Dysfunctionality on the board
A board is said to be dysfunctional when it fails to effectively fulfil its responsibilities and provide proper leadership and strategic direction to the company. Dysfunctionality on the board may exist when the Board’s performance is suboptimal. According to Principle 1 of the Nigerian Code of Corporate Governance (NCCG), “A successful company is headed by an effective board which is responsible for providing entrepreneurial and strategic leadership as well as promoting ethical culture and responsible corporate citizenship. As a link between stakeholders and the company, the board is to exercise oversight and control to ensure that management acts in the best interest of the shareholders and other stakeholders while sustaining the prosperity of the company”.
Accordingly, characteristics of an effective Board will include an effective Chairman and other Non-Executive Directors, a brilliant and charismatic Chief Executive Officer (CEO), an effective Committee system, a responsible and transparent reporting system, adequate diversity on the board, and an effective secretariat.
Dysfunctionality on the board may play out in various ways, including in gender and board dynamics. Such dysfunctionality may occur where a board member feels discriminated against, is often dismissed or ignored while expressing their views. The following excerpt was reported in the Harvard Business Review article, Dysfunction in the Boardroom:
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“A highly successful and accomplished woman in financial services was asked to join the board of a growing multibillion-dollar public company. She brought the greatly needed financial expertise to the board and a deep understanding of the company’s industry, yet she routinely felt shut out and stifled during meetings. Her questions were greeted not with respectful collegiality but as intrusions into the “real” conversation among the male board members.
The CEO and chairman and other male directors had taken her aside many times and asked her to be “less vocal” and to “stop arguing her point” during meetings. She recalled one incident at which she was pursuing a line of questions about a strategic decision when a male director interrupted her and exclaimed, “You are behaving just like my daughter! You are arguing too much – just stop!”.
Where the boardroom dynamics are unhealthy, the board is unable to perform optimally, which results in its overall dysfunctionality. boards operate smoothly and harmoniously when all opinions are heard and valued.
Dysfunctionality on the board may also show up in an ineffective Chairman. The Chairman’s primary responsibility is to lead and focus the board on strategic matters. She or he plays a crucial role in promoting board effectiveness and the effectiveness of individual directors, ensures effective communication on the board and promotes the highest standards of corporate governance.
An effective board requires strong and effective leadership. If the board’s leadership is ineffective, the board’s experience and ability to offer value will be impeded. Where the Chairman is at the centre of the dysfunctionality and exhibits dysfunctional behaviour, it is imperative that there is an effective Independent Non-Executive Director (INED) on the Board to provide the required stability. It is also critical to define clear duties and responsibilities for individual Directors.
A dysfunctional board culture negatively impacts board effectiveness. Directors may be oblivious to the culture on the board and thus it is useful to seek feedback as part of the board evaluation processes, examining the patterns in meeting behaviour, communication and decision making, and reflecting on how these impacts the organization’s culture and performance. Maintaining a healthy board culture is the responsibility of each director on the board. The board should periodically review its performance and implement the recommendations emanating from the exercise. Every director has the responsibility to provide feedback on peer behaviour, and create a climate where constructive criticism is safe and welcome.
To effectively deal with dysfunctionality, the board should ensure that new members are properly on board, encourage directors to engage in periodic social activities to promote bonding and camaraderie on the board. The board should also be periodically refreshed to bring on board new perspectives. A process to deal with undesirable behaviour and a transparent system to address conflict among board members should be established. Having private conversations with the dysfunctional director, coaching and mentoring are ways to deal with disfunctioanlity. Finally, Boards that desire to eliminate dysfunctionality must be prepared to act on board evaluation recommendations and where necessary, remove poorly performing directors.