Still Simmering: The Two-Boss Brew at CIRM

(This correction was posted 6/23/06:David Serrano-Sewell, CIRM Oversight Committee member, corrected us on the "Two-Boss Brew" item June 20.

(Here is what Serrano-Sewell said,

"The ICOC approved (13-5 vote) the 'internal goverance policy.' As you note, the amended policy granted to the Chair the authority to concur with the hiring of certain CIRM staff, Senior Officers. The proposed policy was amended to limit the Chair's concurrence authority to two Senior Officers in legal and communications. Please note, the adopted policy does not grant to the Chair the authority to fire or concur in the firing of those Senior Officers.


("Arguably, the policy is confusing. The President could hire a Senior Officer with the Chair's concurrence and then fire that same Senior Officer without the (Chair's) concurrence."

We thank Serrano-Sewell for heads up. We appreciate all such messages and try to correct mistakes promptly.)

For Robert Klein, chair of the California stem cell agency, it was a "watershed issue." For Zach Hall, president of the agency, it was a matter of no comment.

The issue was the "two boss" conundrum at CIRM. One member of the Oversight Committee, Jeff Sheehy, said, "This is the sloppiest thing I ever heard of."

The issue surfaced earlier this year over seeming picayune matters (see "dualing execs"). But it has resurfaced again and does not seem likely to go away.

The latest forum was this month's meeting of the Oversight Committee, which oversees CIRM, hires the president and elects the chair. Both have major overlapping responsibilities by law but the conflict has boiled down nominally to to such things as travel, office assignments and concurrence on hiring senior staff.

It was the latter that raised fresh questions about the future dynamics of CIRM. While the agency will administer $3 billion in funding, it is a small organization, now only about 20 employes. By law, it is limited to 50, which means that two strong executives can rub against each other with great regularity. Hall and Klein are two such men.

During the debate over CIRM's internal governance policy, terms like "crazy" and "Rube Goldberg" policy were bandied about, according to the transcript.

Sheehy was perhaps the most vociferous in confronting the situation. At one point, he said,

"We basically set up the situation where someone is going to have two bosses with equal authority....I work for people, so I kind of have a sense of what this means. and this is insane. I couldn't work in that environment. and I don't know why we would want to set up that structure" which he called "completely, totally untenable."

Sheehy was among those concerned about the implications for CIRM when it comes time to find replacements for Hall or Klein or, for that matter, finding top executives who are comfortable serving two masters – not to mention the 29-members of the Oversight Committee.

Sheehy said,

"The more we muddy these (management) lines, the more dangerous it is. We're making compromises. Even having to have these things negotiated out must make the job of the president extremely difficult. And I, frankly, think we should have taken care of this a long time ago. But if you guys (oversight committee members) want to go point by point over the next God knows how many years with how many presidents and fight over office space, travel allowances, hiring of staff at this level, I think we're not going to be able to do the business that we were put here to do."

Ed Penhoet, vice chair of the Oversight Committee, and others stood behind the bifurcated management. Penhoet said Klein was really an "executive chair." (Penhoet did not mention court testimony last winter by Klein, who operates his own financial firm, that he does not consider himself a state employee because he does not accept a salary.)

Others noted that the language of Prop. 71 compels a certain duality. And still others pointed to organizations, such as academic health institutions, that have executives with overlapping responsibilities.

David Baltimore, an Oversight Committee member and president of CalTech, said,

"You can't analyze this situation as you would any other organization because no one would ever set up an organization that has split authority like this except Bob, I'm afraid, because that's not an efficient or effective way to run an organization, to have two heads of two different elements that have to interact. The notion of having a CEO is that the CEO has complete control of the organization. We're not going to get there because we're not going to amend Prop. 71."

Hall's only comment during the discussion was "I have no comment."

Klein said concurrence on hiring senior staff was "critical" to his position. He later agreed to limit concurrence on the hiring of the top executives for communications and legal matters. He resisted suggestions that concurrence be changed to consultation.

"Otherwise I'm not going to feel like I can perform for this board, whether it's a legal function, the financial function, communications areas. I think it's a watershed issue."

Ultimately the Oversight Committee voted 13-5 to give Klein concurrence on the hiring of the two top legal and communications executives. That also gives him concurrence rights on firing them. The committee also, on a voice vote with Sheehy the only audible no, approved giving Hall office assignment responsibilities. On travel, by the same vote, Klein will only need approval of travel from Hall when it exceeds the budget approved by the Oversight Committee for Klein's office.

Early in 2005, the stem cell agency hired Hall, then 67 and a well-respected scientist and skilled administrator, as its interim president for one year. Ultimately he was hired as permanent president following an international search that cost $205,289. We have long suspected that the search ran into difficulties because the top candidates detected the underlying problems with CIRM's two-boss structure. Hall meanwhile was getting a close look at CIRM and Klein and probably thought the issues could be overcome. And CIRM was engaged in a truly remarkable, once-in-a-lifetime endeavor that was hard for Hall to pass up as he neared retirement. Of course, that scenario may be totally wrong but it seems to be reasonable speculation.

Discussions of the top management issues at CIRM preceded the disclosure this month that Klein was not wearing just one executive hat. He is also head of an advocacy group called Americans for Stem Cell Therapies and Cures. As its head, he sent out national emails excoriating a top California legislator as an "ongoing threat" to CIRM for carrying legislation to tighten oversight of the agency. The language in the letter went beyond the Oversight Committee's official position. CIRM said it had no comment on the Klein letter, saying he did it on his own time.

John M. Simpson, stem cell project director for the Foundation for Taxpayer and Consumers Rights of Santa Monica, Ca., told the California Stem Cell Report,

"Klein needs to decide whether he wants to be ICOC chairman or chairman of his advocacy group. I don't see how he can do justice to both effectively."