In this captivating episode, Mike dives into an insightful conversation with Eric McCarthey, a seasoned boardroom virtuoso. Eric brings his wealth of experience as a strategic leader, offering invaluable insights into the dynamics of successful boards and transformational leadership.
With a remarkable career spanning leadership roles and board positions, Eric sheds light on the inner workings of board committees, the essence of the duty of care and loyalty, and the power of cultivating a kind and thriving company culture. He shares a remarkable story of partnering with Ralph Lauren, unraveling the challenges, and the pivotal role of kindness in turning a struggling company into a success story.
Tune in to this episode to discover boardroom secrets, unravel the magic of successful transformations, and explore the art of leadership through the lens of a seasoned expert.
Eric McCarthey’s Bio
Eric McCarthey brings a wealth of experience to the boardroom, combining a diverse background with a passion for strategic transformation. With a remarkable career spanning various leadership roles, including private equity CEO, venture capital managing partner, and former corporate officer at Coca-Cola, Eric is a seasoned expert in steering businesses toward success.
Eric’s expertise extends across numerous domains, from strategic business transformation and brand positioning to mergers and acquisitions for competitive advantage. He excels in cultivating sales and service systems, optimizing supply chains, and driving revenue growth. Furthermore, his proficiency in business recapitalization, IoT, digital transformation, and cyber security is highly regarded.
Beyond his corporate accomplishments, Eric’s contributions as Past Chair with Vistage International, the world’s leading CEO membership organization, highlight his commitment to fostering CEO leadership development. His insights are sought-after, making him a published author on sales leadership, high-impact boards, and a compelling public speaker on leadership and relationship development.
Eric’s dedication lies in shaping exceptional value creation and seizing new growth frontiers, making him a trusted authority in the realms of business strategy and leadership.
In This Episode…
- Ever wondered about the secret sauce behind successful boardrooms? We spill the beans on how high-performing boards really operate.
- Get the lowdown on the crucial committees within a board and their roles. Think it’s all about compensation? Think again!
- Discover the power of kindness in building a resilient company culture and how it can drive transformation from the inside out.
- Hear a riveting real-life example of turning a stuck company around, complete with insights from the legendary Ralph Lauren’s approach to business and culture.
- Want to be a board member? Learn about the duty of care and duty of loyalty, and why a touch of caution can save you from some hefty insurance claims.
Links & Resources Mentioned…
Mike O'Neill: Welcome back to Get Unstuck and On Target. I'm Mike O'Neill. Whether it's our team at Bench Builders working with the company, or it's me coaching the CEO one-on-one. Getting leaders in companies unstuck is at the heart of everything I do, and that's exactly what this podcast is all about. Each week, we bring you incredible guests who share their hard learned experiences of getting themselves or others unstuck.
Back on target and moving forward, I hope it gets you unstuck and on target as well. Joining me today is Eric McCarthey. Eric is the CEO of Shelty Viking Capital Group. It's a private equity holding company focused on several industries to include cloud, SaaS, life science, technology, healthcare. Retail e-commerce and nutritional foods and beverages.
Eric is unique because he comes to this role, has been a private equity, CEO. He's been a venture capital managing partner and he has extensive public, private family, and nonprofit board director expertise, and it's that expertise we're going to be spending time on. Welcome Eric.
Eric McCarthey: Hey here, Mike.
Mike O'Neill: Eric, I wanted to speak with you and invite you onto the podcast because it seems to me I've been doing the kind of work I've been doing for private companies and public companies. I have worked with private boards and public boards, but there's a whole world out there about board work, and what I really wanted to spend our time on is not just talking about what does board work look like.
How can a board, when it's properly configured, really make a difference for the organization and by chance for those who serve on boards. How can they assure that they're making a huge difference? Does that topic make sense to you?
Eric McCarthey: Yeah, absolutely. Yeah. A lot to move around in there.
Mike O'Neill: There's a lot. Now I know you have 30 plus years in senior leadership roles. You have led large organizations spanning multiple continents. You are you're the CEO of a private equity holding company. What is it about board work that just kind of lights you up?
Eric McCarthey: Well, my journey in the board world and board work actually started when I was with the Coca-Cola company, who I worked for, for 30 years, and I got to serve on several boards inside that system with our franchise bottler partners.
