Data Solutions for Better Corporate Governance
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SHOW NOTES: DAVID CHUN
David Chun on his career trajectory
Yeah, so I guess I’ll start pretty much at the beginning. I grew up in New Jersey, right outside of New York. We were an immigrant family from Korea. Our ticket out of Korea was my dad’s ability to go get a scholarship at Fairleigh Dickinson University to get his MBA there. And so I did my undergrad at the University of Virginia, worked in strategy consulting at Bain in Boston, had a short stint at a software company, then got my MBA, then spent six years on Wall Street with Donaldson, Lufkin, & Jenrette – a great firm that longer exists as they were acquired by Credit Suisse. That was probably the most influential experience in terms of what got me to where I am today for a whole host of reasons. I think it started with learning to understand the data. As an investment banker for six years, I spent a lot of time going through SEC filings and I began to recognize the wealth of data that was there. And that’s what inspired me to go out and start Equilar in the spring of 2000 to mine this data. And somehow we stumbled into this whole corporate governance area as Enron and Arthur Andersen were going out of business. I would point to that as the start of the modern era of corporate governance. As we all know, Sarbanes-Oxley came out of that, and there was a lot of focus on executive compensation, and that’s where it all started.
We have carved out an interesting niche in working with corporate America. The institutional investor community, the media, academics. Compensation, for a whole host of reasons, is an important part of the corporate governance dynamic. And that’s what really started Equilar. From there, we’ve been able to continue to grow Equilar and build other solutions. As you know, Janice, you’ve been an amazing champion for diversity. So while collecting the compensation data, we built a people database, and now we have a digital solution. And working with the Women’s Forum of New York, as you know, you and Maggie Wilderotter and others have done an amazing job of honoring companies who are doing the right thing, who are very thoughtful and intentional about it. And I am honored and blessed that I’m in a position where we are today to work with people like you.
David Chun on Equilar’s early years as a startup
In one word, it was tough. Let me explain why I left in March of 2000. Nasdaq had just broken through 5000. I’m out here in Silicon Valley. It’s the land of milk and honey. And then quickly, within a couple of weeks, the market started to soften, and then, frankly, crater. So we had raised a small amount of capital, about a million dollars through friends and family, but with the intention of going out and raising additional capital. But that market completely shut down. So for the first couple of years, we had to be very creative and entrepreneurial, and somehow, we pulled a rabbit out of a hat. We were able to find an interesting niche around compensation. And our first break, actually, was with Reuters. I distinctly remember this email exchange with the reporter Tim McLaughlin. He was covering Tyco and needed to know what the CFO at the time, Mark Swartz, made in 2001. And we were able to provide that information to him. That helped put us on the map.
To put this in perspective, those first three years, I was not taking any salary at all. Zero. And going from investment banking to a startup that wasn’t making any money. I had this conversation with my accountant. He said, “I’ve never had anybody in your situation that went from the bracket you were in last year to qualifying for an Earned Income Tax Credit the next year.” It was a very humbling experience because there were many, many days where I would wake up thinking, “am I crazy? What am I doing here?” But I also recognized that there was the opportunity, there were some green shoots that made me realize they wouldn’t be calling us back or engaging with us if they didn’t think what we were doing was meaningful. So thankfully, we were able to get to a point where we were a sustainable business and were generating enough revenue to cover our costs and eventually to be able to take a salary coming out of it. But yeah, those first couple of years were very challenging.
But much of what I do is driven by supporting my wife, who’s extraordinary. In 2010 Holy Trinity Brompton introduced us to IJM – International Justice Mission – and the plight of the world in terms of slavery, in terms of human trafficking. My wife is on the boards of Restore and Freedom from Fistula, and these are important to us as a couple. My role in these is supporting her so that she can do the leading in those areas.
Another important thing to note here is that corporations and corporate leaders are increasingly caring that the companies that they lead have a soul, have character, have a sense of values and a commitment to giving back. So, for instance, I chair Reference Point. Scott Goeden is the CEO there. It’s a terrific, very successful management consulting firm that specializes in the financial services sector. Scott commits a huge amount of time and energy to Africa New Day, looking at the incredible humanitarian crisis in the Congo. And it’s not a matter of just sending money overseas. He goes on site, he puts himself at risk. He spends considerable time there. That’s part of leading from the front, demonstrating to the staff that you care and in that sense, inspiring others.
