It goes without saying that board directors should provide input on important board discussions and debates. After all, that’s the whole point behind having diversity on boards. Yet, every year, companies meet their demise, only to find out that certain board directors had serious concerns about some of the board’s decisions and never voiced their uneasiness before succumbing to a consensus. Nobody likes to be different or unpopular, but board directors are supposed to set that aside in the service of protecting the best interests of the shareholders and the company. Lax boards can be discovered too late for a struggling company to recover.
The blame for bad decision-making doesn’t always fall on poorly or mediocre-performing board directors even when they’ve clearly failed to give their opinions and dissenting views during board meetings.
Executive and non-executive board directors are expected to protect the interests of the company at all times. Every board director has fiduciary duties that are legal obligations. A board director’s duties require them to have inquiring, probing minds and to be individuals who stand firmly by their convictions. Board directors who fail to express dissenting opinions in the boardroom on matters that could cause harm to the organization aren’t fulfilling their responsibilities.
Board directors who fail to review all areas of risk can open up exposure to damaging forces. Legal sanctions can impose liability on board directors who withhold their opinions, either individually or collectively. In cases where organizations suffer damage due to lackluster performance by their boards, board directors may need to prove that they took reasonable steps to debate matters heartily until the full board reached a consensus. In essence, board directors who are silent or inactive can be held accountable for failing to protect the organization. The fear of upsetting the board’s sense of collegiality isn’t a valid or acceptable reason for not performing board duties to the best of their ability.
A Board of Directors Is Deliberative by Definition
Part of the role of a board of directors is to strive for a consensus on important decisions in the best interests of the organization. In the best of situations, dissenting opinions should be expected and accepted. Peers are expected to keep an open mind toward those with differing perspectives. When a board director disagrees with the consensus, there is an acceptable process. The dissenting board director should feel free to voice their opinion respectfully and give supporting reasons for it.
Unfortunately, that doesn’t always happen. While individual board directors may have personal or professional reasons for remaining silent on an issue, not speaking up can set up situations that are detrimental to the organization and that can cause serious losses or damages. Where board directors fail to voice their opinions on important matters often enough, eventually, it all catches up to the organization and it increases the chances of harm to the company.
What’s Keeping Board Directors from Speaking Up About Important Matters?
Many things can cause a board director to fail to speak their mind in the boardroom, but the reasons essentially stem from a lack of knowledge, a lack of understanding or a lack of skills.
Before accepting a board position, board directors should have a good understanding of their board duties. That should include an understanding of their fiduciary duties and related liabilities. Some directors take their positions for granted and don’t fully appreciate their role or responsibilities as a board director. They don’t prepare well for board meetings, which makes it difficult to fully participate. It’s important for board directors to be independent in thought, to present their views constructively, and to be informed and involved. Today’s board directors need to be dedicated with their time, be active listeners, be willing to ask tough questions and insist on getting answers.
For other board directors, it’s a matter of lacking the necessary skills or experience to make good board decisions. Besides having the necessary board skills, some board directors lack the appropriate interpersonal skills or psychological attributes that make for good communication and relationships. Board directors may have hidden insecurities along the lines of being fearful about being disliked by their peers, being viewed in a negative light for having a dissenting opinion, or in the worst-case scenario, being completely ostracized by the board. The desire for social harmony and collegiality shouldn’t supersede bolstering one’s confidence to voice one’s opinion in front of the board. While the expectation is that all board directors will offer advice and information from their own perspectives, about 43% of board directors state that they find it difficult to voice a dissenting view in the boardroom. With the percentage being this high, it falls to the board leadership to ensure that they’re drawing out all views of board directors in the boardroom and that all perspectives are being considered.
What Kinds of Issues Are Difficult for Board Directors to Voice Consent On?
PwC’s 2019 Annual Corporate Directors’ Survey provides an indication of the types of issues that inhibit the freedom to express opinions. The survey of over 700 corporate board directors lists the following categories and the percentage of board directors who were hesitant to voice their opinions over the topics:
- Director re-nominations 26%
- Director refreshment policies 12%
- CEO/executive pay 10%
- Company approach to diversity/inclusion 8%
- CEO succession planning 7%
- Public policy/social issues 7%
- Company strategy 5%
- Director recruitment 4%
- Crisis preparedness 3%
- Company risk appetite 3%
- None, not difficult to voice a dissenting view 57%
The more knowledgeable board directors are about issues, the more confidence they will have when offering dissenting views in the boardroom. Diligent Corporation designed Governance Intel so that board directors have access to real-time information about the latest corporate news, which they can customize according to their industry and their needs. The software creates efficiency by eliminating the time-consuming task of wading through massive amounts of data so they can home in on key insights, developments and trends that will result in rich boardroom discussion. Having the benefit of consolidated market research and competitor insights will greatly assist the board to enable better strategic planning and prove that they’ve done their due diligence in forming their opinions.