When a board of directors fails in its mission, im- pacts to shareholder value can be catastrophic. The financial press has a field day when a public ompany like Kodak or Research in Motion prac- tically evaporates, but private company boards experience many of the same struggles — strate- gic missteps, regulatory problems, miscalculated
mergers, and so on. Less frequently discussed, though, are the challenges that
boards of all stripes sometimes face from within — challenges caused by “dys-
Providing strategic direction to a company is difficult work under the best
of circumstances. And given the power and responsibilities entrusted to each
director, a single under-performing or misbehaving individual can sometimes
disproportionately impact a board’s ability to function.
Unfortunately for board chairs and CEOs, it’s the shareholders, and not the
board, who elect and remove directors under the laws of most states — even if
a director has been convicted of a crime. And since shareholders don’t usually
attend board meetings, they are often unaware of problems in the boardroom,
absent any press coverage.
Does This Sound Familiar?
•;Controlling;founders;often;keep;underperforming;friends;and;family;mem-bers on boards well past the point where it is still amusing.
appoint whomever they wish. Anecdotes and commentary suggest that
investor-designee board members pose
greater risks for incompetence and con-
flicted loyalties than directors identified
through well-managed searches.
• Many companies have ownership, cultural, or process drivers that keep highly
ineffective boards in place. The president
of a large-but-failing online social media
company recently lamented that nobody
on his board uses social media.
What’s a Board to Do? And How Can
In the spirit of leading with good news,
potential problems in the boardroom
usually can be prevented or kept to a dull roar
through good governance practices. Secondly, even though shareholders are in the
driver’s seat, the board isn’t always powerless
to deal with problems. And the bad news? Not
every boardroom dysfunction can be fixed.
Lastly, even in situations where a boardroom
problem can be solved by the board itself, the
process usually involves some level of difficulty and stress for those involved.
Fixing and Preventing Problems in the Boardroom
Disaster by Paul A. Swegle