Khosla leaves Board of Juniper Networks
By siliconindia   |   Tuesday, 13 April 2004, 19:30 IST   |    13 Comments
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CALIFORNIA: Vinod Khosla, one of the Bay Area's premier venture capitalists, said Monday that onerous securities regulations had pushed him to step down as a board member of Juniper Networks. He said a host of recent regulations -- introduced by the Securities and Exchange Commission, Nasdaq and the Sarbanes-Oxley Act of 2002 -- are important but have combined to create burdens on board members, with unintended consequences. Khosla's move raises the question of whether Silicon Valley will see a wave of other venture capitalists making similar moves. Reactions by other venture capitalists to increased regulations are mixed. Some, such as Promod Haque, a venture capitalist at Norwest Venture Partners, believe Khosla's move is being joined by others. "It's so damned time-consuming," Haque said of the new regulations. "All of us have been reducing our board positions in some form." Haque, who serves on the boards of Extreme Networks and SPSS, says many venture capitalists are asking themselves if they could put their time to better use. He said start-ups are actively looking to hire outside directors to help venture capitalists transition out of the board positions more quickly. (Venture capitalists generally take board positions at young companies to help guide and keep track of their investments.) Last month, San Francisco's Gap, the largest U.S clothing chain, said Charles Schwab also has decided to step down from its board after 18 years because of time commitments. Still, venture capitalists such as David Liddle and Steve Kraus, both of US Venture Partners, say they are happy to serve on public boards -- partly because increased sensitivity to securities laws by executive teams, accountants and lawyers have made it safer to serve. So what's Khosla's beef? Khosla argues it has become difficult to recruit board members, because the pool of qualified people willing to serve is smaller. It's also likely that the rules will discourage people who really know the business from serving, he said, filling boards with "overseers who do process" instead. "In that sense, you can say that some of the regulation is having the reverse effect of what it intended to do," he said. He said he found himself increasingly pulled into policing and monitoring companies -- an important role, but one that took time away from consulting and assisting entrepreneurs and their executive teams, which are the things he says he enjoys. Khosla gave the example of wanting to sit down with a group of product managers at a company to discuss strategy. Such meetings are frowned upon by new standards that seek to avoid the perception that board members are influencing decisions at the operating level. "Under the current regime, it's getting harder and harder to be anything but just a policeman," he said. He said he would rather forgo taking board positions and continue to advise companies, and will do so at Juniper as long as Chief Executive Scott Kriens requests it. Khosla also talked about regulations making board members liable for company reports. "It pains me, every time I fill out one of these company forms. It sits in my bag for a month," Khosla said. He and other board members can never be certain they have the full information needed to be absolutely sure, he said. "It's taking a risk." Khosla, a partner at Kleiner Perkins Caufield & Byers, hit grand slams during the Internet boom by backing networking ventures such as Juniper, now a public company, and Cerent and Siara Systems, which in 1999 were sold for $11.2 billion. He was one of the four founders of Sun Microsystems. In recent years, Khosla has stepped down from the boards of two other public companies, Corio and Concentric. He has one remaining board position, at telecommunications giant Qwest. Khosla wouldn't comment Monday on his plans for stepping down at that company. However, Khosla stated previously that he wants to remain until the company has cleared up some of the lawsuits that have targeted several executives there. Khosla has not been implicated in any of those cases. He said his move to step down from Juniper's board is independent from his decision, made earlier this year, to ratchet down his pace at Kleiner Perkins and spend more time with his children and on philanthropy. Currently, as part of his philanthropy efforts, Khosla is researching ways to support microcredit initiatives for poor regions.

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