How to fire a director.

• Author: Neff, Thomas J.
• Position: Reprint from Directors & Boards, Summer 1986

MANY CEOS have to contend with unsatisfactory board members ranging from non-contributors to active irritants. Others inherit boards too large and cumbersome to be dealt with effectively. Amid today's heavy merger and acquisition activity, these conditions are spreading. Directorships are bargaining chips in most deals, and once the deed is done, board members with widely differing business philosophies often end up at the same table, eyeing each other uneasily.

There is no simple procedure or accepted method for a CEO to remove unwanted directors. Ideally, directors chronically out of step with a CEO who has most of the board behind him would resign rather than hang on as a permanent minority.

Such resignations are rare, however. Directors who are thorns in a CEO's side usually don't realize it or don't care. Regardless of what their sins may be -- poor attendance, indifference, long-windedness, failure to keep up with the times, habitual nonsupport, active opposition, or even personal obnoxiousness -- they tend not to change, blandly assuming that to stand for reelection is an unalienable right. If they are to go, the CEO usually must force them.

In a CEO's eyes, however, board members are also bosses -- more to be favored than pushed around. It is also possible that the other directors will side with a pesky peer rather than the CEO who is doing the pushing. Instead of upsetting the balance of a group so important to him, the CEO may well prefer to simmer in silence.

But danger lies that way, too. Dissident board members can cause a company to lose direction and even undermine it. An overly large board, instead of giving unified attention to what is important for the company, will often break up into narrowly focused committees, which the committee chairmen then treat as personal baronies.

One method of shrinking a board quickly is by changing the bylaws to make specific directors no longer eligible for membership. This is a process which many companies have already completed -- years ago, in some cases -- through adopting some or all of the recommendations of former SEC Chairman Harold Williams, Textron founder Royal Little, and numerous others. The bylaw approach includes limiting management representation on the board to two, the CEO and COO; excluding suppliers, customers, and close connections like bankers, investment bankers, and legal counsel; and eliminating ex-CEOs and other emeritus members.

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