*kxtt*rz,ande*sr.ri*gth*i*.

ugfrrtyatjhacweprocessdesig''lsatealhetareaswher*
board c*n add sipificact, baf hard-to-quantiftr, valuc-adde&

T.'Z CASE S?U}Y: }E\IEIOPING COILF*RATE GOIiERN ANtr;

AT X{TGHrLY LCGISTTCS SOTTWAXE'* BUT IIOW?
was a*5*1y1o*ktag*
6 JLNE Z**s,tN IIIGHFLY'S B*ARFROOM AT 11;4?AM. Tom
Arno, not even ryirg to hide his emotions:

ivlore corporate governance. '. ?i You want

11
bti"g bureaucracy to us' killi:rg the

ers*eprerziarz*Z s{it,t z*d spee* ihai h*s ma6,* i1'*x e**pxty sc s*cce*sful?

Loosening his Ue. Tom looked arouad at the other nrcmbers of the board
o[ dkectors'
s be*as& ts*rn p1xy e4 ke s*ppr6 asd *:ked:
n**i"&JC hi*rself &al he w e*ted t a

What do you think?

There was no immediate response, as rhe members of the board of

directors were obviously
gns:lre artd*e*dedlirre to ,il..t.
Tom'was the e'a-tbr:*der,,cb*itg;ta1,CV*'a*d*astgr:*aitt
;t fi*lrfly 7*gixitc* Ssftwarc, a l,ardo:r-Lra+qd scfTyre ia l*gistics
"9Tpyy-:l"aahzzxg *tgV:??e"zl
i*
,otntlo, .;o*J iaception seven years aga {seefiqe:'1--1: :*-'li$*y'* r*pi&ly zn-itx
;;;;*. ;"rviving the bw*t *t ** *st.ia66, btbble,,Iat**s bae gr*ws
wa*at *r*", a*,&ting headc*lrt **d rcverz*fr yeer W yt*'' The f*st
gr*utth *r*xze& lsj
G-rt"*iig io*o X*}g*aszra** ** .s{}$Le *t fizeboer*. ***e* bz& y*ixt** o:rt dariag
*"9}!'2L
:he discus*io*. arourrd t{e yr*vqu* *o'.dai:em. To be**; serve its *zst*mvrs'
?he
,
a'*.stz*-ty*-a11 **g?N* p,ogt**, ?lad bee* sptrit irtw &stlr*1 7*dtl*l|tz1le* f*r.. *lf.k
'htx'
***pa*ies, retailers, aud wi*i*rs*a 9an'tpaTne*.11id,rfry *rxpl*ye& ? btgr-ty qzzalt&ed *d
u"**uyy r:aixr:d s*a* fort*, *v*icb it<>t *nlV x+sea;lle.* a*e rzpqS*d tEz s*ftwx*. b*t z1s*

helped wlth * broad vaiefy *f issues: tfetrrl*g tlr tb*tt war6*r*e' 'fsre f,Ebtsr
"o-*to**r,

3tS salet *preseatatil'es

'?tzrs 39 ib *ijlriris?:z*al

?igare 1.5 *4hf11'*:$geiTerr$rat.r*l J'ar].$e

a: ?a,-.
z.
a,
a'
 Corporate
- --"^*^** ;eyo*d
Governance B the Scarrdals *ad *urypords
33
',
,:ffi I;.,iffi"".ff il,Ilffi:..1 ap tario n to c omp an] _
so.;ffi
[:TT,IH **:: ::, l^t: *T*p hic
tr H;,; _1f. ag and
marke rs, esta bris hi sa] e s

