Consider the following boardroom dilemmas:
* One or two directors dominate board discussions, despite the chair's best efforts to engage everyone.
* A director's skills are no longer current.
* Directors fall into factions, and discussions across lines go nowhere.
* Input by one or more directors is routinely ignored.
* Directors are concerned about the CEO's performance, but they aren't able to clearly define the problem.
* Directors' feedback to the CEO has little or no impact on performance.
* The CEO doesn't believe that the directors want him or her to succeed.
While these problems (and more like them) are not uncommon, little consideration is given to them in governance literature or at conferences, in sharp contrast to the strong focus on compliance and governance best practices. And yet behavioral problems can impair board effectiveness, with implications for company performance and the concerns of all stakeholders.
All directors share responsibility to ensure board effectiveness, yet they are often reluctant to confront a peer whose behavior is dysfunctional. Most tend to leave such an awkward and difficult task to the board chair or lead director. But board leaders, too, can be reluctant to address behavioral problems. Boards are not like C-suite teams where a hierarchy of power is clear. They are, by design, a group of independent peers. The best chairs lead by example and by building consensus, not by command. In fact, when chairs become too forceful, directors get concerned. And even if board leaders are willing to contend with difficult behavior problems, they may well be unsure how to effectively address the issue.
And yet, directors expect board leaders to do just that. For example, in the 2014 Annual PwC Corporate Directors Survey, 36% of responding directors said someone on their boards should be replaced, up from 31% two years before. Concerns included aging, lack of expertise, and lack of preparation for meetings. In the same survey, 53% of respondents (up from 48%) saw an impediment to replacing underperforming directors: namely, board leadership discomfort.
In the 13 years since Sarbanes-Oxley launched the new world of governance, significant progress has been made on two fronts: understanding and applying new laws (compliance) and defining and advocating pathways to effectiveness (best practices). However, expertise in compliance and best practices won't solve issues like distrust between...