answer.

And as Michael suggested, get the feedback specifically.

Now, when I was CEO, what I looked at at these board meetings was an opportunity for my N-1's, my direct reports to get practice for ultimately the management presentations they would do when we sold the company.

So we have 20 plus board meetings over the five year hold.

How do we prepare our N-1's to present to 10 future investors?

This board meeting is probably the closest thing they'll get to a management presentation.

And so really focusing on how the management team should prepare, how they present the information, how they interact with the board is critical to, I think, their growth and development as executives.

But use this opportunity, the board, to N-1's for their personal growth.

And this is where I think the Lead Independent Director plays a critical role in this.

And as Lead Independent Director, I often do full on prep with the CEO and the management team, and we do one or two complete dry runs of the board meeting.

And so how do you clarify their story?

How do you ask the questions that someone in the boardroom is gonna ask?

You ask those questions in advance and you help them create present, their story and also help them develop professionally.

The other thing that you can do as an LID in the these board meetings is what I would say support the team by revealing nuggets that were missed.

Oftentimes under the stress of a board meeting some an N-1 or CEO might forget to bring something up, but because you've got that closeness to the company and management, you can identify a nugget that may be overlooked.

And I think the most important role for the LID is actually post board meeting.

There's a great quote we have as CEO, if you complete all of the things that the board suggests that you do in a board meeting, you're gonna get fired.

If you do none of the things that the board suggests, you're gonna get fired.

So how do you prioritize what is heard?

The feedback you get.

The constructive guidance that you get from the board.

How do you turn that into action?

How does it fit in or feather into your strategic plan and your tactics for the next two quarters?

Those are the things where the LID can help craft a better story for the board and management.

You know, one thing that comes to mind as we're talking here is, you know, in many cases our CEOs, you know, especially early, you know, obviously early in the hold period, don't have experience with Shore boards and they also, in some cases, don't have experience with boards in general.

And so, you know, again, back to the role of the Lead Independent Director, I mean, I think it's really important to try to set them up for success by explaining sort of what the intent of the meetings are, the style and substance of the members, and what they're trying to get outta the meeting itself as opposed to, you know, sort of having this piece from nebulous sort of task of report outs.

I think the really critical there is making sure they understand that in reviewing the business, it's important that they describe or they talk about issues that they need help with.

So you can use the review of the business as context, but make sure that you flag those issues that you're thinking through struggling with, and that's a way to prompt the board to give advice.

A lot of times you just have to go through this a couple times before you understand what the real sort of process is of the board meeting and what.

The tone of these board meetings are, and once you get that figured out, then you can really start to impact those discussions and the ultimate outcomes of the board meetings.

So we've talked a lot here in terms of the early days, new CEO, new platform, new board member in place but obviously in this context, we're talking about a five to six year hold period.

We're talking about rapid growth and evolution.

Bill, can you just talk a little bit about how the board has to evolve in the same way the business evolves?

How does the board, we've talked about differentiation early, but how does the board continue to play an outsized and differentiated role in the success of a platform as it grows and evolves?

I think boards evolve as companies do.

If you think about the phases of planting, growing, and harvesting, I think boards at the early planting stage focus often on building the right team and getting the growth initiatives kicked off.

And so what I mean by that is.

Is it an M&A strategy?

And how are we gonna integrate these businesses early?

How are we gonna initiate our organic growth strategy?

Who's the VP of sales that we're gonna hire the Chief Growth Officer?

What marketing are we gonna do to get our organic growth started?

Are we gonna do a de novo strategy?

So I think boards in the initial planting phases where they create the most value is helping lift.

I think of it almost as scaffolding.

The boards can help companies grow faster if they can bring the experience to not only in hiring talent, but also initiating those organic growth strategies or their inorganic growth strategies early.

Then when you transition into the growing phase is how do you accelerate those strategies you've laid the foundation for in the planting phase and get operationally efficient?

And so this is where boards with exceptional scale have been in that industry can help management teams operate at scale and also operate more efficiently.

Then in the harvesting stage, having board members who have been a part of a private equity sale who've sold their company or brought a company public, can really help management understand what are the true drivers and create value at exit.

And so, you know, oftentimes I can think of a deal we were once in where we were close to exit and the board said, you know, bill, if we just do one more acquisition here and we add this capability, we're actually gonna get a higher multiple at exit.

And so, you know, in the last eight months of the hold, we got this target, we found it, we executed in really creative value.

And I wouldn't have done that.

I wouldn't have want to taken that risk if the board hadn't pushed me to execute on that one last acquisition before we went to market.

And it really helped transform the business and gave us a better exit multiple at the end.

Like most private equity funds, Shore's work begins with an investment thesis where the partners of a firm vote and decide they're going to invest in a business or a business category in the case of Shore.

That investment thesis is certainly backed up by great research.

But let's be honest, all business plans are about 75% assumption and about 25% truth 'cause they have not yet collided with the market.

When you collide with the marketplace, all the things you did through your research and your interviews, some of them prove true, some of them don't prove true.

And also every year the market keeps shifting a few degrees on you.

So what you believe to be true this year in three years will be a bit different, I think throughout the whole period.

One of the most important responsibilities of board members is to first begin by understanding the core investment thesis that was made and what were those assumptions versus facts.

