Dear reader,

Welcome to the October 2016 edition of The Director’s Dilemma.

Our case study this month looks into the difficulties of finding yourself culturally at odds with the prevailing board values and behaviours.

I hope you will enjoy this dilemma and the three suggested responses.

To read this email in your browser, go to www.mclellan.com.au/newsletter.html and click on 'read the latest issue'.

Ignacio is an old boy of a private school with a proud sporting tradition. He was invited onto the board last year when a long-serving director retired. The school is well run with a professional principal who has the respect of the staff as well as many of the boys.

The school has worked hard to develop academic excellence and its place in rankings has improved with a greater percentage of boys qualifying for university.

At the last board meeting the CEO was absent. The chairman explained that he had taken stress leave because he couldn't cope with bullying from some of the parents. Some directors sniggered and the rest looked embarrassed. There were a few comments about 'needing to grow a backbone', 'being a pansy', and 'not having the guts to stand up to parents or lead the teams to victory on the field'.

Ignacio was aghast - he asked about the anti-harassment and workplace health and safety policies and was given leave by the chair "to look into 'covering our backs' if necessary".

Ignacio met with the HR manager and discovered the policies were out of date and appeared to have been cut and pasted from the original Department of Education advice without customisation. From his experience running a business Ignacio is aware of the importance of mental health issues in the modern workplace and also of the legal duty of directors to provide a workplace free from bullying and harassment. School staff are all aware of a discrepancy between the stated School values and those of the board and some parents. The HR manager tells him that recent bullying by parents has become more akin to verbal and even physical assault. Staff believe the board will not support them against fee paying parents even though the school is, in theory, a not-for-profit institution.

How can Ignacio help lead his board to an understanding of their duty to provide a safe workplace?

Bullying is one of the most insidious behaviours in today's schools and workforces. Whilst it undermines the individual's self-esteem and mental health there are also widespread consequences at an organisational level which also need to be considered including the impact on performance and the reputational concerns arising from poor management of the issue.

For Ignacio the fact that this is a school where the Board are not dealing appropriately with a culture of workplace bullying should lead him to question the issue of whether the school handles bullying of students and staff appropriately at any level. In particular I would investigate whether there were signs that staff turnover and student turnover was significantly higher than usual for schools, particularly since there are already strong indications from staff that this is the case.

It would also be helpful prior to the meeting to enlist the support of the Chair. The CEO is the chair's direct report and to the extent that there are any subsequent claims will be involved directly in any proceedings. Further as the Chair he is responsible for the organisation and allowing a culture to flourish where there are such significant discrepancies between the stated values and the behaviours.

From a risk management perspective the policies and procedures clearly need to be updated and when that is presented to the Board I would also recommend that external counsel present directly to the Board regarding the consequences of inept management around workplace bullying and harassment. Quantifying the financial costs and reputational damage may be a more effective "stick" with this Board rather than simply reminding them of their obligations to provide a safe workplace.

Christine Pope is a non-executive director and treasurer at ATMS. She is based in Sydney, Australia.

Poor Ignacio - the dream directorship is hard work!

He is right to be concerned; bullying is unacceptable and the board will be liable if they fail to implement proper processes to prevent it. He has made a good start by getting the Chair to endorse his becoming involved. Now he needs to raise the issues in a way that will gain the board's support.

Relationships between a board and the senior executives are based on trust. If the executives believe that the board will not support or protect them when they encounter bullying that trust will disappear. Trust between directors and executives is vitally important.

The statistics on parental bullying are sobering; there has been an increase in frequency and severity across private, charitable and state schools. These statistics may help Ignacio persuade his board that the problem is real and not just a figment of the Principal's imagination.

He should also report back to the Chair and inform him that 'covering the board's backs' is necessary. Out of date policies that are not customised, endorsed and enforced put the board at risk. The board should work with the executive team to develop a policy that fits the school and its culture. The board should also abide by the policy. They cannot resort to name calling, or distraction to sporting performance, when there is a serious complaint about a workplace health issue. Mental health is as important as physical health. For a successful school it is imperative that the person leading the team be mentally up to the task. Leadership is stressful enough without needing to face down bullies as well.

The board should apologise to the Principal for the past events and then issue a statement to all parents that bullying will not be tolerated, between pupils, parents and/or staff. Any bully will be warned, counselled and, if not able to prevent a reoccurrence, removed from the school community.

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

The case illustrates how bad culture can take hold and be sustained against all common sense.

The Principal was respected and high performing as evidenced by improving academic outcomes over time but that doesn't mean he was necessarily immune to the pressure of some demanding, even aggressive, parents and a Board whose members had explicitly or implicitly and callously failed to live up to its duty of care to provide a safe workplace. The Board should have supported the Principal in tackling issues by enforcing boundaries around acceptable behaviour and removing families from the school (after requisite warnings).

Ignacio has been given a legal mandate for butt-covering but this itself reflects a retrograde mindset and the moral/ethical imperative is sorely missing.

