The Different Reasons Your Board Is Dysfunctional
Corporate Board Member published a bylined article, “The Different Reasons Your Board Is Dysfunctional,” authored by Russell Reynold Associates Consultant Anthony Goodman. He addresses the many reasons boards may be dysfunctional and notes the importance of clear roles and succession planning. The article is excerpted below.
For over 15 years, I have sat in meetings with board directors for companies great and small, public and private, for profit, nonprofit and, too often, not enough profit. Each of these directors described the challenges their board were facing, but to paraphrase Tolstoy’s Anna Karenina, “While all happy boards are alike; each unhappy board is unhappy in its own way.”
When we are approached to advise boards that are dysfunctional, it may revolve around a relatively easily fixed matter such as a lack of information flowing to the board to enable them to make smarter decisions. However, there are sometimes much bigger issues at stake. The common reasons a board is dysfunctional include one or more of the following:
A failure to address succession planning
Reluctance to discuss strategy or risk or both
An inability to deal with disruptive behavior by a director
Board and committee structure that creates confusion or leaves issues uncovered
A failure to refresh board composition resulting in investor concerns
The best way to tell if a board has become dysfunctional is to ask those directly involved, namely directors and management that work most closely with the board (CFO, COO, CHRO, GC etc). In other words, the board itself needs to run an effective and rigorous board evaluation that creates meaningful change, rather than a check-the-box compliance activity to meet listing requirements.
While most boards go through the semblance of an evaluation process, the outcomes seldom move the needle in terms of change. Very few boards are bold enough to ask management what they think or invite a third party to take a more objective look. This despite the fact that the largest asset managers and public employee retirement funds are urging boards to conduct a more objective external evaluation every two to three years as is the case in a number of markets like the UK and France.
To read the full article, click here.