Corporate Governance & Director Skills

Corporate Governance & Director Skills

Larry has held numerous corporate directorships in publicly-traded and privately-owned corporations engaged in such diverse industries as dairy processing, financial services, franchising and fast food (Custom Creamery, Orange Julius and Crescott, Inc.– all NASDAQ), mortgage banking, publishing, software and information technology, oil & gas (Comstock Resources, Inc., NYSE: CRK), and others. He served as Chairman of the Committee of Independent Directors in the sale of Orange Julius, Inc. to International Dairy Queen, now owned by Warren Buffett’s Berkshire Hathaway, Inc.

Selected other directorships include OZMA Corporation (Chairman); First Midwest Mortgage Corporation (Chairman); First Chesapeake Mortgage, Inc. (Vice Chairman); HomeLenders of America, Inc. (Vice Chairman); AmeriMac Corporation (Vice Chairman, sold to CrossLand Capital, at the time the largest U.S. savings institution east of the Mississippi River); IntelCap, Inc. (Chairman); and currently Cogent Information Analytics, Inc. (Chairman).

Recognized by the National Association of Corporate Directors for his many contributions to corporate governance, he served as President of the organization’s New York and Metropolitan Baltimore/Washington, DC chapters.

Accounting and Compliance Audits

He has served on several board audit committees of SEC-reporting companies, taught accounting and finance at several colleges and universities, and published extensively on the topics of audit committee functions and corporate finance. Early in his career, he routinely coordinated mortgage industry policy regarding regulatory compliance audits (HUD, FNMA, FHLMC, etc) and attended meetings of the Financial Accounting Standards Board’s (“FASB”) Emerging Issues Task Force while employed at the Mortgage Bankers Association of America. (While completing all coursework necessary to sit for the CPA exam), Larry’s move to New York to work as an investment banker at Donaldson, Lufkin & Jenrette precluded his sitting for the CPA exam.

Change Agent

Some situations just call for dramatic change. Very often the perceived unrealized value is recognized by an outsider such as Carl Icahn (Icahn Report) who finds a company where he believes change represents value. Typically this is a company that has lost credibility among shareholders, is doing a poor job of communicating enterprise value to Wall Street, or for many reasons is just a lackluster performer.

A serial entrepreneur, Larry is responsible for over a dozen start-ups which have resulted in the creation of hundreds of new jobs. He is a founding director of Comstock Tunnel & Drainage Co. (now Comstock Resources, Inc. NYSE: CRK), beginning with a negative net worth of $32,000 (in 1985), and having a current market cap approximating $2 billion.

Leadership

He demonstrates a lifelong pattern of leadership: class president and service-club president in high school, student government president in College, energy law association president during law school. He has been Chairman, Vice Chairman or CEO of about a dozen corporate entities. He has demonstrated leadership by serving as president of the Dallas Internet Society and as president of the New York and Metropolitan Baltimore/Washington, DC chapters of the National Association of Corporate Directors.

Legal and Securities Regulatory Compliance

Larry’s first drafting of an offering prospectus was in 1979, when he served as Chairman of OZMA Corporation, a Washington, DC-based financial services entity operating in the mortgage banking industry. During the following thirty years, he has spent thousands of hours involved in the drafting of various corporate, legal, and securities disclosure documents for many of the various entities he has been associated with or for investment banking clients.

Law school afforded him additional skills in the areas of agency and partnership, corporations, mergers and acquisitions, oil and gas, and securities regulations. He is author of numerous articles on the topics of law, finance and corporate governance.

Securities Analysis

Having trained in business school as a securities analyst, he subsequently worked as an investment banker at Donaldson, Lufkin & Jenrette in New York. As a result, he understands investment valuation and how various functions in the capital formation process come together to allow for the efficient raising of necessary investment capital.

Early in his career, having completed all course requirements necessary for the CPA, he worked at Disclosure, Inc. as a financial analyst under a contract with the U.S. Securities and Exchange Commission, conducting financial analysis and abstracting and indexing certain financial statements and other disclosure items (Forms 10-K, 8-K, 10-Q, etc.) filed with the Securities and Exchange Commission.

Strategic Planning

Maybe the most difficult talent to spot in director candidates (you can’t tell by looking) is the eclectic knack for “that vision thing”. Experience gained from a strategic planning process may prove beneficial toward assisting your board in development of a culture of strategic planning where decisions are made within a framework of constantly challenging your fundamental assumptions about where you intend to be five years from now and how you intend to get there. Strategic planning seems to be so fundamental to the success of any enterprise and yet universally acknowledged to receive inadequate attention by many boards.

It was thirty years ago that he first became fascinated by the wisdom of Texas Instruments to have a standing Strategic Planning committee of the board. Texas Instruments at that time was very homogeneous, with almost every member having an engineering background. The TI Strategic Planning Committee was chaired by attorney Bryan Smith, Chancellor of the Texas University System and veteran director of numerous major boards such as Merrill Lynch and Texas Instruments, just to name a few. Conversations with Bryan Smith motivated him to write FOCUS ON THE FUTURE: THE STRATEGIC PLANNING COMMITTEE, National Association of Corporate Directors, Washington, Director’s Monthly, Vol. 4, No. 8, Sept. 1980 (NACD).

It appears universally agreed upon that nothing is more fundamental to the success of any enterprise than having a clearly communicated shared vision of where the corporation is headed, before there can be any chance of achieving these goals. Yet most boards have no “system” in place to nurture continuous thinking and decision making over-time or provide a systematized feedback loop as to progress against strategic goals (indeed to systematically assess whether the strategic assumptions remain sound, or need modification). This paradox is commonly restated by the axiom “if you don’t know where you are going, almost any road will take you there”. My advocating the presence of a standing strategic planning committee at the board level thirty years ago has obviously been a minority view since there has subsequently been an astonishing absence of such committees to be found among the corporate landscape.

However, “I’m going to stick with my view that in the long-term, absolutely nothing is more important than visionary thinking”, says Trautman. Constantly questioning assumptions about where we think we’re headed five years from now seems a fundamental foundation for ongoing decision making. Getting lost in the weeds of regulatory disclosure and making sure the accounting is correct does not go to the heart of anticipating the needs of your customer five years from now. Nor does near-term tunnel vision provide adequate resources so that you profitably meet the future needs of your customer before they are met by your competition.

Value and Job Creation

One of the best indicators of the likelihood of future success is the extent to which someone has accomplished their goals in the past. This may often be a sub set of “the vision thing”. Larry remains most proud of being able to create hundreds of jobs through his entrepreneurship. Small business is the primary economic engine for job creation. He is credited with perhaps a dozen start-ups.

Workout and Turnaround Expertise

Mr. Trautman has legal training in bankruptcy and corporate reorganization. Even for a company that shows no indication of ever being in a situation of needing bankruptcy advice, these skills in a board member may prove valuable in an instant where your company is acquiring assets or stock in a turnaround or bankruptcy setting. The lessons learned from these experiences might bring valuable insight to board deliberations. Should the unthinkable happen and bankruptcy considerations face you (or a decision to not seek bankruptcy protection), these experiences are valuable to any board.