Principle 4: Poor decisions
Board members are responsible for making decisions in the best interest of the organisation, while safeguarding corporate assets and organisational funds. Regular poor decision making is symptomatic of a dysfunctional board. These board characteristics, and recommended actions, include the following:
The chairman should consider altering the board size by either requesting the nominations committee to initiate the selection and appointment processes or taking appropriate steps to retire directors.
Insufficient range of expertise
The chairman should consider requesting the nominations committee to initiate a study of the personal skills, knowledge, and attributes required by the board. When carried out properly, this can easily identify skill gaps on the board and paint the profile of the next board member to join the board.
The chairman should ask the company secretary and executive to remedy the situation.
Inadequate debates, few overt disagreements or differences of opinion
The chairman should consider encouraging non-executive directors to be more independent, challenging and critical in their behaviour at board meetings. It’s a valued skill set to be able to disagree, without being disagreeable.
Decisions are made by small inner groups outside of the board
The chairman should consider reviewing the statement of reserved powers.
Few reviews to see if the decisions were correct
The chairman should consider initiating a regular review of the board’s material decisions.
Failure to identify the risks
The chairman should consider initiating a regular review of the organisation’s risk profile.
In all the cases highlighted above, remedying board dysfunction is the chairman’s responsibility, since the chairman has ultimate responsibility for managing all aspects of board meetings.
Source: Corporate Governance Board Leadership “Dysfunctional Boards” | The International Finance Corporation, World Bank Group
Jan Bladen is managing partner of Governance Creed