Danger: the possibility that a thing is likely to cause harm or injury

Over the years, I have seen a number of boards and other organizations crippled -- even put under -- by conditions that I call the danger zone.

If you intend to improve the performance of your organization, you might want to go over the checklist of these danger factors to be sure you have them handled.

Here they are:

1. Loss of Shareholder or Community Confidence

   When you lose your constituency, life on the board becomes one of reacting to political threats, finding fault and other activities, none of which help the organization improve. It is the first responsibility of the board -- not management -- to make sure that the community and shareholders remain confident in the board.

   Threats can come from malicious politics, a serious lack of attention to communications with shareholders and other constituents, unethical behavior on the part of board members (see Unethical Director Behavior, below), and the inability of board members to communicate -- with confidence -- the current conditions and future plans of the organization.

   Prescriptions:
   • Create an active shareholder/constituent relations program (which the board oversees). This program should begin with a survey to determine the current level of confidence in the board and the organization.
   • Deal more effectively with unethical director behavior (see Unethical Director Behavior, below).
2. Hostile Board Members

   One road to a directorship is to pledge to "clean things up," or "right the wrongs," and so forth. That strategy works only if danger factor 1 (loss of shareholder or community confidence) is in play -- at least to some degree. If it is, making those kinds of pledges is a common and successful election strategy.

   More often than not, once on the board and exposed to the real data, these board members do one of two things: They get on board or they get off. If they get on, they become positive forces. If they get "off," it's probably because they've become isolated: No one else is willing to play their game. They either resign after a year or two, or they opt not to run for re-election. In the meantime, their negativity can inflict all kinds of damage on the board. I've known them to pose endless questions, harass management, make senseless motions, never vote "yes," and so forth.

   Prescription:

   This usually calls for the same remedy as the first prescription in Loss of Shareholder or Community Confidence (above). If that doesn't work, you must consider a thorough board orientation program that includes complete data on the history, current condition and future plans of the organization  If such turns out to be the case, check out both of the following articles for further information: Board Orientation Checklist and Board Problems and How to Handle Them.  You can also check the BoardGrowth™ webinar info for our webinar "New Board Member Orientation".

3. Unethical Director Behavior

   Usually this situation is related to #2 (Hostile Board Member(s). The ethical lapses usually take the form of violating the Duty of Loyalty (defined below), and include revealing executive session data outside the boardroom, speaking ill of board actions to constituents and/or personal conflicts of interest.

   It is my experience that on boards that are constituted by election rather than by self-appointment, dealing with unethical members is a huge challenge. Boards continue to tolerate the behavior and enable the errant director to keep the board tied up in knots far too long.  While this is going on, the board can make virtually no progress. The situation is a real detriment to the organization.

   Prescription

   A strong code of ethics should be included in board policy and the chairperson must be willing to enforce them, with verbal warnings and letters of warning, and, finally, by recommending to the body that the member be censured or ultimately removed, if appropriate.

4. An Ineffective Chairman

   An ineffective chair plays into the hands of those seeking to play the game that is described in the other three danger factors. Such a chairperson makes it virtually impossible to deal effectively with all the other factors.

   A chairperson has to be able to rule people out of order and enforce board ethics policies. He or she also has to have the courage to take on disruptive board members, even if the rest of the body is timid. Often, I see the rest of the board waiting for the chair to act, and the chair waiting for the board to demonstrate its displeasure, before mustering the courage to act.  In the meantime, the disruptive behavior continues.

   Prescription

   • Learn and use Robert's Rules of Order
   • Make clear the responsibilities of the chair in dealing with ethics violations
   • Get a coach or parliamentarian to assist the chair, as needed
   • At the end of meetings, have each member write or state how the meeting could have been improved. This could include comments on the actions of the chair. The information should be used to embolden the chair and the group to deal more effectively with danger factors.

   Follow these links to get more information about being an effective chairperson: Role of the Chair and Effective Chairmanship.

Take some time at one of your meetings to openly discuss whether any of these danger factors exist in your organization. If they do, make dealing with them a first priority, because until they are resolved, you will not be able to improve governance.

- Bill

Definition of Duty of Loyalty:

Upon becoming a member of the board, the individual member commits to serve the best interests of the corporation and its shareholder group or members. Those interests must take priority over any personal interest. The basic principle is that the member should not use his/her office to make a personal profit or gain other personal advantage. During a section of the meeting in which a decision could affect the member personally, he/she should be absent or abstain from the discussion.