Would you cast a unanimous vote for consensus?
Calls by the governance advisory community for the individual voting record of each director to be disclosed to shareholders are missing an important aspect of boardroom dynamics — joint and several liability.
Within a board each director should feel that they can, and will, be held to account for any, and all, of the decisions of the board. The prospect of a director saying, in effect, “Don’t blame me; I didn’t vote for it” is utterly dismal. Such a director would possibly also feel able to shirk responsibility for devising solutions to problems that ensued from a course of action he or she had voted against. That would be divisive and could dangerously weaken the board by removing insights, knowledge and moral support from the team making the rectifying decisions.
There is a big difference between informed consensus on a strong board and weak directors who pander to and support the decision of the majority.
“The only difference between consensus and group think is the effort that goes into making consensus and the learnings that come when it has finally been reached.”
When a director, as all directors must at some time in their careers, finds him or herself disagreeing with a course of action that the majority of the board wish to implement it is imperative that he or she continue to disagree until satisfied that:
· The decision will not materially harm the company in the short term
· Implementation will provide information that can then be used to decide if, and how, and up to what agreed ‘walk away point’, to continue
· The proposed actions are broadly in line with the expectations of all shareholders and will be acceptable to all legitimate stakeholders
· There is a review point at which the whole board can reassess the decision
· The opportunity cost is affordable, and
· The decision is legally and morally defensible.
If a director finds that the rest of the board wish to implement a decision that violates one or more of these statements then the safest thing to do is resign. This board is not serving the shareholders’ interests or meeting societal expectations and it will be dangerous to remain associated with it.
If a decision meets these tests but is not to the directors liking it is for that director to propose an alternative that will better serve the needs of the company. If there is no better alternative to a course of action that is affordable, in line with shareholders expectations, in the interests of the company, legal, and capable of being halted at a later stage if adverse effects become apparent then there is no reason to oppose the decision.
Much depends on the trust that the individual director is able to place in his or her fellow directors. If you believe that these are honourable people, who will stop and reassess when and if say they will, and who are working in the company’s (or shareholders’) interests than a director may allow the board to proceed even if, personally, he or she would prefer not to. If the decision, once taken, will then be allowed to run an unexamined course or if a review is not also a point for reassessing the direction (often serving, instead, to determine bonuses for completion of certain stages) then a director may be loath to proceed even with assurances.
Chairmen, in particular, should ensure that their boards are scrupulous in living up to any commitments that have been made to gain approval for a decision. They must also be patient and allow dissenting directors to find a point to which they are comfortable to proceed. There is value in listening to and seeking to understand the reasons for dissent. It can help manage repercussions and risks.
In the long run, a board that is confident and able to form true agreement on each and every decision is far stronger than a board where factions and spurious majorities can force the board’s hand on important decisions. If the ‘voting record’ shows 100% agreement on all substantive issues that should be a good thing. The true measure of the calibre of individual directors should be the time and diligence with which the whole board seeks consensus and the unanimity with which they endorse and support decisions once they have been made. The only difference between consensus and group think is the effort that goes into making consensus and the learnings that come when it has finally been reached.
What do you think?
Julie Garland McLellan is the professional company director and corporate governance consultant that leading chairs and directors turn to for practical advice and quality education that makes a difference in the ability of their board to generate winning company performance.
She is the author of the “Director’s Dilemma” newsletter, “Presenting to Boards”, “Not-For-Profit Board Dilemmas: Practical Case Studies for Directors in the Non-Profit Sector”, “Dilemmas, Dilemmas” and “All above Board: Great Governance for the Government Sector”.
Julie undertakes board and director appraisals; her in-boardroom education is characterised by a practical approach using real-life scenarios to build rich interactive learning experiences. She facilitates difficult meetings with tact and vigour; her guidance behind the scenes has helped many boards, CEOs and chairmen to turn difficult situations into successful outcomes.
If you think Julie could help catalyse your board success contact her for an initial scoping call using this link: https://calendly.com/julie-gm/getting-to-know-you.