Governing boards face many challenges including but not limited to qualifications, conflicts of interest, undue influence, egos, preparation, accountability, confidentiality, board size, diversity, commitment, consequences, tone at the top, and truth. In this post, I consider qualifications, conflicts of interest, undue influence, and egos.
Qualifications – The greatest challenge in selecting governing board members is finding qualified people who, to paraphrase President John F. Kennedy, ask not what the organization can do for them, but what they can do for the organization. Basically, they need to add value in achieving the organization’s mission, which requires competence, independence, availability, and fit.
Difficult to define and measure, but when fit doesn’t exist, it usually becomes evident quickly. To paraphrase Justice Potter Stewart’s remark regarding the definition of hard-core pornography, regarding the lack of fit, “You know it when you sense it.” More than anything, fit relates to style—how one interacts with board members, members of management, and staff members. It encompasses one’s attitude.
Conflicts of Interest (COI) – Too often, new board members have personal agendas. Self-dealing and COI can emerge after a person has been elected or appointed. Examples I’ve observed or others have shared with me include:
- former CEOs (CFOs) who serve as board members and undermine current CEOs (CFOs) with objectives of replacing them;
- board members who are CEOs in other organizations and attempt to impose their leadership styles on CEOs they are appointed or elected to support;
- a university trustee who owns a hotel in the city where the university is located and not so subtly suggests external functions be held at the hotel;
- a university trustee who is the owner of or a major stockholder in a furniture company who expects furniture in a new building the trustee advocated for will come from the aforementioned company;
- a trustee who wants his or her best friend hired by the university;
- a trustee who wants the daughter or son of a friend to be awarded a scholarship or admitted to the university;
- board members who have strong influences over other Directors through interlocking business interests and exert control over how they vote on issues;
- a board member who has strong personal ties and obligations to members of the CEO’s team and serves as their protector; and
- board members who previously served in or were connected to the organization and believe they know more than the CEO about how the organization should be managed and don’t hesitate to tell the CEO how to conduct business and who work behind the scenes to undermine the CEO with other board members.
Undue Influence – A challenge CEOs face, related to the selection of board members, occurs when a power broker works behind the scenes and hand picks individuals to serve on the CEO’s governing board. In such instances, people are placed in positions to carry out directions from the power broker. A corporate example is an activist investor whose stock holdings yield a certain number of seats on the governing board; a university example is a wealthy individual whose financial support of the governor and/or state legislators and/or financial contributions to the university result in the person having great influence over the selection of trustees. When faced with such situations, a naive CEO can become disillusioned and discouraged; some are unable to function effectively, while others make the best of a bad situation.
Egos – Generally, board members are selected because they’ve been very successful in their careers. Consequently, several have large egos, making it difficult for them to check their egos at the door when they enter the boardroom. When this occurs, it’s generally manifested by new board members not ready to listen and/or acting as though they know better than the CEO what must be done to advance the organization. As a result, the CEO is placed in a difficult position. Fortunately, on boards on which I served, when (not if) this occurred, other board members recognized what was happening and intervened on behalf of the CEO. In several instances, people’s board services ended because they didn’t keep noses in, but fingers out of the company’s operations.
Next Week: Governing Board Challenges – Part 2