And that got me on the radar of other board work outside the company. And I was fortunate that the company allowed me to do that. And I started to, I was on several public company boards. I was at Coke, so my interest in it and my passion on it is driven from a couple of things. Number one, a board member or a board director carries a lot of responsibility and accountability and a board's first and foremost responsibility is to hire the right CEO for the company.
That that's what boards primarily are you know, are responsible for. Once that's done, then there's a partnership with that CEO on the game plan of the company. The forward game plan. How is it going to increase its value over time?
How is it differentiated in the market? How is it going to utilize capital? How is it going to transform itself so that it's always relevant to its customer base? Those kinds of challenges are ongoing. They're stimulating. So you're constantly learning if you're an active and a dedicated board member.
Because you have to learn about the company's business model. But you also have to learn about the broader marketplace where the company competes. And all the forces that are working against and or for what's called value creation, which is making the firm more valuable. Public markets do that every day with a market price but that only represents 5,000 companies in North America.
Most of the business landscape of the North America, and for that matter, for the world are private companies, family owned businesses, et cetera. But the job of the board member in either of those scenarios is to make the company more valuable over time.
Then there's another tier, which are family owned businesses, a major part of the North American Capital system are family owned businesses. They're, they're, they're very important. They're unique because sometimes they're, they're involve trusts that are multi-generational in nature. And what they'll do is form an independent board to help the family navigate or chart their options as they go forward.
They want that outside perspective, especially in situations where there's going to be generational change in leadership. So that, that, that's, you know, a longer answer to your question.
Mike O'Neill: But it triggers yet more. You mentioned that the, the primary role for a board is to select a CEO. Give that CEO the support they need, the guidance that CEO needs.
But hold the CEO and leadership team accountable when you mention family owned businesses, privately held family owned businesses, particularly businesses that are now beginning to have a generational handoff. Yes, yes. I personally have worked in two such organizations. And the dynamics are considerably different.
Eric McCarthey: Yes.
Mike O'Neill: When a company forms a, a board, a privately held company, let's say it's a family, a closely held family company forming a board. Yeah. How does. How would a CEO and a board best foster the right relationship? It seems to me that they're trying to figure out how to use the board. The board is trying to figure out how it does.
Have you been part of the establishment of a board and what challenges did that present?
Eric McCarthey: Yes. Well, it's like any relationship that you're forming it's getting to know each other. It's getting to know the situation or the challenge in front of the company. It's getting to know strengths and weaknesses among the different board members as well as the CEO and leadership team as shareholders, the family, to a large extent in my, in my experience with family-owned companies, the, there are certain family members that are on the board with the other independent directors.
And those relationships are critical because at any given time you have emotional dynamics going on between the family members. You have
disagreements and constructed debate. Sometimes it can flare up and be quite intense. There are choices along the way around. How is the company going to grow?
Where should it grow? How much risk should it take on? Right. Well, you work through those kinds of issues in a collaborative, constructive manner. What's critical, both with family enterprises and for any other board for that matter? In my, my experience is the role of the chairman. The chairman sets the tone.
Transparency, being candid with each other, a high degree of respect, always being professional. Start with trying to understand why those are principles that are critical to a performing board no matter where it's operating.
Mike O'Neill: You mentioned a number of those principles that must be in place for the board to function, but let's take it a step further.
And that is kind of the topic that I hope we would spend most of our time on, is how to see that the board is just downright exceptional. And that could very well be if you serve on a board or if you're in a key leadership role working with a board, how do you strengthen that relationship? What constitutes, in your opinion, an exceptional board and what does it require of a board member to be a contributor to an exceptional board?
Eric McCarthey: Yeah. Well, that's the North Star. That's always the North Star, right? In this very challenging world that we live in, that North Star is seldom achieved because of human nature, but you wanna work towards it in a highly functioning board, a high performing board towards an exceptional kind of ideal state.
It's like any other entity or organization. It, it succeeds or failures because of their culture. Those are all different. They each have their own personalities. They each have their own patterns. They each have their own areas of discovery and learning. They have their own areas of intersections and disagreements and navigating all of that is a team sport.
