Dealing with boardroom bullies

Saturday, 01 September 2007

Deborah Light photo
Deborah Light

    Whether they are dogmatic, intimidating or just lack social skills, difficult directors can hold a board back from doing its job effectively. Deborah Light provides some tips on dealing with boardroom bullies.

    If they’re rife in the schoolyard and in the workforce, as recent research suggests, it’s a safe bet there are bullies in the boardroom even if our terms to describe them vary. “Somebody who is so firm in their views and so adamant and dogmatic and not prepared to accommodate others makes effective decision making very difficult,” says John Story, chairman of AICD and Suncorp-Metway, and incoming chairman of Tabcorp Holdings .

    To avoid this kind of roadblock, Story says it pays to do your research before selecting a board member. “If you’ve done your homework about someone you’re bringing on, you’ll try to ascertain whether somebody has got a track record of being difficult. Those that do have that sort of track record tend not to get asked.”

    But Story believes that if over-bearing behaviour does show up, this is where the chairman earns his or her keep. “The chairman does have to be strong; talk to the other board members and get a perspective from the executives who are sitting in on board meetings and, if the chairman is satisfied that’s where the problem lies, then he or she has to take the offending board member out for a quiet cup of coffee and have a heart-to-heart chat.”

    According to Story, independent board evaluation is a big help in this instance. “It puts the chairman in a stronger position because that means you’ve gone through, in a sense, an independent process. You’ve had an external facilitator who has been getting a clear message from each board member and the senior executive team. So you’ve got a pretty powerful weapon in talking it through. It’s not simply the fact the chairman is a bit fed up with you, it’s the fact that there is a clear message coming from the group.”

    That process needn’t be all that difficult, according to one of those independent board evaluators, Terry Atkinson, director of board advisors, Colin Carter & Associates. “There are a few key questions such as how the director adds value in the boardroom; whether they’re collegial in their approach; whether they respect the views of others; and whether they add value to discussions. There are probably four or five questions and that’s all you need. Then you ought to ask the directors’ peers what are the one or two things that they really value about this person’s contribution and what are the one or two things they’d wish they’d do differently? That is enough.”

    Progressive boards ask questions of management, says Atkinson. “I think good boards are interested in how management sees them. When we review boards, we insist on talking to the management team, as well as the directors, because management has a slightly different view – often an enlightening view – of how things work in board meetings. We think that’s quite important. A chairman can add whatever weight he or she wants to the feedback, but management sometimes see things that are not apparent in the boardroom. Sometimes it’s that they’re just not close enough to see what’s going on – that’s where the chairman needs to apply a bit of experience and accept some things and not others.”

    In evaluating effective boards, Atkinson says he and colleagues look for subtle signs that some directors might be ‘slightly overbearing’ to others. “One of the key things we test for in the surveys and interviews is whether directors are actually polite with management, because some of them can ask questions in a way that’s more confrontational than in a way that sheds light on the issue. And, it’s sometimes not observable from either side. It manifests in a feeling that the board is distrusting of management. They ask an aggressive question and the response might be: ‘Well, doesn’t this guy trust me?’ But, in fact, there is no lack of trust. It’s just poor social skills in the way the questions are asked – very closed questions rather than open questions, for example. So being polite, and not trying to nit-pick reports, is really an important core value in behaviour for effective directors.

    “What’s seen very poorly by management is directors who try to find the one error in the paper rather than looking at the whole. By all means, point out where there’s something missing or not quite right, but that can be handled off-line (out of the boardroom) with the author or with the CEO. To raise it in a board discussion can seem like you’re trying to put the manager on the spot. I don’t think it’s bullying, it’s just one of the things we see in the way that [individuals] interact with each other.”

    Atkinson agrees that where there is a dominant personality who intimidates other directors, the chairman must act. “A good chairman would talk to that sort of director off-line because it could be behaviour they’re not aware of. Or it could be a personality trait they can’t help but they can lessen and mitigate by doing certain things. If the bullying is more than that – indicating some sort of cultural difference between one director and the rest of the board – then that’s much harder to deal with and normally it comes out in individual performance evaluations of directors. It also comes out at re-nomination time.”

