Doomsday signals for directors: these indicators of board and management concern should be on your radar--potential dire consequences may lie ahead.

• Author: Grafman, Allan
• Position: BOARD DYNAMICS

Board service is necessarily a 'team' sport. We spend significant time with people we respect, often developing social and business relationships. Over a span of years, bonds of friendship develop. These bonds of friendship and respect can be the glue that keeps a board and company moving forward.

Conversely, these bonds can lead to a mentality that overpowers a director's own good judgment, inhibiting direct action. The result: a director avoiding awkward conversations that need to take place.

When do numerous smaller concerns tip the scale toward initiating a conversation not warmly welcomed by esteemed colleagues? Ask yourself that question as you consider how many of the following "doomsday signals" your company is sending to you. While no single indicator is predictive or conclusive, the presence of many of these signals--our focus is on board governance and director-level issues--is indicative of problems ahead.

Signals frequently encountered (but often left unaddressed)

Put a check by the ones that are on your radar:

* Culture, ethics and integrity concerns that you would address more directly if you were CEO of the company, but do not because this is a CEO's responsibility.

* Directors who have side consulting deals with the company or with large shareholders. Conflicts are apparent, as it becomes unclear where their priority or loyalty resides.

* Family members as employees and consultants. Would a truly independent director just arriving on the board find this relationship overwhelmingly beneficial to the company, or questionable?

* Committee chairs have not rotated, leading to ossified and entrenched positions, approaches and opinions. The same concern arises when boards have not embraced new members in a long time, or lack diversity in viewpoints and relevant experience. [Ed. Note: Additional guidance on avoiding board entrenchment can be found in Allan Grafman's article, "The Board's 'Seven Year Itch': It Would Benefit All To Have Directors Take a One Year Sabbatical," Directors & Boards, Fourth Quarter 2014.]

* No successor is in place for the CEO, or even an agreed-upon succession plan process.

* Combined CEO/chairman roles. It is challenging for every individual to put their role as an executive ahead of their personal interests. Allowing a CEO to occupy both roles increases that challenge, and makes it harder and less likely for a director to challenge a sitting CEO/chairman. No surprise that the bank with a combined...