I recently reported on a stalled attempt to build a utopia for entrepreneurs and celebrities on Utah’s Powder Mountain, a ski hill an hour from Salt Lake City. The story—which appears in this month’s print issue of Fortune—had the ingredients of a dramatic business tale: billionaires and star investors, stunning real estate, local backlash, lawyers trading accusations about elitism and money laundering, and an apparent battle of egos between founders.
And nestled in this yarn was an age-old management lesson: Every company needs a board.
What happened?
Summit Village was to be an eco-friendly “intentional community” for tech-centric, socially conscious entrepreneurs, with hotels, condos, restaurants, a science center, greenhouses, curated retailers, and more. There were also to be 500 elegant, ski-accessible homes built into the mountainside.
Today, however, the project is stalled, and changing business strategies. Over 90% of the promised houses have yet to be built, and the village exists only as a concept. There are no hotels, full-service restaurants, or shops on the mountain, let alone the slew of promised amenities. The reasons for the delays are myriad, including lawsuits over funding and complaints from the local Mormon community, but several sources said the fundamental problem was organizational dysfunction and friction between the owners who had paired up on the mega project—none of them with a lick of experience as real estate developers or ski resort operators.
And as I wrote in the piece, the project went several years after the 2013 purchase without a board, which Elliott Bisnow, a Summit Series founder, regretted:
Public filings required under the terms of the bond agreement with the county show that the Summit team faced a $2.2 million cash-flow shortfall by 2017 and was hemorrhaging money, paying out an estimated $14 million in payroll in 2016 and 2017 combined. The group decided to add a professional board.
When I asked Bisnow what he would have done differently on Powder Mountain, he admitted: “I wish we’d put a board together even sooner.”
Why don’t more startups embrace boards early?
I looked at this issue when Sam Bankman-Fried’s FTX crypto exchange collapsed in November. It had emerged that a prominent potential investor had suggested FTX add a board but the company reportedly replied with an unambiguous message: “Go ‘f-ck yourself.”
At the time, Peter Gleason, head of the National Association of Corporate Directors (NACD), told me that CEOs who can’t see the benefit of having a real board with independent directors puzzled him: “How many jobs in your career do you have 10 or 12 advisors to help you succeed?” he asked.
Outsider board members can provide regulatory and financial oversight, bring fresh perspectives, improve decision-making, and, crucially, offer a clear-eyed view of business risks. Independent directors can also play referee, soothing relationships when market conditions drive stress and disagreements.
The governance experts at PwC’s Governance Insights Center have looked at the reasons many private firms resist adding outside board members and concluded that many leaders fear the way it may slow down decision-making and create expectations of more formalities and bureaucracy. CEOs and founders may see meeting-planning and recording as unnecessary hassles. “These activities take time,” the consultants at PwC concede. Even so, “[t]his investment typically pays off, and in some situations can come in handy.”
At Powder, the current board has “a much more elevated set of skills than the Summit founders, whether it’s around finance or real estate development,” Bisnow told me.
Roni Yehuda, a diamond industry executive and Powder Mountain homeowner who last year became chair of the board, said he believes in a culture of transparency and diplomacy—a promising sign for the group’s future.
Lila MacLellan
lila.maclellan@fortune.com
@lilamaclellan