    Diane Grady, a non-executive director of Woolworths and Bluescope Steel, does her own research to weed out potential conflict before she accepts a directorship. “I spend time interviewing the chair, the CEO and a number of other directors before I ever say yes. I check pretty carefully to make sure they are collegial before I begin. I always ask the question: ‘On a spectrum from boards as a necessary evil to a value-adding partner, where do you put your board?’ If the CEO sees the board as a group he or she has to deal with – as opposed to a group that the CEO can get value from – I’m just not interested.”

    Indeed, Grady believes that boards that offer directors the opportunity to participate in decision-making are more likely to foster mutual respect among directors. “I think tension usually arises when there’s no respect between individual directors or between the board and management,” she says. “Sometimes it’s the history – the way the board has always operated – sometimes it comes from a CEO who hasn’t had the experience of working constructively with a board in a collegial way. Sometimes it comes from a chairman who doesn’t value input from other directors. Occasionally the chair sees the role of board members, particularly the chair, as one of judge to hire and fire the CEO. If you see the main role of the board as hiring and firing, chances are you’re not going to feel that collegial and the environment is not going to be a collegial environment – where the CEO feels that he or she can’t share concerns openly.”

    Grady adds: “I wouldn’t say it’s bullying, but where I have seen tension is when there is a director who thinks that he or she should have become the CEO, or remained as the CEO and that person stays on the board, and then nit-picks the new CEO. That’s not a healthy situation.”

    Grady is also a fan of performance reviews for boards when it comes to addressing tensions that may be caused by a director attempting to dominate. “They can be useful because sometimes directors aren’t aware that they’re perceived to be difficult and a performance evaluation – where you get honest feedback about how your colleagues see your contribution – can be very enlightening. I’ve seen situations where it’s led people to change their behaviour dramatically and I’ve seen situations where it led people to leave.”

    As any study of the great corporate collapses that followed the 1987 stock market crash suggests, the boardrooms of the corporate buccaneers must have abounded with directors intimidated by bullies. “I think a common feature of some of those boards was that they were run by executive chairmen,” says Story, who adds that times have changed. “You did have dominant CEOs who were also the chairmen and that’s a problem. I could see, as a lawyer in those days, that the principles of corporate governance as we know them today simply were not applied. The companies weren’t governed by formal board meetings – it was just done on the run with the authority of the chairman/CEO and without having gone through the checks and balances that we expect of board processes today. It’s a lot more structured now and I think that structure does bring in the checks and balances which were absent in the 80s.”

    Grady agrees that things have moved on: “I don’t think in the past that boards were held so accountable for the performance of companies. The whole environment’s changing and boards 15 years ago were more likely to be in that hire-or-fire the CEO, compliance mode. Today, boards are much more actively involved in ensuring that the business is delivering and in helping to ensure there is a strategy to take the company forward. When the board was in a more passive role, there were probably less instances where there would be a clash. It’s usually when the board is in a more active role that there’s more potential for clash.”

    Grady doesn’t believe an owner/CEO or owner/chair or major shareholder necessarily becomes a bully. “It comes back to how they view the board. It’s their attitude that makes a difference – it’s not a function so much of their entrepreneurial skills or their ownership. I think Frank Lowy, for example, uses his board very creatively. It’s more the personality and the attitude than the structure.”

    Story believes that women may provide a brake on domineering behaviour in the boardroom and if he’s right, statistics tell us that there are still too few females on boards. In 2007, just 11 per cent of all directors on the nation’s 2000 largest enterprises are women.

    Story observes: “Women bring a different dynamic, there’s no two ways about it. I think they are more alive to the dynamics within a boardroom. They are more sensitive and probably pick up more quickly if people are feeling intimidated or are unable to speak. They are more collegiate by nature. The male of the species can be more aggressive, whereas I think women are more attuned to a collegiate, effective boardroom approach.”

    Story points out that there’s also another side to the debate about boardroom outsiders. “The other situation is where you find yourself in a minority. And, that can be a difficult situation. If there is group think and you’re on the outer, you’ve got a problem and again I think that’s something that you have to take up with the chairman. Bring it out on the table. But if you’re in a position where the board is routinely making decisions that you don’t agree with then I think ultimately that you have no alternative but to go.”

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