• Ignacio should outsource the rewriting of school policy to an expert and use the refreshed policies as an opportunity to roadshow a strong and unequivocal message about the need for parents, students, teachers and school administrators to uphold a zero tolerance policy to bad behaviour.
• He is new and his advantage is "fresh eyes" but he needs backers. Getting in guest speakers or circulating landmark cases to open the eyes of board members to their responsibilities whilst giving a voice to the more reasonable and caring members will be crucial.
• The Board needs to appreciate the need for sensitivity in the workplace to mental health issues and the optimal environment for high performance which is a safe one. The Chair needs to rethink and model alternatives to the poor cultural norms displayed in Board comments; eat humble pie and acknowledge the reaction to the Principal's plight was unacceptable.
• The board must make a collective commitment to turn the cultural ship around including consistent and appropriate action to any form of bullying and eventually the parent cohort will realise things have changed permanently.
• Ignacio can make the point that continued bad parental behaviour will ultimately keep other full fee paying parents away with the reputation that will ensue which may cause the Board to sit up and listen.

We get the culture we deserve and the behaviour we're prepared to tolerate. If we use the risk to school fees as a pretext for condoning and rationalising bad behaviour from parents towards school leadership and board members to their CEOs, then we might as well allow students to bring weapons to school as long as they are straight-A students.

Leanne Faraday-Brash is an organisational psychologist and Director of Brash Consulting P/L. She is based in Melbourne, Australia and is the author of "Vulture Cultures: How to stop them ravaging your performance, people, profit and public image".

Book review - All Above Board; Great Governance for the Government Sector. by Julie Garland-McLellan Many directors of government-owned enterprises take up the role because they want to have an effect on the organisation and on the society they live in and will bequeath to their children. Indeed, they are frequently appointed because the shareholder sees their passion for effecting change in that way and feels that it would add value to the board. Even directors who do not profess a burning sense of mission will admit to a deep sense of responsibility for organisational and societal outcomes. Regardless of what the passion is, whether it is conservation of the environment, empowerment of employees, preservation of heritage, education of youth or care for the needy, it must be controlled and focused by the boardroom processes to achieve its true expression in organisational results and societal or environmental impact. This book explains how to balance passion and process to achieve your desired outcome. Read full review ... Purchase online through the Australian Institute of Company Directors website. Both printed and eBook versions are available. If you wish to purchase multiple copies please email Julie and she will arrange a bulk discount for you.

Inspirational quote for October - This month my favourite quote is:

"Give me business-savvy directors"

~ Warren Buffett ~

Chinese language edition of Presenting to Boards

What's New? In September I had the joy of receiving proof copies of my book 'Presenting to Boards' in its Chinese translated edition. Now I am looking forward to travelling to the Taiwan Corporate Governance Association's Corporate Governance Summit for the official book launch. It has been such a pleasure working with the TCGA team on the project and is lovely to see it in print (even if I can't read it). I greatly enjoyed a lunch at the Sydney Mining Club where I was lucky enough to be seated next to a former head of enforcement from ASIC. The presentation was good and the table conversation sparkling; we covered Centro, James Hardie and HIH with a lot of behind the scenes anecdotes. I enjoyed trips to Melbourne for the consumer directors of EDR boards and to Tasmania for Cats Tasmania's director development day (please don't tell my dog who I was working for). Then it was on to Brisbane for 'Evaluating Governance Effectiveness in the Public Sector' followed by a 'Presenting to Boards and Senior Executives' course at CQU in Rockhampton. Back to Sydney to attend the AICD Essential Director Update at which Graham Bradley did a fantastic job; it was an insightful event and will enhance my training delivery for years to come as well as improve my own boards' performance. A director development day in Bella Vista on the 30th rounded out a busy and satisfying month. On the personal front I enjoyed a special Taekwondo training course at UTS which included sparring with a current national champion.

A note on names - A few readers have asked me where I find the names for the protagonists in each case study. I can only say that I 'borrow' them from people I meet or things that I read. Ignacio is a Spanish name derived from the Latin root 'ignis' meaning 'fire'. Our Ignacio will have to light a fire in his boardroom and make sure that it doesn't consume him.

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. I could not write this newsletter without your help and without the generous help of all the experts who respond each month to the case studies.

Be a contributor - if you would like to attempt a response to the dilemmas before publication you are most welcome. I received feedback that people were having trouble posting to the LinkedIn group so I will now post the dilemmas on The Director's Dilemma Facebook page. You can visit the page at https://www.facebook.com/DirectorsDilemma.

Your comments and contributions will be most welcome. You can respond to the dilemmas on the page or make your own posts (scroll down on the left hand side for the visitor posts section). If your answer is one of my favourites it may get selected for publication.

Farewell until the next issue (due 1 November 2016). I look forward to greeting you again then. In the interim I hope you will enjoy health, happiness and hard work.

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

Best regards,

Julie

 

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.