Too Many Life Sciences Boards Are Shirking Responsibilities

There is a persistent myth in life sciences that once a company transitions from a scrappy startup into a more mature company, its board will naturally evolve to meet those new, more complex challenges.

The reality is that these boards all too often fail to keep pace with their organizations. Those gaps leave management teams without the strategic guidance and governance needed for sustainable growth and enterprise value creation.

It doesn’t have to be that way.

Board evolution is typically a gradual process. Early-stage companies assemble boards composed of initial investors, past or current business colleagues, scientific or clinical luminaries or collaborators, and trusted allies. As companies approach commercialization or a strategic exit, they add functional experts to their boards: financial, commercial, R&D, and regulatory specialists.

While these moves are logical, they are often reactive and piecemeal—not part of a comprehensive plan for board effectiveness. These new board members may bring impressive credentials and deep subject-matter knowledge, but they remain focused on narrow functional silos rather than enterprise-wide stewardship. They become “financial guardians” rather than proactive advisors who can help the CEO and leadership team navigate the complexities of a maturing organization and think more strategically about the long-term future.

In short, they may be better suited to be consultants to the companies, not board members.

The Cost of Ineffective Boards

For companies otherwise poised for growth—that is, they may be developing differentiated clinical assets and a diversified portfolio; they have strong leadership and ample capital—the drag from an ineffectual board can be significant.

Those companies are more vulnerable to missed opportunities and value destruction. They struggle to raise capital in challenging markets and fail to commercialize products optimally. In the most extreme scenarios, these factors can collectively trigger a downward spiral that can be hard to bounce back from—a decline that can even gain the unwelcome attention of an activist shareholder. In these scenarios, the blame for that collapse typically goes to the leadership teams, while the board’s role in allowing that unraveling often escapes scrutiny.

Recent events with Dynavax Technologies illustrate how a sleepy board can fuel an activist challenge. Earlier this year, investor Deep Track Capital challenged the company’s strategic direction, arguing that it should focus on the products that drove its core value, not diversifying its vaccine portfolio. Deep Track wasn’t able to make any headway in conversations with the company leadership, and eventually launched a proxy fight, nominating four new directors to run against those chosen by the board. While Deep Track’s slate was ultimately unsuccessful, its challenge to the Dynavax leadership underscored valid concerns about the company’s spend rate, capital returns to shareholders, and M&A expertise.

Over three decades, I’ve helped recruit hundreds of board members. I’ve seen the good, the bad, and everything in between. What stands out for me is how many boards are stuck with a sub-optimal makeup for their needs and how slow boards are to move on from ineffective members, even when they correctly diagnose the gap. I’m not saying that it is quick or easy to swap out board members. But it’s important that board chairs start that process sooner rather than later.

CEOs can also hinder the development of the board. They sometimes simply accept (or even opt for) a board relationship that is frictionless. A rubber stamp might be what the CEO wants, but it isn’t what the CEO needs. Change demands work, and it’s vital that CEOs are active members in the board succession process.

Even when a board has the perfect makeup, the culture can be problematic. Whether board members engage with each other constructively determines the body’s overall value. It’s important that boards have ways to encourage the less extroverted to comment. There is sometimes an inverse relationship between how long a board has been place and its effectiveness. Boards, like anything else, can get stale over time.

Beyond that, it goes without saying that with any bad behavior among members, boards need to nip it in the bud quickly.

Given all that, what distinguishes an effective board from an ineffective one? In my experience, there are three key areas:

–Enterprise-Wide Stewardship: Effective board members bring not only deep functional expertise but also the ability to think across the enterprise.

–Proactive Recruitment: Boards recruit new members based on a clear, forward-looking plan rather than reacting to immediate needs.

–Constructive Engagement: Effective boards are hands-on advisors, not passive observers or harsh critics.

How Boards Can Be More Effective

To set themselves up for success, the boards of companies that haven’t yet developed commercially and clinically viable products must take the following steps:

–Elevate Board Succession Planning: Boards should make succession planning a strategic priority rather than an afterthought triggered by immediate vacancies or crises. This means establishing a formal, ongoing process for reviewing the board’s composition; identifying gaps in expertise; and forecasting future requirements based on the company’s direction. Tapping external advisors or governance consultants can help the company avoid insular thinking.

It’s critical to cultivate relationships with potential candidates well before seats open up—so there is a steady pipeline of qualified directors. This approach allows boards to anticipate shifts in market dynamics, technology, or business models, and to refresh their membership accordingly.

–Prioritize Enterprise-Wide Thinking: Boards should seek out individuals with a demonstrated ability to connect the dots across the business and who are known for challenging assumptions when necessary. Candidates with experience in major transformations, enterprise risk management, or leading initiatives that span multiple disciplines bring valuable perspective to the boardroom. Diversity in professional background and industry experience is also crucial. I was looking at the board roster of one company the other day where five of the seven board members are either current or former CEOs. While this may sound like a dream team board, it’s akin to an NBA team sending out a starting lineup of five power forwards. The best boards, like the best teams, have players with clearly defined roles – point guard, shooting guard, forward, center, etc.

Once they are brought on, directors should be oriented toward the company’s overall strategy and value drivers, not just their own specialties. Comprehensive onboarding and ongoing education sessions should focus on emerging trends and enterprise-wide challenges.

–Stay Ahead of Activism: Boards must remain vigilant about the risk of activist investors, but they cannot allow fear to drive decision-making. Staying ahead of activism requires a deft and delicate level of engagement with major shareholders. Some shareholders bring a natural balance of short- and long-term vision, while others can be quick to want change just because things aren’t going well in the moment. One big (and often overlooked) role of the chair is well-organized interaction with these disparate shareholders.

BioMarin Pharmaceutical provides an example of a board that deftly handled a potential activist. In that case, outside shareholder Elliott Investment Management was advocating for more discipline with operating expenses and faster performance improvements. After initial resistance from the leadership, Elliott raised its concerns with the board, which negotiated a resolution that temporarily expanded the board and installed Elliott’s nominees. This coincided with a CEO transition, giving Elliott significant influence over the leadership change and prompting the formation of a new committee to review BioMarin’s operations, capital allocation, and long-term planning. The skillful negotiation led by the board—particularly the lead outside director—helped address shareholder demands and headed off a potentially more disruptive activist scenario.

More often than you might think, boards of mature life sciences companies are failing to live up to their responsibilities, and in the process, they are causing long-term shareholder-value destruction. The solution is to build boards that are proactive and enterprise-minded. Only then will they be true partners with the leadership team and make sure the company doesn’t backslide into irrelevance.