In my experience, self-discipline tops the list of challenges for governing boards.  Discipline for what? Ethics violations, destructive behavior in meetings, and abuse of power outside board meetings, are the common ethical problems that only the board, itself, can identify and confront.

Other issues, like poor decision-making, and the lack of clarity of direction are more performance-based issues, and they can be addressed by a CEO.

What Sort of Problems?

Ethics violations are one type of problem. These most often include conflicts of interest or breakdowns in the Duty of Loyalty (that is, not supporting decisions the board has made after the member has left the meeting and is out amongst those stakeholders who elect the board).

Other sorts of destructive behaviors might include:

• Never giving in to the will of the majority, but continuing to fight for one's position and disrupting the meeting.
• Attacking those you disagree with.
Constantly attacking management as a means of garnering personal power.
• Always advocating for one's personal constituency rather than for what is in the best interest of the group as a whole.
• Striving for personal power, rather than striving to move the organization forward.

What I See Out There

The board response to these problems that I see most often is denial. At least, if you were to observe the dynamics of the meeting, itself, you would conclude that the board did not see the problem. However, these problems surface often in informal settings where nothing can be done about them. That's why I call it denial.

The root causes of this denial are:

• The lack of policies that prohibit the abuses.
• The lack of procedures and prescribed penalties for violations.
• Sometimes, a lack of courage on the part of the chairman.

A fair percentage of boards have ethics policies in place, but lack prescribed procedures and penalties for violations. Hence, the violations are never dealt with.

Why This Matters

First, ethics violations are a potential risk for the group. That is, the board can be successfully sued or removed (or both) for failure to comply with ethics violations, or for failure to meet the standards of duty of loyalty and duty of care. So, if you ignore ethics violations, you risk assets, the costs of litigation, and a total halt of momentum, while the board defends itself against lawsuits, and so forth.

Second, ignoring ethics violations almost certainly erodes trust among shareholders, members or constituents, and that erosion can cause the board to become pre-occupied with its own survival, instead of the survival and prosperity of the organization.

Third, the impact of these problems on staff morale and, thus, organizational performance, is staggering.

How You Can Fix The Problem

If you sense that you have an ethics problem, fix it by adopting a clear and comprehensive set of ethics policies that prohibit conflicts of interests and willful disruption of smooth board operation.

Include in those policies a clear set of procedures for:

• Reporting.
• Investigating and processing allegations.
• Applying penalties or sanctions to remedy the situation. To the extent that it's possible, make the sanctions automatic, rather than at the call of the chair.

For example, for a first violation, have board members report to the chair, or have the chair take the initiative and issue a written warning. On the second offence, have the board, or the committee assigned to handle such matters, determine whether fact-finding is needed. If a second violation is verified, consider sanctioning the behavior of the member by removal from committee appointments, exclusion from discussions and actions on matters requiring confidentiality, and so forth.

Beyond that, consult the law in your state regarding removing a member from the board. What is allowed under the law? Is action by the voting members or shareholders required? Must the appointing authority exercise removal? Do state statutes provide for petitioning the court for formal sanction and/or removal?

Whatever the case, make the procedure automatic, rather than requiring a vote. That is, if the facts prove that a violation has occurred, then implement penalties as prescribed. Requiring a vote puts the matter back in the realm of board politics, and, more often than not, the group will lack the will to act forcefully, allowing the destructive behavior to continue.

- Bill