Where you have to sometimes set your ego aside, which is challenging because of who we are as human beings, but to lay it aside and try to work with your fellow board members to come up with what, what I call board wisdom. In other words, let the best decision surface. Don't try to force it. Let it surface and great surfacing happens through great conversation.
Sometimes it's a fierce exchange. Sometimes it's a more kind exchange. The point is that you're trying to learn and come to a place where a set of optimal decisions can be made, because that's what boards do, they advise, and in some cases they help formulate a decision. Major material decisions which they're responsible for. That's what great stewardship requires.
Mike O'Neill: You know, Eric, I was tempted to almost quote this as looking behind the curtain of, of the board, and I'm really intrigued as you've been describing this, because the characteristics of an effective board are essential to the. I mean, it, it's almost exact as the characteristics of a high performing key leadership team of the organization.
Eric McCarthey: Yes.
Mike O'Neill: And, but so often people don't see behind that curtain. All they hear is the board decided. The board said they don't even know what goes on behind those closed doors, per se. When a board works well, it sounds as if everybody understands they have a role to play.
It sounds at least based on your style and your leadership style, is you're really wanting constructive. You want people's voice to be heard, and if there is that environment, the best emerges board wisdom results.
Eric McCarthey: Yes.
Mike O'Neill: You know, prior to us recording this I wrote down a two word phrase that really kind of caught my attention, and that is Board Catalyst. And I think I know what that means when I heard you say it, but how do you define board Catalyst?
Eric McCarthey: Well, at the end of the day, you're trying to shape and provide energy into things that are going to be value creating and value creating for the business at large. Value creating for, let's say, development of the key leadership team.
So that they're growing and getting better. You wanna be a catalyst for your own board's functional capability, as we had discussed earlier I've always liked the word catalyst as a way to think about how you're becoming a force multiplier. And I think that's a, that's a rare dynamic in leadership teams and in boards.
It can only happen if you're trying to be a catalyst for it. It doesn't happen through osmosis, right? And, and so there's effort and intention about it, and that's the way I've always interpreted the word catalyst, and I've applied that to everything I do with inside my board responsibilities.
Mike O'Neill: I don't know if people realize that there is actually accreditation and training for those who serve on boards. For those who don't know much about that, how do you explain that?
Eric McCarthey: Well, there, there's a spectrum of these kinds of certifications or, or programs that somebody can go through. On one hand, you can go to the big universities. Who offer board programs? There are, my certification as an example was with the Institutional Shareholder Service Organization.
They are the ones that handle all of the proxy work for public companies, right? They're considered to be best of breed when it comes to. Board roles, responsibilities, et cetera. So I went through that training myself and got certified because when I became a board member of a public company, I wanted to be grounded in that stuff big time.
I'm also a member of the National Association of Corporate Directors. The firm's called NACD, headquartered in Washington, DC. They have 21 chapters, 22 chapters across the United States. We put on programs for education for boards. They have developed a certification program that's quite robust and and complete.
And I know several people that have recently been through it. So you have a range of things out there that are certification, like and similarity. They deal with all of the board basics. So that at least, you know, as a boilerplate platform what, what, what's, what you're responsible for as a board director when you become one?
Mike O'Neill: You know, we've talked generically about a board director. We've described the. A primary role of the board is in the selection of the CEO, but in terms of their, the roles on a board, some of them are actually set aside by function. Can you walk us through what are the most common dedicated roles for board members might be?
Eric McCarthey: Sure. The board is made up of committees and, and that's the engine. A board of directors, the committees you have the compensation committee?
Mike O'Neill: Yes.
Eric McCarthey: Who's responsible for setting up and comparing and benchmarking the CEO and the executive team's kind of, equity pay stock, et cetera. So you have the compensation committee, you've got the nomination and governance committee.
That committee is responsible for assessing the composition of the board. The relevancy of the board members, their performance. And they typically are responsible when there's a CEO change to lead that process.
Mike O'Neill: I see.
Eric McCarthey: And then the other committee, there's probably two or three other committees. The audit committee is the most important one. The audit committee looks inside the engine of the company. Does robust risk assessment, make sure that there's financial integrity happening all the time? You starting to see that committee take on things like cybersecurity risk?
Mike O'Neill: Yes.