Il*ryHl::#r';*l"y;X*;"*,;";#jfi
enteriag Chiaa, rrur rom's
** a'*um .uI ;ffi rKJ:"-;:ff i:i;3#ai:
'&Il? ;::'ffi ilffiri:'r,;#Jr1 :;
IIighfly's need f,sr org*nizaficn*I
*d*pt*fr*t
ff;f# ;f#: H?*;;:'#,Tr :i::T: ;;
:-:,_':' I:*
;:;iHHtr::ffi":W,?
wirh n:ree ye*rs *r ltigrly
ffi,:?J"}Jtr*
y,X#t;;*e
qaarter vf 20A6-
rast :ffi"n *:
six *.;il,,;; Tji:::{
;;;"lnff rrs continued faii,
?rr:*: Xf,mto the red by the
&o as
fltrst
success _ which
,"IIJ:fr;XHyJ had rargeil..been,his own
success slory _ hacl ro
rra*arasr,roocrJ;;;:;W:ffi ff
the xext wcr,m. Arr,r axalurfux;;;;;;;;oru,
i"*T#*r
ffi*Xw:Xi;;**y:*fX
w*r* au$naag rwen,t' g*w1?t t:aez rrigh{ly,s c*sis
far severar riasons. He"thea
developed wltatbe called a
:,:nJil:it'itffii:1mi'il:i::,;; rJio*rng poinrs. wtuch de communicared
in a
* 7*$ *tuch &*pkeaa** i* adapa*g
X:::::::y.*:n* b *ff**sfor eusta'ler
adaq*ng *ff*t*sfor eustanler *eed*.
: ff ffi nT_.*;T::*1yiI{ ",,*i'#,i',Iff {Zlif'.*iY#X";.**-,
T"; and deve,opmen B
XiX:;X:.i:*;.**u.n"*i*"*iJi"{#€ff
'mx.T;:x:..x?:.*i{ jt1:::_;;;,w;,;#ixx*rr-ff#:;
x*#:exr;;i:::::*'ji:s#{;:;ru3;;7-::z#:;;X
T* *stur$sh*d
xex4y
* whlch at*''uLx -t,.-Y,?t-ems'
*x. were expea*we to
bac oecasionarry;:llH--;,1::Hr"i:T :yl {r<"ea sufficienr u.,""r, ,o
and R&D rhe
ffi #:ff
* :iltT't",#*j*1*:::F;#;ff
*e a*6lei*i-*# ;;":; ffi:il,tn:,ffi ril"#.*ffi
T?1 :r*r av
'X:.xf;;::#*#X:11ffi*"ff erc'J had beeE exola&igz
'**ar:ew *;;;;;:X;ds- *,.*:1_!*ofiTexdaa,ngartennorring
afficebuildiagaine aste.r.**wxg
c*sts alone
f *.* a* ce*siderah,le
alane were .*rlo er*htt, t1trt2 ^-- ^__l:"h appreciated and frequenteo.ur.erii
rrn;*,
T?%:}vdelxsr:ostreceai,lertet{z**theCE0,tr
"*rr*?ffi*::r;
''L 'eLLcLi'ttw*eub{-}'t*hisk4ypeqple,T*agiaposedthefollowing:
.,.. - aht*rg keeze.
**setha tsfietertf-
ry&*o'J',Ce &e tE
aecountirg, arsd gevet*
*f?a *at *tbsid;*iesrely **
servi*ss fElrreti*a trs ext*r*alprovidex.
ai*i *i"i,
rr.v'leclge sharing. ns erclusiveiy and panicipate
in more
*.*tabli*tt a g*a7 af redw*tng
admixrs:rraaon eosrs by
Sfe &ryd X&D e*sts by
1*?a.
rsing rhe cafeteria and
curs- rn R&D were s,,ongry-spposecr._ly
wtth a simirar 'rechno-freak' Jose, aq ord buddy of
u".rgr#d" ;;#;r,
reiponsiuie i;;;i&D and
srrougiy

e<&.1* €l -43 €, ti S$t.g?._

%-
 Corgerate Aevet a*ce

defended ary move :rhich could possibly bave * *egattve iapaet on bis domaia' .dfter all'
R&D was 'his baby', w*ieh he had to FrotecL
Darxiatq*e,lhe yoxi:gest membe; *f the e)recutile learll, joi*ed High*y as *ief. zttarketing
offtcerin l"te';*A2. As aa exeepti*a, D*n:iaique kadbe*rv ailowed to join *e*rtg*iugbaar&
.a:a

r/.)
Y ftsgri*g in *rder to prcvide an uFdaae *r the i*erna**r:*L expansio*. He wa* a1s* *Vp***d
to T6m's idear as lrc :ras ulrsrr e rt *zry had bee* weil &*ught thraugh or if Tam rv'as
nrerely 'shooting f;om the hip'" Domiai q*e dzf:zrt*1y' did *cf *'alrt tc a?sr{}w thr" wtar:ageia}
disaetios of the subsidiaries, which neede d ebe fsee.d*t*t* gel zstabltsb*d aa er:sare a lasii*g
retum on investments.
.Arno was one of the most active members o[ the board of directors. He understood
Tom's d*ske t+ coalinr:o*sly d*velop *e <trg*nizzlion br:r also saw rccm for improvement
elsewhere. As Tora was abaril tl ciose rhe aeeti*g by askirg il there was ally further aa

business t* discuss, Amo carse up with the prcp*sai ta r*-exarnir* €b* act*al c*atribrition of
the board of Highfly. tialf a* hcur eadier, Arrr* ltad eryrrr*e*ted t* L1*tbert dtsxtg a c.*?fe*
,a-

