Alignment of Interests. I gave some serious thought last evening about SGLB and why they seem to have difficulty getting to the point of self-sustaining profitability. SGLB has struggled to commercialize a product that would provide a revenue stream to support on-going business operations. As outlined in the Nanalyze piece projections for commercialization have been made in May, August, and November of 2012 and again in May and August of 2013 yet to date shareholders are still waiting. I got to thinking how could this happen repeatedly with no consequences to management (except for a generous bonus for Mark Cola). I believe the answer lies in the composition of the Board of Directors and the fact that with exception of the recent addition of Tom O’Mara within the past year all of the directors are considered inside directors (either officers in the company, previous employees, or close associates of SGLB). The company officers as well as most Board members with the exception of O’Mara are previous employees of Los Alamos Labs employed as senior research scientists. O’Mara is the only “outside director” who is truly independent and has a strong incentive to protect shareholder interests as opposed to management interests. Coming from the Lab environment, where all activities were government funded and the emphasis was on scientific research and not on profitability, I don’t believe the current board of directors has been an adequate independent voice in representing shareholder interests. Scientists are often more interested in peer recognition, the publishing of scientific journals, association and collaboration with like-minded scientists, etc. than they are in bottom line profitability. When I attended the last Board meeting I made an appeal to bring additional independent directors on board, specifically those with a broad business background. O’Mara, who owns his own management consulting firm and has a long and distinguished management background was brought on late last fall. He was an excellent choice , but in my opinion we need about six more Board members just like him to truly make a difference. Until we have a board of directors who is firmly and unwaveringly focused on achieving commercialization and who will hold management accountable for achieving that goal we are going to continue to struggle.
Independent directors who are not involved in the day to day operation of the business but who have backgrounds and experiences that can contribute to the setting of goals and objectives for management will be critical to SGLB’s long term success. Independent directors need to regularly evaluate the performance of management in meeting previously agreed upon goals and milestones and reward or replace management as necessary.
In my humble opinion, while Mark Cola is unquestionably a brilliant scientist, he may not be the best choice to lead the company into profitability. A senior manager with significant management background, and a proven track record in bringing start-ups to profitability would be a better choice. Mark could make a significant contribution as the Chief Scientist or Technology Officer and would allow him to focus on what he does best.
The upcoming Board meeting will be the very best opportunity you will have to make your opinions heard. Independent Board members whose interests are 100% alligned with shareholders will be critical to SGLB’s future success.
