August 7, 2014
Preparing for Inevitable Boardroom Conflicts
The results of this recent director survey, Conflicts in the Boardroom, caught my eye – primarily because it’s an unusual survey topic but an inevitable occurrence for most boards at some point regardless of size, structure or internal cohesion. Given that these conflicts/disputes have the potential to significantly impact the board’s day-to-day functionality as well as overall oversight effectiveness, it’s worth our understanding how directors most frequently encounter conflicts, their reactions, and what they want in the way of skills training to more effectively manage these situations.
Key findings include:
– Almost 30% of respondents had experience with a boardroom dispute affecting the company’s survival. Short of that, commonly cited impacts include:
- Wasting management time
- Distracting from core business priorities
- Reducing trust among board members
- Affecting the functioning of the board
- Affecting the efficiency of the organization
– Most common subjects of board disputes were, in descending order of frequency: 1) financial, structural, or procedural workings of the organization; 2) personal behavior and attitudes of directors; 3) strategy development, including M&A
– Most difficult factors in resolving board disputes were issues related to competing factions on the board—“handling the emotions of those involved and separating personal from business interest”
– While about 48% of respondents attempt to mediate board disputes, 34% admit to frequently being an active party in the dispute – and 25% frequently take a side of an active party.
– Directors are much more confident that they can resolve an internal board dispute than an external dispute involving the board and external stakeholders.
– Disputes are most commonly resolved through internal negotiation (61%) or internal mediation (25%). Boards are very reluctant to resort to litigation to resolve disputes.
– Over 67% of respondents reported that they have encountered unresolved issues. 24% of small company respondents reported that issues are frequently not resolved – whereas only 6% of medium company, and about 16% of large company, respondents reported frequently unresolved issues.
– Directors are extremely interested in receiving training for dealing with personal factors: 75% described training in the “ability to deal with different personalities” as very useful.
– A gender difference emerged regarding the kinds of skills desired: women are far more interested in receiving training in negotiation skills; men are more interested in training on how to deal with different personalities.
Toolkit for Resolving Boardroom Conflicts to the Rescue!
The Global Corporate Governance Forum publishes this free toolkit offering practical guidance on how to prevent and resolve boardroom conflicts/disputes (both internal & external) short of litigation. The toolkit addresses (1) the rationale for applying ADR-like processes to these sorts of conflicts, (2) implementation/use of dispute resolution mechanisms and services, and (3) associated necessary skill sets and training for directors to effectively manage these types of disputes.
More on “The Mentor Blog”
We continue to post new items daily on our blog – “The Mentor Blog” – for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– Auditor Engagement Letters: No Company Intervention in Auditor-Directed Work
– PCAOB Roundtable: Mixed Views of Proposed Changes to Auditor’s Report
– Perceived Board Effectiveness Linked to How Board Allocates its Time
– FINRA: Pre-IPO Selling Procedures Need to Be Adequately Supervised
– Board Trends at the S&P 1500