Shearman & Sterling’s Mark Kessel, of counsel and a leader of the firm’s life sciences industry initiative, had an article, titled “Do You Really Want to be a Biotech Board Member?,” published in the bioentrepreneur section of Nature Biotechnology. In the article, Kessel explains the legal and fiduciary responsibilities in serving on the board, as well as some of the practical considerations and challenges.
Kessel, who was co-founder and partner at private equity firm Symphony Capital LLC and has been active in the life sciences industry for over 25 years, points out that “Unlike being a member of an SAB (scientific advisory board), in the corporate world your appointment as an independent director means you are now part of the bedrock for the proper functioning of a company's board of directors. You are being hired to bring necessary expertise, independent judgment and act as a reality check on the strategy and vision for the company espoused by the CEO.” Kessel also cautions that “you need to be aware that in many organizations the real power resides with the CEO; often the board of directors is sidelined and their potential contribution unrealized.”
Kessel notes that biotech companies “are in constant need of qualified directors.” He adds, “The composition of the board is often looked upon by investors as a key ingredient in their determination as to whether to buy, hold or sell the stock of the company. Investors often divest their holdings if they discern a lapse in corporate governance with the concomitant adverse impact on the stock price. As prospective directors are exposing themselves to potential liability and reputational risk and are expected to put in the time to do their job, the pool of qualified directors for biotech companies who are inclined to join a board is not plentiful. Many are called but not all respond.”