The 'toxic' director: it takes only one to derail the board: I have seen numerous examples of one director's dysfunctional behavior significantly impairing the effectiveness of a board.

• Author: Isaac, George
• Position: BOARD DYNAMICS

ONE OF THE MAJOR BENEFITS of having a board of directors is the ability to spread authority among many talented advisors. Drawing on that talent by design, a company's board of directors' "power" is based upon resolutions duly approved by the board as a whole, not by directives from individuals. Some board resolutions require simple majority voting, others super majority (i.e. two-thirds approval), and even others ratification by the shareholders. In all circumstances, individual directors do not have individual power and must therefore function as part of a larger organization to effect change.

As a result, a board's effectiveness depends upon group dynamics, which can be fateful if one director is toxic from various behaviors that undermine management or the board. As will be shown, an individual director's ability to successfully work within a group becomes critical to the performance of the entire board. That is not to say a director must be compliant or go along with so-called groupthink. It also doesn't mean that a director can't voice a strong minority position or concern. It does suggest, however, that positive group dynamics are essential to board effectiveness. The "soft" interpersonal and communication skills, not just technical or business expertise too often used exclusively in board candidate evaluations, should not be overlooked. We need to find ways to measure these qualities in director recruitment. Directors should be independent, respectful, and critical thinkers, but not confrontational, abusive, or petty.

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Having served on 25 boards, of which 14 were corporate boards, I have observed numerous examples of one director significantly derailing the effectiveness of a board. In certain instances as discussed in the following four case studies, one director caused so much disruption that key board fiduciary duties and directives got sidelined over less relevant pet-peeve issues or biases raised by a dysfunctional director.

Case 1: The 'Policeman/Witch-Hunt' Director

This board represented the owners of a real estate company where an outside property management firm was engaged. The mission of the board was typical: oversee management's effectiveness and approve basic business policies, operating and capital expenditure budgets, property improvement plans, and risk assessments. The directors were functioning very effectively and working well with management. However, after two years one board member was...