David Chun on the power of Equilar’s database
When we started collecting the data, literally in spring of 2001, we got the compensation data, but we were also tracking, obviously, what executive and board members were receiving. And we made a very conscious decision from day one when a Tim Cook shows up at Apple and then a Tim Cook shows up at Nike, we wanted to make sure that we captured it in a way where it was the same Tim Cook. So it was a little extra effort to do that. But what that has allowed us to do is to build out the foundation of a pretty exciting executive board relationship database. And so while collecting the data, let’s say Tim Cook at Apple, and let’s say 2005 or 2010, we were also identifying who else was with Tim Cook at Apple during those years. We built out a database of about a million and a half executives and board members, individuals that they’ve interacted with, where they’ve overlapped. There are some very exciting applications for that. One is clearly around recruiting. We’re excited when companies say they cannot find candidates. My response is, “if you have 10 seconds, we can quickly go in and show you – here are the candidates.” But even better, they’re not only getting a list of profiles who could potentially fit the criteria, they’re seeing how they’re connected to those individuals. How they could potentially get to these individuals through a warm introduction through their trusted network. How they can identify people in their network. It can also serve as a reference for you when trying to do some background checking on individuals. So that’s a pretty unique aspect of what we’ve built out.
The first use cases were around executive and board recruiting. But frankly, the bigger opportunity is helping on the sales and business development side. So in addition to working with B2B sales organizations or working with private equity firms and others, I like to say we’re solving that last mile. “We’re trying to get to this individual or person or company. Who in our network knows this person? How do we get to that individual?” And inevitably, with what we’ve built out, with our data and our full tech stack, we can integrate email, activity data, and other signals to help people connect to individuals and companies, and frankly, accelerate business. And that’s something we’re very excited about.To put this in perspective, those first three years, I was not taking any salary at all. Zero. And going from investment banking to a startup that wasn’t making any money. I had this conversation with my accountant. He said, “I’ve never had anybody in your situation that went from the bracket you were in last year to qualifying for an Earned Income Tax Credit the next year.” It was a very humbling experience because there were many, many days where I would wake up thinking, “am I crazy? What am I doing here?” But I also recognized that there was the opportunity, there were some green shoots that made me realize they wouldn’t be calling us back or engaging with us if they didn’t think what we were doing was meaningful. So thankfully, we were able to get to a point where we were a sustainable business and were generating enough revenue to cover our costs and eventually to be able to take a salary coming out of it. But yeah, those first couple of years were very challenging.
But much of what I do is driven by supporting my wife, who’s extraordinary. In 2010 Holy Trinity Brompton introduced us to IJM – International Justice Mission – and the plight of the world in terms of slavery, in terms of human trafficking. My wife is on the boards of Restore and Freedom from Fistula, and these are important to us as a couple. My role in these is supporting her so that she can do the leading in those areas.
Another important thing to note here is that corporations and corporate leaders are increasingly caring that the companies that they lead have a soul, have character, have a sense of values and a commitment to giving back. So, for instance, I chair Reference Point. Scott Goeden is the CEO there. It’s a terrific, very successful management consulting firm that specializes in the financial services sector. Scott commits a huge amount of time and energy to Africa New Day, looking at the incredible humanitarian crisis in the Congo. And it’s not a matter of just sending money overseas. He goes on site, he puts himself at risk. He spends considerable time there. That’s part of leading from the front, demonstrating to the staff that you care and in that sense, inspiring others.
David Chun on the evolution of professional networking
David Chun on changing corporate governance practices
David Chun on diversity in the CEO pipeline
David Chun on CEO succession pitfalls
CEO succession planning is the unpleasant conversation about what would happen if the CEO were to get hit by a bus or get into an accident – who are the candidates in the pipeline? Well, that is the number one responsibility of the board. Because if you think about the governance issues that companies have had over time, it’s often driven by not having the right CEO in the role. So the succession plan is absolutely crucial.The “organ rejection rate” of CEOs brought in from outside is very high – typically close to half of outside CEOs don’t even make it past a year or two. An issue we’ve looked at that’s related to this is the pay of CEOs for an internal promotion versus an external hire. In an internal promotion, when the person who’s right below the CEO gets promoted to CEO, they’re very happy to get promoted. Obviously they’ll get a raise as part of it, but it’s typically a relatively modest increase from before. The minute you need to go outside, that changes. And so you bring in an outside CEO. And for better or for worse, their salary information is now publicly available. And so if you think about all the folks internally who did not get that role, and then they see the pay package of somebody brought in from the outside, then you see the board scrambling to retain the key executive talent that knows how to run the business. So you have this ripple effect of what ends up happening if that CEO succession decision isn’t handled properly.
