The culture of a Board is as important as the skills, experience and knowledge of its members. The directors should have the behavioural skills to function and work effectively together as a collegial team.
A number of boards often have overheated conversations. What are the options in fixing this potential damaging issue when personalities clash.
An all-out battle might not be that common in the average New Zealand boardroom, but in the rare event that it does happen, the ramifications can be disastrous if it is not handled well.
The consensus among directors and chairmen is that boardroom debate should be actively encouraged to ensure healthy governance. It is when it boils over from healthy discussion to an overheated and out-of-control dispute that problems arise.
Causes of heated boardroom debates can include:
• Lack of communication
• Loss of confidence in the CEO or chairman
• Emotions and misunderstandings
• Uncertainty or a period of change
• Feeling unheard or misunderstood
• Reputation concerns
• A weak chairman
How, and how effectively, these can be dealt with is going to vary enormously from board to board with major influences being the nature of the company. Examples include public, private, shareholder representation on the board, number of independent directors, personalities, size of the company, open or very controlling approach to the board from the CEO and/or Chairman, CEO capabilities.
A former global senior executive felt that "In difficult situations it is important directors remember who they are representing and appointed by - the shareholders, and that they have to act in the best interests of the company. They are not there to impose their own agenda, line their own pockets or undermine proper governance. Words that are easy to write but often ignored in practice!"
"It is important to recognise that all boards are different and what might have worked in one situation may not work in another. Available resources - not just money, director capabilities and experience and time for instance will all affect how issues can be resolved. One size does not fit all!"
The role of the Chairman can often be crucial in how heated discussions can be prevented from turning into major conflicts. A chairman who is prepared to listen, even outside the formal board meetings, to the views of other directors and who can establish a good working and personal relationship with the CEO can be vital in minimising conflict.
John Brabazon, investment banker and director at Auckland International Airport, says that "some degree of rigorous debate is inevitable in board rooms and should be encouraged. The last thing any board wants is for all directors to be clones of each other. However, this needs to be managed by the Chair so it doesn't lead to conflict. A board should be able to disagree without being disagreeable."
The Chair should have a one-on-one meeting with all directors at least annually to review that directors performance and provide feedback. Some directors for example may need mentoring due to their inexperience and/or further targeted education to fully contribute at board level.
John adds "If you cannot persuade your board colleagues that your plan is the best alternative, chances are it is not and the consensus should rule."
Emotions and a lack of communication are key ingredients that contribute to discussions getting out of control. "I think very often, at a very general level, people just don't know how to communicate with each other." Often, there isn't recognition of the emotional issues that can occur in a boardroom.
Recently, we have seen examples where a loss of confidence in the CEO or the chairman is one instance where people feel threatened, emotions run high and discussions don't always follow a rational path.
In the end, a good leader will be able to navigate through the emotions and steer the board to consensus. And, dissenting directors on a healthy board, with the best interests of the company at hand, will be more likely to change their positions to ensure the best outcome.