Diane Creel knows firsthand what it's like to serve on a board where public discussions are not encouraged. A few years ago, she was asked by investors to join the board of directors of a company facing a financial crisis. She agreed, hoping to help bring the company back to black.
The rest of the story is an unfortunate lesson that can happen when the board is seen by CEOs, particularly the CEOs who are chairing them. Creel quickly learned that no opposition was encouraged and real conversations about risk and strategy were rare. When she raises concerns, they will be immediately rejected and the rest of the board will simply move on to the next topic.
“It was a doll committee,” says Creel, a former CEO who has served on various boards including TimkenSteel, Goodrich and Allegheny Technologies Incorporated (ATI). Eventually, she resigned. “I couldn't stay.”
Her experience is not unique. A recent PWC Board survey of over 700 directors found that over half of board members do not comfortably express their dissent in the boardroom. However, when meeting rooms operate as echo chambers, the risks to the company and its shareholders are enormous.
Open discussion is important to avoid group thinking, identify risks, and improve strategic decision-making. “If the board is not going to consider different perspectives in good faith, it can be very dangerous,” warns Richfields, who implements the effectiveness practice of the board at Russell Reynolds. “The decisions considered often bring significant dollars and other consequences behind it. Getting it wrong can really be damaging.”
Paul Denicola, principal of the PWC's Governance Insights Centre, can unintentionally suppress diverse opinions, even the most intentional committees. “If you put eight or ten or twelve people together in a room, there is all sorts of inherent behavioral bias that makes individual directors bite their tongues on a particular topic or aren't used to vocalizing views.”
We checked in with several directors and governance experts on some advice on how the committee can build a culture where objections are welcome rather than being silent.
1. The chair needs to be set tone. “It really starts,” says John Driver, chairman and CEO of Lynx Technology and executive at Vital Energy and Broadway Financial. “They can have a huge impact in the boardroom.”
Susan Fleming, director of RLI and Virtus Investment Partners, agrees that it is the job of board leaders to hear all the voices and actively investigate for alternative views. “That's the key issue and if you're thinking, as the chairman or lead director, 'This isn't an easy decision,' then it's like everyone's nodding a bit and moving on together. [the question]: Have you considered the risk? Did we think of the other side of this? ”
One tool is to pre-appoint a demonic advocate who knows that you are expected to challenge an idea. “It's important not to be the same person every time,” he adds. “We don't want that person to become known like a chronic opponent.”
Another tactic is to rearrange the discussion flow. “The biases of authority are real,” explains Denicola. “If the longest decorated director or the expert on a designated subject speaks first, others may hesitate to challenge that perspective. Instead, try talking to the latest director first and bringing a fresh view.”
2. We investigate individual directors. Most public committees do regular full-board evaluations, but most people do not yet do one-on-one interviews. This makes it easier for the supervisor to openly discuss cultural dynamics. “The board is profiting when people have a safe place to raise concerns and stock things that are working overall and that could work in the future,” Fields says.
And once you get the results of your rating, don't stick it on your drawers, Denikola says. “An assessment is not effective unless action plans and follow-ups occur.”
The best boards even begin to discuss director openness before discussing it, says Denicola. “listen [candidates] Questions of behavior to understand: Is this someone who makes them comfortable to express their dissent? “And asked about their past experiences and said, “Please tell me about the time when you had to convey a difficult message. How did you do it? Did you have any problems? How did you overcome it?”
Fields recommends that you set up “engagement rules” to recruit new directors. “It should be clear: “This board is looking for a supervisor who is willing to challenge properly, bring in independent thinking and do courageous things, even if it is difficult.”
3. Creates opportunities for informal, candid discussion. Sometimes directors who hesitate to express their opposition in the boardroom will do so at such an informal gathering. And that applies equally to internal supervision. Ken Gilbert, director of Capital Holdings at Wendy's and Iantes, says his board will invite CEOs to dinner for an open and informal dialogue on challenges and opportunities. “Sometimes, these dinners give the best ideas, especially when discussing subjects that are not on the agenda of a formal meeting. At the very least, touching on some of these issues makes it easier for the whole board to meet the entire senior leadership team.”
Gilbert also relies on prior discussion. “Reviewing a meeting pre-read may raise your head to the CEO and point out that I might oppose. The few times I've done this, the CEO usually helps them understand their position and direction better.
That route also leaves more air on the agenda for improvisational discussions if the director has concerns that have not been raised. Drivers should ensure that the agenda does not contain any administrative presentations and that there is little time left to explore meaningful discussions and alternative strategies. “The most common textbox comments I've seen [in assessments or surveys] IS: “Open discussions require more time.”
Note that there is too much backchannel discussion, as they can erode trust, according to the field. “What's always nervous about me is pushing out the arguments that should occur in bilateral off-record conversations across the board?”
4. Dealing with destructive opposition constructively. Fleming recalls an example in which the director “fostered the same thing over and over again.” He was not hostile, but his tenacity undermined his reliability, making him less likely to hear the board's ears, even if his feedback was useful. “We rolled our eyes after a while,” she says. That's when the lead director or chair has to intervene, saying, “Communicate with that person: “This is weakening you.”
“You don't always want to object,” adds Creel. “But if something is very important, you're putting your board and the company at risk, you have to speak up, which means that's your job.”
Directors considering the role of the board should try to find out in advance how well the board is doing with dissent. If culture doesn't seem to welcome healthy discussions, it may be wise to take a pass.
“If you feel that it's an armchair board for rubber stamping CEOs,” says Gilbert. “That's not a board for me.”
