Board Room Relationships

Balanced relationships in the Board Room are so important for the effective functioning of the Board and, in turn, for the effective functioning of the Company. 

This has generally been recognised through the various codes of governance that have been written and adopted over the years.  Governance comes from the top, the Board, and flows down through the organisation.  The Board takes ultimate responsibility and therefore needs to know that there is some form of control, that is governance.

As part of good governance, perhaps the most important part of it, there is a lot of guidance on how a Board should be structured, and how it should operate, to help ensure that the Company is being run effectively.

However, how many companies adopt a “tick box” approach to governance without putting their heart into the meaning behind it?  I fear that there are too many.

The Executive team, led by the Chief Executive, should keep the Board properly informed.  The NEDs should constructively challenge the work of the Executive and the Chair should facilitate the decision making process of the Board to get the view of the Board as a whole.

Let’s look, in particular, at the role of the Chair and his/her relationship with the Chief Executive.  The Chair should be an Independent NED.  The Chief Executive reports to and has a working relationship with the Chair, but this relationship should not be too close as the Chair should oversee the work of the Chief Executive on behalf of the Board.

This relationship sometimes becomes more of a friendship.  This is fine so long as the Chief Executive is doing an effective job.  However, I had an issue when working for a Charity.  The Chief Executive concerned was not as competent as she could have been and was not being honest with the Board about issues she had around the running of the charity.  If she had been honest, I know that the Board would have given her the necessary support but, instead, possibly due to a lack of confidence, she chose to hide these issues from the Board.

The Board became suspicious that they were not being told everything.  They started to ask questions about what was going on.  The Chair, rather than taking up these questions on behalf of the Board, decided to protect the Chief Executive.

I was asked by the Board, as an independent Company Secretary, to review the situation.  At this point, the Chair decided to turn against me in an effort to protect the Chief Executive.  As a result, I resigned.  The Board then asked both the Chief Executive and the Chair to step down from their respective roles. 

If the Chair had been carrying out her role correctly, this would not have happened.  Instead, the Chief Executive would have been called to account a lot sooner, could very possibly have kept her job with the right support, and there would have been less damage to the charity. 

There should be a good balance of power between the three parts of the Board, the Executive, the NEDs and the Chair.  How often, however, do you find a Chair that has such a powerful influence, the Board just tends to fall in line with what he/she wants? 

I was the Company Secretary of one Board where all the Directors were very anxious to give the Chair the right answers.  The Chair would ask the opinion of each Director in turn on a matter to be decided and each Director, especially the NEDs, would try his or her hardest to fathom out what the Chair wanted!  Consequently, the Board always ended up agreeing on what the Chair wanted.

One Board I had the pleasure to work with had an Executive Chairman.  So, rather than separating out the role of Chief Executive from the Chairman, in this case, they were effectively in the hands of one person.  To add to that, this particular Chairman had been in this role for many years and, as a result, had a strong influence.  As a result, not only did he control the business, he also controlled the Board.  There was little challenge from the NEDs.  So, despite having legal responsibility and liability for the company, the Board directors had little influence.

Sometimes, you will find that the power is in the hands of the Chief Executive.  This can often happen with charities, where Trustees are effectively all NEDs with no day-to-day involvement in the business.  They often also have little understanding of how the business of the charity should be run, having stood for a Board position purely because of their passion for the charity’s particular cause. 

Such Trustees have to put their trust in the Chief Executive and this allows the Chief Executive to have an unhealthy influence over the Board.  One Chief Executive who I worked with, if he wanted to get a particular decision, would telephone each Trustee in advance of the meeting to campaign for their support.  He always got the decision he wanted.  Another Chief Executive was asked to propose to the Board possible new Trustees.  Of course, he always suggested people who would support his views. 

It is hardly surprising that situations such as the Kids Company can arise.  It is so important that new Trustees are trained and supported in the right way!  The Company Secretary, if allowed to work independently from the Chief Executive, instead reporting to the Chair, can help to ensure that this happens.

The Board room can be a very interesting and a very challenging environment.  However, it can also be fun.  In my next blog, I will talk about some of the more amusing situations that I have come across in the Board room.

So, to conclude, let me give you an update on our dog, Jack, who I introduced at the end of my last blog.  I have talked about there needing to be a balance in relationships in the Board room.  Our relationships with our dogs is not meant to be on the same basis.  The dog is supposed to do what his owner tells him, the human is his master. 

Jack does not seem to understand that, believing that it should be a balanced relationship, balanced in his favour.  Recently, despite my husband’s instructions not to do so, Jack decided to jump into a lake at a park near where we live.   My husband yelled at Jack from the bank in absolute frustration while Jack spent 20 minutes fruitlessly chasing the ducks.  Every time Jack got near, the ducks just took off and landed in the water behind him swimming off in the opposite direction!  So much for obedience training!