'a
break lor the board in the cafereria:

?a*r is * irearr:atios cf the classic imperial CEO. Ok, I have heard he does lelegxe
reat.
if s*meane ejsr*es trp v:ith z pr*misiag ide*, bl.ll :a,,h*t do:te as tle bo'*rd a*tzta11y Gt>2
W-e haye s* *hetks a*dbal*zzees ir: place - no real outside e)iperts an the ba*rd leveI, ao
*ftnua} eval*zri*tt, si*rp1y rzolltiog. We *re a* langer a stxl-rtp - *rt* btxt, e*r**t d* it
a]} alone. Omchallenges are just loo**q1p1ex-?ttdiz willget tk*r.r*.Wer,r;edz*ch*ng*
sorxelhing: we tt*rd ta become Lretter and l':ette.r. Wlril* we lead t* *e*ar.l* 9rcaler eff*tts
from ol-hers, norhing is moving in this part of the organ.ization. It is nor nghr. Our real
valu* potentrai is nor in inrernal restructuring, bul wi& **t *h*ztLs **l r?tere. We *e*eL l* ,1

provide fresh stimuli - on an on-uoing basis. Don't you agree?

Herbert noddecl wirh a sigh- sipping from hrs hot latte macchiato. lor h]m the best there rvas
arro*g a* caleteria affers. He did not kao*- what to z&d.

C*rp*rate geve*iir;ll;e *t glig?rfly

The iaiti*l basiaess sLrccess *vershadowed ar] &rea *t Highfiy *aL xaw few cbxzges i* tbe ,:.

lasl seyer years .- corporate gcvemance- Tom felt be had a clear visi*s *t wkerc t*ghf7y ,::-

need*d t* b* 1A years dowa the r*ad, sc he fried to avoid having Lo*g and tedic*s board
meeti*gs. Hrgftfsy'* board asual]y.,rr:et four l* five tirrer * yeat fw rls rnilre *tar:. lw* *r
",
..,

three hoers. W?ile axerliance was quite good, itwas x*l ar:ts**l {*r a**rrtber to be abseat. .;
The board consisted of five people:

r T*m Sve*sso*, tbaxman & CEO-

o Herbert lanes, t?zzef F]t*a*ciai Of*ee;.
t Yarz Chu, First Stages Capizal
r Arno Levia, Venture Fa*rt*er*-
r Kevin Gar:ias,lndegrr:/L**tDirpr;tw with several baard assignrte*ts.
Ya; xtd Arr* repre*znted t$,o private equig iavestors. Er,s: Stage* Capiral arrglrzally
trz,;esled{5 nrilli*n i* extba*ge lor a 3A7c stxke, Y*rt*xe Part&ers caine ca b*xdla*t and
fiaanced the second round of expansion. wirh f25 miltion, and now ow'ned -107c of Highfly.
'- ,a

*.,.-..---......
 loryorate Gavernance - Bey*ad tha Scandals artd.E*zrlysrd* 33
:''::'*s c*xrswt to Arno, wha har] jr:st recently
repr*ced a retiring et]lreag,le, yan had bee*
ihe board for almosr seven yea.rs. Herben remembered an
., -
v*r, .o*.enr during one of the
Vt*viats board meetirgs:

and market opportunities, bur then we have

Strategi,es rreed years
to ret the cEo and il ffiffi;";ffi]
r* fulry deptoy. 1ye st2 i:r ae aac*grou:ra *rrc cagh*p*furly
**w *e var*e of our investn:e* i*r***s. Tom has d*ae goad w*tch
a job s* f*r.
Tam and his co-founders (most of rvhom had le.ft
rhe organization) owned the rest of Highf1-v.
Tcm thought back to the momenr when he decided
to spur growrh:
to o-pen rn" .i*p*y to outside invesrors

ff o*ly tha&kept itwitttxt my fa*itry and group of frie*ds. . . &ea I would :rot have ro
*eal with all cf &is.