Then ask really good questions and bring market knowledge as a board member that you see the market shifting to the discussion so that we don't, as a board, keep chasing initial investment thesis when we have learned that half of our beliefs didn't turn out to be true.

We're never gonna create great value in a company.

Until we have 80 or 90% facts and only 10 or 15% assumptions, you always have a few, but we can't keep living off of a thesis that didn't prove to be true.

So bringing that market knowledge to the board and challenging early assumptions that don't seem to be showing up in the business is a really important piece of work for every board member to do, and our best board members understand that responsibility and they take it quite seriously.

To wrap up this part of the conversation, I would love to hear just from each of you, if you had to prioritize one to two measures that tell you that a board is effective, that you've got a good board in place, what would those measures be?

And Michael, maybe I'll put you on the spot first and then let the other guys think a little bit but what would your.

Thank you.

You're welcome.

What would your one to two measures of board effectiveness be?

I think first and foremost to me is understanding the strategic plan the company has and making sure suggestions, insights shared, are supporting that plan and not sending the management team in a brand new direction.

It's really hard when the company has a plan, and board members are off suggesting things that's already been ruled out both by Shore and the management team.

So that's one key measure of a great board, is they understand the strategy.

Yes, they're bringing new insights to every meeting, but they're not suggesting a completely different strategy every other board meeting, they understand strategically what's gonna make this company valuable.

I think the second thing is something that makes a really good board is really great questions around the cadence of what the company's doing operationally, and sharing insights and lessons learned.

I will tell you as a CEO myself, my best board members were never telling me what to do, but they were saying, I tried something like that three or four years ago.

Here's what I did.

Here's what went well, here's what didn't go so well, and if I could do it again, here's what I would've changed.

With that insight from two or three members around the table, I can make a good decision for my company without feeling obligated to follow any specific set of instructions from a board member, but I can learn from their experiences and that's a really great measure of a good board meeting is when they share experiences and it's less about a to-do list being given to a CEO.

Yeah, I would agree with Michael completely.

And I think for me, sitting in the CEO seat, what makes an effective board is, I'd say refining strategic direction.

So if you set your compass at, you know, 327 degrees, because that's where you think the, it's gonna create the greatest value, and through the discussions with your board, you change degrees 3 to 4% to just be more precise.

What it does, it helps you not only minimize risk and also accelerate growth, but what it does is it helps the management team avoid cycles of operations, right?

Every month of the hold is roughly 2%, and so the sooner you can get to these initiatives, the better off it's gonna be for the company and management.

So for me, the number one thing is refining strategic direction in concert with management.

And I think the second thing that Michael touched on as well is.

Helping with operational guardrails, right?

Understanding when things are not going well.

Getting ahead of those things, helping the management see around the corner where you can minimize risk.

Those are all great points, and I'm gonna go fundamental on you, which is, I think the things that start a great board off are one that the board are all present and prepared for the meetings that they attend.

Too often people are busy.

I understand that, but too often when you have remote board meetings or members who are remote, it just changes the dynamics of the discussion.

I think it's really important that we get people together in the room understanding body language and the conversations that are going on.

And then secondly, I look for engagement between the board members and management outside of the meetings themselves.

I think that's a really good indication of whether you have an engaged and a board that takes on that spirit of being helpful and a resource versus someone who is there showing up for the meetings and you know, sort of doing their duties there.

So I think, you know, fundamentally there's a level of engagement that I think is really critical and I measure that through attendance and in-person attendance and outside meeting engagement with the CEO management and other board members.

So I think all those points of view are really solid, particularly as it relates to a Shore board.

I would say from a final view for A CEO, if you're a board member and you have industry contact.

If you have opportunity to link the company with a strategic partnership or another organization that could be complimentary to the company, often an introduction like that can be extremely valuable because many of the CEOs, it's their first time, they don't really have the same breadth of contacts that a board member does and and I found as I was running companies.

Board members who took the time to personally connect me with others that could help our business grow were deeply valuable to us.

And it actually strengthened the relationship between myself and that board member, because I guess different than critiques or questions at a board meeting, I felt like they were actually helping me build something.

And that feeling of your board isn't just asking questions or actually helping you build something creates a completely different dynamic for the CEO and their team.

So I didn't wanna stay in the conversation and not bring that up because being in the trench with the management team, helping them build is a rare, wonderful thing that some board members do, but not all.

But the few that do, they become the most valued members of the board, particularly to the management team.

If you enjoyed this episode, be sure and check out our five-part Bigger.

Stronger.

Faster.

series on What Makes a Great CEO.

Additionally, throughout our Microcap Moments series, you'll find interviews and profiles of successful CEOs, Executive Partners and Lead Independent Directors, including our one-on-one with Charlie Talbot.

This podcast was produced by Shore Capital Partners and recorded in the Andrew Malone podcast Studio with story and narration by Anderson Williams.

Recording by Austin Johnson.

Editing by Reel Audiobooks, sound design, mixing, and mastering by Mark Galup of Reel Audiobooks.

Special thanks to Bill Clendenen, Charlie Talbot, and Michael Burcham.

This podcast is the Property of Shore Capital Partners, LLC.

None of the content herein is investment advice, an offer of investment advisory services, nor a recommendation or offer relating to any security.

See the Terms of Use page on the Shore Capital website for other important information.