Eric McCarthey: In more advanced companies, bigger companies, you'll start to see a technology committee form. Now with AI and everything going on with ai, It wouldn't surprise me at all that you'll start to see some companies form an AI committee. So there's, there, there's a bunch of different varieties out there. The bigger companies are going to have more committees. The smaller ones don't need as many, and you, and you basically house things underneath three or four committees and, and that's sufficient.
Mike O'Neill: Well, that's that structure, those committees. The fact that the board itself has to function well, particularly if it's going to serve the organization, but there's also a somewhat of, of a fiduciary responsibility for a board member because I, I know there's insurance for board members.
Eric McCarthey: Yes.
Mike O'Neill: They're, they're held accountable when something doesn't go right. Do you find that that has scared some people to even consider serving on a board?
Eric McCarthey: Sure it has. Just in the last few months when we watched what happened with Silicon Valley Bank as an example you know, that that bank failed and went into bankruptcy. And you can, you can read 35 articles on it and get under an understanding of what happened.
But at the end of the day management made the wrong decisions. And one of the questions is, where was the board oversight in that situation? You haven't seen a lot written about that.
That surprises me because the board is accountable. Board has two duty of care, duty of Delaware law, most of governance of both public boards and or private boards comes through out of what's called Delaware law. And a lot of, a lot of companies in North America are incorporated in Delaware because of the sophistication of their governance system in their legal system. So you have to be very clear-eyed when you become a board member on those duties.
And making sure that anytime a major decision is being made, you're exercising something called the business judgment Rule, which means essentially that for material decisions, you are weighing and evaluating all the options and you're documenting those. So when a company gets directors and officers insurance that insurance covers them and there's all kinds of different coverages that are out there, but it's covering them for everything up to gross negligence.
One could argue that the Silicon Valley Bank had board gross negligence involved. I've heard some people postulate that. I don't know enough about the situation to declare that that's what happened. But those are the kinds of things that, that are the guardrails on proper board functionality.
Mike O'Neill: Let's talk about those guardrails a little bit more, if you don't mind.
Eric McCarthey: Yeah.
Mike O'Neill: The business judgment rule, and then you preface that by describing the duty of care. The duty of loyalty.
Eric McCarthey: Yes.
Mike O'Neill: I'm not familiar with that concept. Can you elaborate on that?
Eric McCarthey: Well, duty of care essentially means that you are going to be all over and understand the business and how it works where its issues are, where its risks are prepared to make decisions. Preserve and keep the value of the company and not put it in harm's way.
Mike O'Neill: Okay.
Eric McCarthey: Alright. Duty of loyalty means to the organization, to the company not to the board, but to the company. And so that means that you are going to do everything you possibly can to ensure that company can sustain itself. And there's a lot of other nuances that you could read about those two duties, but essentially that's, that's what they are.
Mike O'Neill: I'm loving this. I am, I've got lots more questions. I know we're not going to have time to get to all of those, you know, but I'm, I didn't read your bio, but it's impressive. You have been in leadership roles, board roles.
You're able to describe things that I suspect the average viewer, the average listener is not overly familiar with, but reflect on your career. Particularly, maybe from a board perspective. Can you share an example? You don't have to mention the organization's name.
Eric McCarthey: Yeah.
Mike O'Neill: But where either a client or a board got stuck and what did it take to get unstuck?
Eric McCarthey: Yeah. Well, I'm going to give you a story. An example, one that was made an impression on me, and it's after I retired from the Coca-Cola company. I went on a special project. With a a very qualified friend of mine and we went to work with the Ralph Lauren company. They were stuck. They were stuck because of the way that their marketing system worked and wasn't working.
They were stuck with having way too many brands. They were stuck. A strategic inflection point about where fashion and the fashion industry was going. And they brought us in to give them some fresh eyes on what was going, what was, what their, what their options were. And I got to get very close to a man I highly respect Ralph Lauren. He's an introvert.
Mike O'Neill: Really?
Eric McCarthey: Yes. But his special god-given skill of design is, Well, the reputation speaks for itself, right? The man is a genius.
Mike O'Neill: Yes.
