Welcome to the February 2013 edition of The Director’s Dilemma.

This month our real life case study considers the options available to a non-executive director when faced with inadequate chairing and sub-optimal decision-making.

Consider: Which response would you choose and why?

Rhian is a director on a not-for-profit company board. She is very committed to the industry and is aware that there are several companies serving the same community interests as this board's organisation. She has never felt that the companies are in direct competition and has, rather, considered the others as allies in a common cause.

She has recently become aware that her board is not making the decisions they need to make in a timely fashion. There are changes mooted to the government subsidies available in the industry and the board needs to decide how they will respond. Rhian is aware that there are several possible strategies which could be followed but her board discusses these and never reach a decision.

She has approached the Chairman and expressed her concern. The Chairman’s response was that there was no need to worry; as long as the company kept trying to be helpful to the community things would work out and they had never had to change before. Something always happened to allow them to just continue as they always had.

Rhian is not convinced this is true. She fears that the other organisations will retain relevance whilst her board sit and talk and her company becomes less and less important to the industry and community. She now doesn’t know if she should stay on this board or if her enthusiasm and desire to have an impact would be better employed at one of the other companies in the industry.

How should Rhian handle this issue?

Simon's Answer

This is a fundamental issue – company survival and continued fulfilment of the social purpose for which the company was created. This is a matter for robust and formal board discussion and must be minuted. 

For Rhian, the position of other board members is uncertain. What is clear to Rhian may not be so evident to individual board members. She should summarise the facts (as she sees them), the conclusions she has drawn, the strategies that may be useful and her opinion regarding the consequences of Board indecision in this matter and present her perspective to all directors in a board meeting. 

This should flush out who supports the entrenched entitlement view of the Chairman and whether it is a majority view. Perhaps other directors are as concerned as Rhian but have not spoken up (why?). Are the directors paralysed by the gravitas of the decision knowing that in all likelihood this will be the difference between existence and extinction? 

Whether rightly or wrongly, if Rhian is a minority voice she is out of step with the board and must resign. The resignation letter needs to articulate her reasons for doing so and the evidence that supports that decision. 

On the other hand, if Rhian gains support from the majority of the Board then she might choose to stay.  However, understanding the amount of work that may be involved to get the company in a position to capitalise on the funding changes may be overwhelming unless it is adequately resourced. 

So the question for Rhian is this: Does the will/drive exist amongst a sufficient number of directors and are there the resources, capability and capacity within the company and at director level to see these changes through?
 
Simon Pinnock is  a professional and practising non executive director and Board consultant. He is based in Melbourne, Australia.

Julie’s Answer

Rhian is right to be concerned; a board should take decisions to position the company for future success. She did well to talk with her Chairman first. Her Chairman’s excuses sound weak. She needs to know who else shares her concerns; quickly but without creating unnecessary tensions between board members.

Her first call should be to the CEO to discover what the current plans are and how well prepared the company is to implement them. Rhian can inform the Chairman that she would like to set up a meeting with the CEO.

Having talked with the CEO, Rhian will be in a position to discuss the need for decisions with her fellow directors. She could do this in a series of one-on-one meetings where she should make it clear that she is concerned about the long term survival of the company.

After those conversations Rhian will face a tough decision of her own; either she will find no appetite for serious engagement among her fellow directors or she will find a level of support but will need to step up into a leadership role.

She may have to challenge the Chairman to make the required change happen. Setting up a strategy committee that can investigate and propose changes to the board might be a good first step. If the Chairman or her colleagues on the board resist any involvement in the strategy, Rhian should take it as a sign that active directors are not welcome here and, sadly, should consider other avenues for contributing to the industry as this one may be ineffective.

Julie Garland McLellan is a practising non-executive director and board consultant based in Sydney, Australia.

David’s Answer

I think an appropriate response to most situations of conflict or concern at board level is to talk privately to the Chair and if not resolved satisfactorily engage the whole board, not just a subset of directors or alternatively management.

That may result in the board addressing the issue or deciding to replace the Chairman or a variety of other initiatives.  If the board decides not to address the issue then it becomes a question for Rhian as to whether a failure to address this strategic concern is of sufficient importance to the organisation that it will compromise its viability and capacity to deliver its services. 

If Rhian does resign, it would be appropriate to wait a reasonable time (some months) before joining a competing organisation to minimise suggestion that she was taking current inside information from her previous board to a competitor.

David Minty is Deputy Chairman at Sydney Anglican Schools Corporation. He is based in Sydney, Australia.

Disclaimer

The opinions expressed above are general in nature and are designed to help you to develop your judgement as a director. They are not a definitive legal ruling. Names and some circumstances in the case study have been changed to ensure anonymity. Contributors to this newsletter comment in the context of their own jurisdiction; readers should check their local laws and regulations as they may be very different.

What's new

Presenting to Boards Masterclass – Usually I deliver the Presenting to Boards Workshops in-house for select corporate clients. This month I will be giving a public course. More details are available at http://www.tonkincorporation.com/?m=5&id=1196&t=7

Book review – Strictly Mining Boardroom I have been known to chuckle whilst reading in airline lounges and on the flight itself. Whilst reading this book I couldn’t help but laugh aloud at the accuracy of some (slightly unflattering) descriptions of director behaviour. As well as being well written and amusing the book is packed with insights.  It is as much about the business of mining as about the boards themselves and worth reading regardless of your industry sector. Available at Amazon.com.

Four Tips to Improve your Boardroom Presentations – A brief article about the education sessions that I run to assist executives with their presentations in the boardroom: http://www.eganassociates.com.au/four-essential-board-presentation-tips-for-management/

Inspirational quote

"Apply yourself.  Get all the education you can,
but then, by God, do something. Don't just stand there, make it happen."

~ Lee Iacocca

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This newsletter – If you have any ideas for improving the newsletter please let me know. If you are reading a forwarded copy please visit my website and sign up for your own subscription.

Suggestions for dilemmas – Thank you to all the readers who have suggested dilemmas. I will answer them all eventually.

Farewell until the next issue (due 1 March 2013).

Enjoy governing your corporations; we are privileged to do what we do!

Best regards

Julie