Deborah Hicks Midanek
As the founder and president of Salon Group, Deborah Hicks Midanek works with businesses on growth strategy and handling rapid change. She gained insightful experience into changing company dynamics early in her career when she led Drexel Burnhamâs board restructuring during its bankruptcy in 1990. Ever since, Midanke has been a sought-after director and has served on 15 corporate and 5 nonprofit boards since 1990. We asked Midanek to discusst her career history as a director and talk about the boardroom dynamics facing private companies today.
Directors & Boards: Tell us a little bit about your first board experience.
Deborah Hicks Midanek: My very first board experience was probably my most dramatic. I was a Drexel Burnham employee and shareholder in the late 1980s. It was a private, closely held company. When the bankruptcy was announced in February of 1990, I organized the shareholders to get recognition from the court. I became chairman of the court-appointed committee to represent the shareholders in the bankruptcy. In that role, I negotiated a restructured board of directors to favor non-management directors for the first time. I recruited the others and then became a director myself. I served as the de facto lead director in that situation, which was very complicated. Shortly after the appointment of the directors, the SEC deemed us an inadvertent investment company.
D&B: How has the landscape of board service changed over the past two decades?
Itâs different and itâs not different. At that time (in 1990), I looked around and there was nothing in writing about how to be a board member and what the rules were. Today thereâs a lot more focus on governance and a lot more general interest in governance, but Iâm not really convinced that the fundamental understanding of the ambiguity of the role and how to do it has really moved a whole lot.
D&B: Youâve served on a variety of private company boards? Were they all very different or were the experiences similar?
A family-owned company is very different from a private-equity owned company, which is very different from a closely held company of unrelated shareholders.
Serving on a family board is probably the most complex. What the board is mostly trying to do is work with the family, the shareholders and the management to try to bring in sunshine from outside. You have to keep the focus from becoming too narrow on family or shareholder concerns and make sure that the family and the shareholders understand that the health of the enterprise is what gives them their returns. That could be a very difficult distinction for people who are so close to the business.
D&B: How do family company dynamics differ from private equity dynamics?
The biggest difference between private equity and family business companies is that many family companies are interested in long-term sustainability as a family-owned enterprise. They have a very long planning horizon for their strategies and their projects. But the private equity companies are at the other end of the spectrum. They usually have a three-seven year time clock for holding the company. From the time the company is bought by the private equity firm, theyâre thinking about how to manage their exit strategy and get out with a profit.
On the board, a private equity company is looking for particular industry expertise so they get complimentary skills to those that they already have in house. A family board might be looking more for somebody they trust.
D&B: Would you say that private company board service is very different than public board service?
In my experience there is a big difference. Public companies need to focus on compliance and proper risk oversight and documenting all of it. In a large public company, what youâre doing is working to be sure that every question has been asked and answered and every possible risk has been considered. All of those requirements still exist in a private company, but the time ratio is a little bit different. In a private company, youâre typically looking at a longer horizon. Youâre not nearly as affected by the quarterly earnings pressure that public companies face. You can afford to do a little bit more long-term planning.
From the point of view of the board member, itâs a different feeling. In a private companyâparticularly a small oneâyou feel as if youâre having much more impact on the business because youâre often there because the family really trusts you or the private equity firm really wants your expertise. You often have the opportunity to have a much more intimate knowledge of whatâs going on.
D&B: What types of companies do you look for as a director?
Perhaps because of my temperament, or perhaps because of the way that I got into being a director in the first place, I am attracted to situations where there is a great deal of change going on. I also love companies that are teetering on the brink of disaster. That is another instance where you can have a greater impact. I always ask, âCan the situation really use me?â Iâm not very good at sitting passively by and nodding my head.