Eric McCarthey: When it comes, comes to that, what the other thing he's a genius at is culture. He is, he is one of the kindest men I've ever met in my life, and kindness defines their culture at Wow.
And you could see it all over the place. The people you met. Everybody treated each other with respect. It was valued I believe it was the key ingredient to get them through the plan. We put in front of them about how they needed to change. Because they weren't growing and they weren't growing because they had too many brands was diverting resources.
It was spreading talent out. Et cetera, et cetera. So we we gave them a plan to focus and it was a great learning experience and I have high regards for that company and, and a great respect for Ralph. I got to spend a fair amount of time with him, and it's a, it was a learning experience that I never imagined I would be able to have.
Mike O'Neill: You know, you just explain something. It really boiled down to two words, kindness. When you're talking about the culture and when you're talking about the solution focus, you've got a gift for reducing things to the essence, you know that already.
Well, I don't know. I, I, I try to get things down to their essence because it helps me be more helpful to others as you reflect on this conversation. You say, gosh, I wanna make sure that the listeners really pay attention to the following. What are the takeaways you wanna make sure that we have?
Eric McCarthey: Well, you know, I, I don't wanna be a, I'm not, I'm not a professor. I don't wanna be, I, I'm not, I'm not a, a brand and to myself. I don't wanna be everything I've learned about business.
Relationships comes down to two fundamental things. It's so important and it's critical to, to grasp what your current reality is. And you have to be brutal about it. What's working and why, what's not working, and why Getting the time around that then prepares you to go to the next stage. Which is aha.
Now let's talk about our options. What do we wanna become? Why do we wanna become that? What's going to be the benefits if we do that? That's, that's visioning work. If you do visioning work without doing current reality work, you're stepping all over yourself. Don't do that. Do the work on current reality, then do your visioning work.
That would be my recommendation for leadership teams for boards for companies, no matter what their situation is.
Mike O'Neill: But those who are listening, they may not realize that we are also recording this via video. And what they would've seen is I started leaning in when you made the comment, and that is from a strategy standpoint.
You said what's working? And I think what companies tend to do is just list what's working and they move on to what's not and, but they don't spend enough time understanding why it's working.
Eric McCarthey: Yes.
Mike O'Neill: And if I heard you correctly, what's working and why?
Eric McCarthey: Yes.
Mike O'Neill: What's not and why? And you're cautioning us. You have to be just brutal in the self-assessment, but in doing so, it will pay off in spades if you really wanna set the right path forward.
Eric McCarthey: Yes, that's, that's what I've learned. Yes,
Mike O'Neill: Eric. I've learned a great deal in this conversation. I'm confident those who are listening to this episode have as well. But if they want to learn more, what's the best way for them to connect with you?
Eric McCarthey: Well, I'm on LinkedIn. I, I post periodically on stuff that I'm passionate about or, or that I'm learning. So LinkedIn is a great place to, to connect with me.
Mike O'Neill: That's how you and I connected.
Eric McCarthey: Yes, it was.
Mike O'Neill: I saw you, your, your background and it was only after a little bit back and forth that I kind of concluded. I think Eric would be a great guest. We jumped on a call and you said, yes, I'm appreciative. And you were. Thank you, Eric.
Eric McCarthey: No, you're welcome. My pleasure.
Mike O'Neill: As we wrap up. I want to kind of invite, if you're listening to this and you are looking to truly get unstuck and moving forward, I got something special for you. My favorite thing to do, and honestly what I'm probably best at is coaching leaders in a way that does exactly that. It gets them unstuck. Now, what I'm not best at is creating multi-page sales letters and giving you a 17 point system for how I do it.
I have found the most effective way to demonstrate how I coach leaders like you is to actually coach. So I'm offering something new. I'm offering complimentary coaching session for leaders like you who are doing incredible work, but perhaps have hit a wall or who know. So in essence, who know that you've got more to give and just need some help seeing the path to improve perhaps your personal or organizational performance.
There's no obligation to future sessions, there's no sales pitch. Just a powerful conversation and a new perspective to walk away with. So if you'd like to experience the benefits of such a coaching session, just go to our website, bench-builders.com and book a time. It's that simple. So I hope you have enjoyed and have learned the way I have from Eric and I wanna thank you for joining us and I wish you all the well thanks everybody.