EDC board to take more active role as <br>38 Studios deal demands accountability

When the time came for a decision on whether the state should guarantee a $75 million loan for 38 Studios, it is no coincidence that Keith W. Stokes, executive director of the R.I. Economic Development Corporation, had the EDC board of directors decide the outcome in a high-profile public meeting, attended by at least a dozen media representatives from Providence and Boston.
Stokes has every intention of using the EDC board of directors far more than his recent predecessors. In fact, he intends to give the 12 new members – all of whom were appointed earlier this year – quite a workout, assigning them to subcommittees he is now in the process of forming – a first for EDC in recent times – and pledging to rely often on the advice of what he called “the state’s best and brightest business leaders.”
“This is going to be a whole new level of board participation and leadership that we haven’t had before,” Stokes said. He wants the EDC board, whose members are not compensated, to be actively involved in policymaking and other major decisions, as well as in the evaluation of ongoing EDC programs. An effective board of directors, he suggested, will eliminate politics from economic-development decisions.
“We’re taking the government piece right out of it,” he said.
Stokes, former president of the Newport County Chamber of Commerce, was an EDC board member himself for 15 years, serving during the terms of three governors – Bruce Sundlun, Lincoln C. Almond and now Gov. Donald L. Carcieri. In the past, he told Providence Business News, “We had individual board members who were more engaged than others, but we really didn’t have a board that was actively involved in managing the corporation. Much of it was really centered on the governor’s office.”
Compared to an unruly “basket of frogs” by a review panel last year, the previous EDC board did not play any role in judging the success of EDC programs or even fashioning a mechanism that could be used to measure programs’ effectiveness – or lack thereof. “We did not,” Stokes said. “I can tell you that from a firsthand basis.” That situation is about to change.
“As an example, we have a small-business loan fund,” Stokes said. “How effective has it been? Does it need to be recapitalized? [Providence Business News] did the stories [in June] on the fact that [the EDC] was not accounting properly for its return on investment. So we’re going to create a board subcommittee, hopefully, on evaluation and product development.”
(Editor’s note: In a two-part series published June 14 and June 21, PBN reported extensively on the mixed results of a small-business loan fund and a related micro-loan fund run by the EDC. Though the funds’ primary objective has been to create jobs, the EDC to date has not had a system to track and tabulate the funds’ performance in that area.)
Stokes has presented to the board for review a senior staff realignment plan for the EDC and a proposed subcommittee structure. The board is expected to act on these proposals at its next meeting Aug. 23, with implementation in the following three to four months.
A member of the EDC board of directors would chair each of the following subcommittees, according to Stokes’ plan: finance; lending/capital programs and services; public relations/government affairs; evaluation/product development; business attraction; small-business development.
“The subcommittees are going to help – not only evaluate and monitor the effectiveness of EDC services and products – but also give us an ability to provide further board expertise in guiding these decisions,” Stokes said. Members of the subcommittees would be local business representatives, thus expanding the EDC’s reach to more companies and concerns.
Board member Paul J. Choquette Jr., chairman of Gilbane Inc. for approximately 15 years and currently vice chairman of the Providence firm, said he expects a push for better tools to measure the programs’ effectiveness.
“This is a great board,” he said. “Everyone speaks their mind. They come from a great variety of backgrounds and I think the public will be well-served by this board.”
Choquette said Stokes is “rabid on the subject of data, making decisions on data, and that means we need to have good metrics. So I think you’re going to see some important developments in that area.” Choquette said he would like to see salaries in general raised in the state.
As a member of the former Economic Policy Council, “one of the things we always talked about was to be more like Boston, to get our average job salary closer to Boston,” he said.
Board member Karl Wadensten, president of Vibco Inc., a manufacturer of industrial vibrators in Richmond, was the sole vote against the 38 Studios deal, voting against it because he felt the arrangement is too risky. But now that the vote has been taken and the direction set, he said he will do all he can to make 38 Studios successful, because he does not want to see the company fail.
The new board was actively involved in the deal with 38 Studios. The agreement attempts to build in some protections for the state should the video game developer not make good on the 458 jobs it promises to bring to Rhode Island by 2012, including a penalty fee to the EDC of $7,500 per year for each job that fails to materialize.
Wadensten said he has talked to previous EDC board members and “they’re all kind of excited about the new track and the way we’re going, because they felt a little bit powerless to effect change. It was sad to hear that.” Previous boards did good work, he added, but “it’s time to get a board to implement change, to help facilitate some change.”
Noting that he has been on numerous boards, Wadensten said “one of the best board meetings” he ever attended took place earlier this year, when the EDC board took a bus tour of the Quonset Point industrial area and visited Electric Boat. He would like to see the board make more visits like this.
“Sitting in a boardroom making decisions is very monochromatic,” Wadensten said. “Yes, it has its time and place, but more of the time and place should be out in the field, meeting with those citizens of Rhode Island that rely on EDC to help them with their business, to see what their constraints [and] personal challenges are.” •

