The Scope of Board Ethics

By Bill Dann
BoardGrowth™ Founder

Time to read: Two to three minutes.

Board ethics defined

The common definition in the literature is that ethics is “doing what is legally and morally right in serving the mission of the organization.” It focuses on avoiding liability for the board and its members under the standards that the courts have maintained surrounding Duty of Care and Duty of Loyalty.

But this definition fails to recognize the pivotal role that the board plays in establishing and maintaining the type of corporate culture (defined as what it feels like to work there) that is needed for success. So I have broadened the definition as follows:

Board Ethics: Decisions, policies and practices that establish and maintain standards for legal and moral behavior throughout the organization and thereby safeguard the assets.

It goes beyond conflicts of interest, not disrupting meetings and being loyal or supportive of the decisions made by the board, even if you disagree with them. In a sense, it is having a consistent philosophical or moral compass in everything that you do.

Integrity is the key

Think about the leaders you admire and are willing to follow. They set an example that instills pride in being a member or follower. They set that example even when it may be a disadvantage to them personally or even to the corporation. So, for example, when the market is searching for inexpensive products, the leader of a company known for quality will not sacrifice that quality in order to compete or not loose market share. Why? It is not who and what they are. That’s integrity: being and doing what you say and profess.

It means that your purpose statement, vision and core values aren’t just words on paper, but the commandments that everyone holds themselves and one another to. If this is the case in your organization, leadership by the board will have integrity and likely, ethics need not be a concern. If not, you have some work to do:

A quick test for integrity

To assure that you are maintaining integrity as leaders, ask yourself these questions about the decisions and actions you take as a board. Are your decisions and actions:

• Fair to all concerned
• Consistent
• A source of pride for directors and employees
• Aligned with being an “Employer of Choice”
• Demonstrating respect of the chief executive.

The scope of board ethics

Once integrity is confirmed, it becomes necessary to know the scope to which that integrity is applied. As described above, board ethics in this definition is much more far-reaching than the customary Duty of Care and Loyalty. The complete scope of board ethics actually contains all of the following:

• Duty of Care
• Duty of Loyalty
• Risk Management
• Succession Planning
• Prohibition of individual rights of board members to: direct or harass staff, speak on behalf of organization, disrupt meetings, engage in conflicts of interest
• Board duties: preparation for meetings, support for decisions, loyalty to mission, attendance at meetings

If you have specific questions about any of these, let us know via info@boardgrowth.com, and we will address your questions in a future newsletter.

Enforcement

The final key: enforcement. I have worked with many organizations that have a fine set of policies governing ethics, but fail to enforce those policies. Your policies need to make clear the expectations of members and the chairman to:

1. identify and point out policy violations
2. warn members
3. remove disruptive members from meetings
4. censure members
5. remove members from the board.

Too often the burden for these responsibilities is placed on the chair, who has to balance maintaining a good working relationship amongst members with being the ethics policeman. It is not uncommon for a chairman who feels a lack of support when disciplining fellow directors, to not do so. Thus, it is key that everyone on the board speak to and support the ethical standards that have been established.

How would you describe your board?

Is your board facing an ethical challenge or disruptive member? Would you describe your board as operating with utmost integrity? We have helped boards in a wide variety of situations, and can help you. Contact us and we will get back to you with some advice.