Tlurzg* we*? prefty well for Tor* in ge*eraI.

He had great relationship* raiib ?be tx.}epexdetzt
dztectar*, *specially the two ..pr*s"otutiues
b*rn e";;r-*r-;;;:Also Aracl whs vas
extr*ver, a*d salt rathff yaws, freed in per{ect1j
Arr:* and ?aa kcew thlt e1e* btsiness .eluire a
;h*r1;-,;;*i**nr rhe baard. Bath
being 'at the pulse' of the business to sense rhe
rp"_i*&ii6 *ai wat gxx*d. fr**
intricacies of new divelopments. They were
happy wi& tlre performa::ce *tffiigbfry s* far.
a::d rom ,ever bad a pr*brenzk**pzrtg tbxtzz
impressed with his convincing style and charisma.
Kevin was the remaining p.*on on the uo*J. an"rretiring
from his proressorship at
ta*dan Business schc*l, he cai:tiaaed to have sev*ral
focEders and cc-cwrters brought hira in whea
b*a* as*igxmeats. T,,e aLfu*r c**
** :igya;iyl"ail-u
ia Highlly ard left the b*ari ia 2t)94. They *asted.Kevir;'s th{;ir shx*taldtxg

view. After alr, he q'as a renowned business pror.r*r

i*,x- **** .*t* L*ng-t*t z
books for managers. Kevin likect rhe inreltisen*
,ra;;rh;; a ra,ge of business
r"oc"r; H,;*i;:j_;oftware and was keen
cn promoting staIt-ilFs an& en€eTxert*oolip in g*x*r.al.
As Kzvirt bai b*axj expei,"ace *t
*ffer,he was deer*eci trb;e ahighly sarrat:e carld;;;;;;;;; in'*nor" *rb,"i,,gre,,r*&.,
lte sx*med' rc ccnrirue t* be *itren ery br;y ;;;;;.#;#;; zs,,rrre,nts.
".*
A momeni of truth in }Iighfly,s boardroom
?om us::aliy *avigate& srilafiry z*t:*ghthe board
a:eetings. He sei tka rtghr. **e ar, the ta,-.
wbie,bfu*& zlusaysbe** fr.a*k aad pnsitive _
until taday. lVhile kis sryte was tcr*e,*nes
p*ccived as ta* tast. ke ranetbei*ss saceeeded in che,',*t*g
ef{z*iett}y. For a saqpriszngly la*g tiwte, tirerc was
!;77}s
"x,x*r'iJrti";*:ffi1;
t ouAZ* a*" tha !x>riz*r:. a* Higbfly
erxerged as * k*y pla!*r fxxx the va*ishix:g
g*vsytla{ic,e atHig?$ly *av f*us xbazg*s.
lz*ydzy*.
- sf rhe **e**,t yoq*, *zzd r*rp*>rate
:

'A'rno's proposai was rather clear and simpre. He suggested rhe following:

a *otrble th* rrtmbar

of, bqald **e{zrgs.
* lxcrnase tbe iava|vell;e*t at the t:aiA itz the s*ategy
pr*csss.
1a
*uild a :jsk rna*agemetlt sry sterl.
a lrz**duce tn audtt ccn1mitree,
w**b w*tzldalso be resp+nsibie for rhe n-sk tx***g**r,nt
3Jisteffi,
z,
a
?6- {s,We &Yr.r*ar}c€

Hye!5.body ia the, *ageing board meeting krcw &al,Tee **1y ]rg,rd. ***ir*s ard 'edmi*is-
tration' (as he caled everyching outsid.e of product developrnent md delivery). After personal
coordination, he 'let everybody run their own show'. His usral recommendation to any

Grab the ball and runl

A*d aow: this..,

Tel:r ieoked irr;* the faees of th€ tsard rytrrk, xeft?*g f* a r*g*xse. Nerva*sly
t.ktgr*ix}if.*rztB1ry{, *a &e :abie; tresre #Xb#eqkard a.Ery" &e:::resgal e;zttblxst
fo1&ret& &t**. ?&ezz w.as r:s 6*1gery *:l ik *aW - k ur*d. to lx*w fir*z tkcg- vsl*t
Highfly should do uow abcmt ss,porate gCIfisrsffi. if aireing needed to be done at all.