Dealing with dysfunctional boards

According to Doug Matheson, a New Zealand professional director and author of The Complete Guide to Good Governance in Organizations and Companies, “When directors and chairmen express concerns about the effective functioning of their boards, the most common problem raised is the inability of directors to engage with matters before the board as an effective team. In other words: dysfunctional boards.”

The most common causes of board dysfunction, says Matheson, are:
•Disconnected board members who are not committed to a clear common direction.
• Board members not understanding the role and functions of governance.
• A lack of accountability for the performance of the organisation by individual board members and the board collectively.
• Personal agendas that dominate board discussions.
• Board members who do not demonstrate respect for each other and who fail to work as a team.
• Personal distrust among board members.
• An inability by individual board members to accept what is presented to them when it doesn’t agree with their pre-established point of view.
• Factions or sub groups of board members continually opposing each other.
• Board members who practise ‘group think’ – with uninspiring results for the organisation.
• Lack of effective communication among board members.

Individual board members give rise to dysfunctional boards by:
• Dominating the board, personally attacking other board members or being overly aggressive.
• Refusing to compromise.
• Polarising board discussions, creating win-lose alternatives.
• Arguing for decisions based on personal interests and biases, rather than on facts and information before the board and in the interests of the organisation they govern.
• Not contributing toward the common goal or sense of purpose.
• Not demonstrating a sense of commitment to the common sense of purpose.
• Not demonstrating a sense of interdependence with the board’s common goal or sense of purpose.

He believes a board must move quickly to address the causes of dysfunction by considering:
• Training board members on governance in action and how effective boards work. Individual directors may not understand the role of governance and how an effective board should function.
• Formally agreeing the role and function of their board. Board members may not have a common understanding.
• Formally agreeing the common sense of purpose and common goals. The process of discussing and agreeing can itself change
individual board members’ attitudes and develop the board as a team.
• Recommending a board/director code of conduct be included in the constitution together with a requirement for director compliance.
• Agreeing to carry out a regular annual evaluation of the board (self-evaluation or by an independent facilitator). Establish the performance criteria to be the basis of that evaluation. In this way the performance criteria becomes the standard of performance for the board and individual directors.
• Engaging a skilled independent facilitator to assist the board to function in a more effective way.

The above is extracted from an article by Doug Matheson that was published in the New Zealand Journal of Management in October 2005. Download the article, titled Pouring unction on dysfunction – When boards don’t jell, here.

One Response to Dealing with dysfunctional boards

  1. Richard Gudoi Gidagui says:

    Thank you for these highlights that relate to important issues.
    I feel that they correctly pin point the problem with the board of directors. The question is : does this apply to corporate governance in family businesses, publicly listed organisations, private /public partnership organisations, or state owned enterprises . Ths is because many organisational set ups refer to diferent economic environments like being Anglo-saxon processes, Eurocentric corporate governance, Chinise communists state owned, private public listed companies and ownership structures, Japanese type, Australian process which may be similar to Anglo American; the Brazilian corporate governance, African corporate governance for mixed economies and the codes of corporate governance, do they have similar voice? How about one standard of corporate governance? what is the prescripition of corporate governance suitable for all? With due respect to already attepted definitions by professional organisations and academics, still they leave this gaps in defining corporate governance. Besides, it seems there is no universally accepted definition of corporate goverance since it all refers to businesses, clinical,legal,political and environmental. Many more institutions including academics and researchers define corporate governance in their own way that suits their organisational set ups. Therefore, definitions would go with an application of a certain theory like agency theory Meckling and Jensen(1976),the corporate governance theorist and researchers. I’m yet to see deeper empirical research on corporate governance as one basket simplified for all sectors be it military,clinical,business,political,environmental etc that would form a cohesive ground for a distinguished study in corporate governance. The oulines made above would be developed into a hypothesis for research while a defitinitive definition of corporate governance is sought. Thank you and God Bless.
    For God and My Country!
    Richard Gudoi MSc.Audit(UK),MBA,CIA,CFE,CFSA

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