Jim Clark quits as Shutterfly Chairman

Jim Clark this week quit as Chairman and as a director of Shutterfly (NASDAQ:SFLY), a photo-finishing business in which he was the original investor and Chair. Clark is a well-known Silicon Valley phenomenon - as a founder of Silicon Graphics, Netscape, myCFO, Healtheon and Shutterfly and as a total maniac (as anyone who's read the fantastic Michael Lewis book The New New Thing would well know).

His letter to the company upon his resignation is worth reproducing:

Dear Jeff,

Please forward this to the other board members, as I do not have their addresses with me. After considerable thought over the holidays, I’ve decided effective today, January 1, 2007, to resign from the Board of Directors of Shutterfly. My reasons are twofold: 1) as a technologist, I feel there is little that I can offer to guide what has become a manufacturing company, and 2) because of the constraints imposed by Sarbanes-Oxley on my having any significant role on the board.

As I understand it, Sarbox dictates that I not Chair any committee due to the size of my holdings, not be on the compensation committee because of the loan I once made to the company, not be on the governance committee, and it even dictates that some other board member must carry out the perfunctory duties of the Chairman. What’s left is liability and constraints on stock transactions, neither of which excite me.

It seems pretty clear to me that lawmakers have gone too far in considering a large shareholder to be inappropriate in the roles, but it is equally clear that I have no ability to change this in the near term. My only solution is to become an outsider. I wish to be treated as such effective immediately.

I want to congratulate you and the team for what you have accomplished. You are doing a great job in a very competitive market, and I have no doubt that Shutterfly will continue to do well under your leadership. I will continue to recommend your service to all. Sincerely,
Jim Clark
Chairman of the Board
Shutterfly

Clark makes some good points; corporate governance reforms have been enacted to prevent past abuses, but by doing so they have restricted the roles available to capable people with a real personal stake in the success of the company.

In Australia corporate governance reforms have taken a different form, but nevertheless may - arguably - have a similar effect of reducing innovation and the role of entrepeneurs in corporate life while further promoting the 'old-boy' club of existing directors and professional managers.

Although entrepreneurs are often, by nature, bad with details and quick to circumvent procedure [and this is clearly very bad in a corporate context] their skills, energy and inability to accept failure are the lifeblood of business creativity and innovation and should therefore be encouraged. Entrepreneurship is fundamental to the future of capitalism and rule which prevent substantial shareholders from engaging in Board roles have a downside as well as an upside - an increase in board independence is not automatically to be cheered... it must be weighed against what is being lost.