R.I. Economic Development Corporation board of directors:
• Chairman: Gov. Donald L. Carcieri, ex officio nonvoting member
• Vice Chairman: Alfred Verrecchia, chairman of the board, Hasbro Inc.
Hasbro Inc. has more than 1,000 employees in Rhode Island. Four-year term expires 2014.
Members
• Dr. Timothy Babineau, president and CEO of Rhode Island Hospital and Miriam Hospital
The Providence hospitals are the two largest in the state with 966 licensed beds, combined. The hospitals employ 7,840 people combined. Two-year term expires 2012.
• Paul Choquette, vice chairman, Gilbane Inc.
The Providence-based construction management and development firm has 503 employees in Rhode Island. One-year term expires 2011.
• Donna C. Cupelo, region president, New England, Verizon Communications
Based in New York, Verizon has 1,400 employees in the state. One-year term expires 2011.
• David Dooley, president, University of Rhode Island
He was named president of URI in May 2009. Approximately 1,816 people work at the university, including 716 full-time faculty members. Three-year term expires 2013.
• Stephen Lane, president, Ximedica LLC
Ximedica has more than 100 employees at its 80,000-square-foot R & D and manufacturing center in Providence. Four-year term expires 2014.
• George Nee, president, AFL-CIO of Rhode Island
Nee was elected in September 2009 as president of the state’s largest labor organization, with 80,000 members belonging to more than 250 local unions. Two-year term expires 2012.
• James “Lynn” Singleton, president, Providence Performing Arts Center
He also oversees the for-profit Professional Facilities Management. The company provides management services for PPAC, which has 34 full-time employees, and the Veterans Memorial Auditorium in Providence. Three-year term expires 2013.
• Cheryl W. Snead, president and CEO of Banneker Industries Inc.
Banneker Industries is a supply-chain management company headquartered in North Smithfield. It employs approximately 33 in the state. Three-year term expires 2013.
• Shivan Subramaniam, chairman and CEO of FM Global
Headquartered in Johnston, FM Global is a commercial property insurer with approximately 800 local employees. One-year term expires 2011.
• Daniel J. Sullivan, president and CEO of Collette Vacations
Collette is one of the top private companies in Rhode Island, with 450 employees and $175.9 million in revenue in 2007. Two-year term expires 2012.
• Karl Wadensten, president, VIBCO
Located in Richmond, VIBCO manufactures industrial vibrators and employs about 75 people locally. Four-year term expires 2014.

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1 COMMENT

  1. What are the protections for the state in the event that 38 Studios goes belly-up when in fact Schilling has a non-recourse loan guaranty from EDC? This deal negotiated by the best and brightest on the EDC Board is the most ill-conceived endorsement and every knowledgeable lender, economic development practioner, and those skilled in finance recognize it. The exception of course is the PBN editorial board who most people know have to cozy a relationship with the EDC and frequently co-sponsor events together.