The secretary general’s perspective: governance culture and board dynamics - Part two

Derailers for effective governance dynamics

Derailers for good governance dynamics can be due to (i) individual behaviour, (ii) collective behaviour, or (iii) (even) organisational weaknesses. Since company secretaries are responsible for the proper organisation of the board meetings, the importance of company secretaries in the board dynamics is quite clear.

Individual behaviour :

• Overly dominant individual personalities: Individuals who monopolise the discussion undermine the collective and collaborative nature of governance, which leads to others no longer participating actively and meaningfully to the discussions. If such behaviour is characterised by ego and arrogance, it can lead to a toxic environment in which others feel marginalised and unable to contribute effectively.

• Ineffective board leadership: This can happen when the meeting chair is unprepared or lacks the necessary leadership skills. An ineffective leader may fail to lead discussions, manage conflict, and fail to ensure that meetings are productive, which can significantly weaken the overall effectiveness of governance. It will ultimately reduce the board's decision-making and oversight capabilities.

• Directors seeking conflict or avoiding conflict: Both extremes are disadvantageous. Conflict seekers create unnecessary tensions and disrupt constructive dialogue, while conflict avoiders fail to address important issues, which can lead to unresolved tensions and a lack of progress.

• Lack of individual preparedness: When directors are not adequately prepared for meetings, it hinders the decision-making process. This problem can be exacerbated if it becomes part of the group culture, leading to consistently poor meeting outcomes.

• Lack of individual accountability: Directors who do not take responsibility for their actions or inactions cause a rift within the board. This lack of accountability can lead to mistrust and a failure of the cooperation necessary for effective governance.

• Open or perceived hidden agenda: Directors who have personal agendas that are not in line with the objectives of the board can derail discussions and decisions. Whether these agendas are openly stated or merely observed by others, they create discord and mistrust.

• Breach of confidentiality: When directors fail to maintain the confidentiality of board discussions, it can lead to a loss of trust and can compromise the integrity of the board's decisions. Confidentiality is crucial for frank discussions, avoiding conflicts of interest, and effective decision-making.

• Misaligned expectations: When directors have expectations that are not aligned with the goals or processes of the board, it can lead to frustration and ineffective participation, disrupting the harmony and effectiveness of the board's activities.

Collective behaviour :

• Formation of cliques, alternative subnetworks, and polarisation: This behaviour leads to a lack of psychological safety, with some board members feeling left out and unable to speak freely. Such polarisation can undermine the ability of the board to act coherently.

• Use of a non-English language in an international environment as a weapon of exclusion: When a limited number of directors use a language that is not understood by everyone, it can create an atmosphere of exclusion and mistrust, which hinders effective communication and cooperation.

• Lack of diversity and complementarity: Boards that lack diversity in terms of gender, ethnicity, skills, and perspectives often suffer from groupthink. Such lack of diversity can lead to homogenous thinking, reducing innovation and limiting the ability for a board to effectively address complex issues.

• Ineffective relationship between chair and CEO: A strained relationship between the chair and the CEO can lead to poor communication, misaligned strategies, and ineffective governance. It is critical for these two key people to maintain a strong collaborative relationship.

• Fostering, creating, or facilitating groupthink: When directors feel pressured to conform to the majority opinion, it stifles critical thinking and individual contribution. This can lead to poor decision-making and withdrawal among directors who think differently.

Organisational derailers :

• Poor agenda structure: An agenda that is poorly structured can lead to disorganised meetings and ineffective use of time. Important topics can be overlooked, and discussions can become unfocused and unproductive.

• Absent, late, or illegible management documentation/information: When important documents are not provided on time, are missing, or are difficult to read, it hinders the board's ability to make informed decisions. Timely and clear documentation is essential for effective governance.

• Poor meeting management, including poor time management: Inefficient meeting management, including failure to adhere to time constraints, can lead to discussions with no resolution and loss of focus on important issues.

• Excessive deference to the CEO and/or CFO: When too much authority is given to the CEO or CFO, it can undermine the board's ability to independently oversee and challenge management decisions. Balanced authority is essential for effective governance.

• Not acting on conflicts of interest: The way conflicts are handled is an important factor that creates trust. When conflicts of interest are not properly addressed, it can lead to mistrust between board members and stakeholders, undermining the integrity and effectiveness of the board.

• Allow 'shadow chairpersonship': Shadow chairpersonship takes place when a person other than the chair  de facto leads the meetings, without a mandate or formal authority to do so. This will create confusion and undermine the role of the formal chair, leading to ineffective governance and decision-making.

• (unjustified) Information asymmetry: Information asymmetry occurs when some board members have access to more or different information than others without valid justification. This can lead to mistrust between directors, an imbalance in decision-making power and hindering the board's ability to make well-informed, collective decisions.

• Technology issues: Technology-related issues, such as unreliable internet connections, faulty equipment, or software incompatibilities, can disrupt meetings. These issues, which are usually beyond the control of the company secretary, can lead to delays, confusion, and reduced productivity, affecting the board's ability to function effectively. Ensuring that all technological tools are up-to-date, reliable, and easy to use is crucial for smooth and efficient governance.

What can a company secretary do to stimulate and/or influence the culture?

Concrete examples of working on board dynamics ...

… leading to a positive governance culture

Thanks to their role in the organisation of the board meetings, the organisation of the work plan, the calendar and the agendas of the board of directors, and thanks to their proximity to Chair, CEO, NEDs and management and their role of "trusted advisor", company secretaries can contribute a lot to a positive board dynamic and ultimately to a good board culture.

Addressing governance dynamics and governance culture involves making implicit aspects explicit and highlighting them more clearly.

Generally, establishing good governance dynamics relates to the composition of the group of people who make up the board, their interactions as a group, their personal interactions, clarity about roles and responsibilities, and organisational matters in the board. 

It is actually about avoiding or mitigating derailers. 

As such, actions regarding board dynamics can pertain to:

• the way in which boards meet each other,

• how meetings are organised,

• what kind of meetings and interactions board members have with each other and with management outside of formal board meetings,

• how to ensure that all directors are optimally involved in meetings,

• when to differentiate in style, in meeting method – when to have enough confidence to try out a new modus operandi,

• what kind of one-to-one relationship the chair has with the other NEDs

• and whether the meeting of subgroups (INEDs ;SNEDs ;...) is encouraged, or not.

The focus in the next episode is on what company secretaries can do, directly through their role in the organisation of the board meetings, or indirectly through their influencing and advisory role.