The Problems with Dead-Weight Directors

Millstones date back to around 10,200 BC in the Neolithic Period. Cavemen used these valuable tools to create food, and to this day they still are being used to grind grain. When a director acts like a millstone, however, methodically grinding down the CEO and management team, the result is bad governance and potential dysfunction.

Over the past decade, I’ve seen numerous examples of directors with dead-weight behavior that creates a millstone effect on the shoulders of the CEO and senior management team. Many CEOs are understandably very reluctant to criticize their boards for fear of reprisal. However, in honest, off-the-record conversations, many are frustrated with one or more directors.

Directors should aspire to be the building blocks for a strong foundation of company growth and CEO support. Yes, there’s a strong governance component to ensure that the company is performing to its potential. But, we also need to support for the CEO and the executive team.

There are three ways that directors can avoid the dead-weight dilemma:

1) In an era of intense board scrutiny, some directors have become increasingly averse to risk. I was at the boardroom table when a well-performing medical services business came under pressure with the advent of new software that threatened to change the business model of the industry. Over several board meetings, it became obvious the company had to invest in this new digital technology, but two directors were intractably resistant and fearful of the CEO’s plans. “What if we are too early?” they worried. “What if we fail? What will happen to our reputations?”

Despite their reluctance, the company moved forward, making prudent investments that proved to be successful. One of the dissenting directors grudgingly supported the plan but the other resigned, refusing to support the new strategy. It had been a time-consuming exercise, frustrating for the board and the CEO, and the company lost an opportunity for competitive advantage.

2) In today’s fast-moving world, every director has to stay educated about the markets in which we compete, our competitors and new disruptive technologies. I have been on several boards where directors asked questions in multiple board meetings that indicated they didn’t understand the company’s products or had not read the board book. This wastes valuable board time, and is best resolved by an annual peer feedback process, which may result in cutting loose a consistently unprepared director.

3) Dysfunctional behaviors on boards can manifest themselves in various ways, including as rivalries between directors where winning the argument trumps what’s best for the company, and sidebar conversations in which factions develop and divide the board. These destructive behaviors serve only to grind meetings to a crawl.

For each of these dead weights or millstones, and many more, there are two effective cures.

First and most important, your board should create a safe environment for the CEO to provide feedback to the board and directors on their behavior and opportunities for improvement. This can occur in an executive session or via the relationship the CEO has with the lead independent director or non-executive chair.

The second remedy is to identify, understand and address problem directors through anonymous annual board evaluations and director peer assessments. It's best to enlist the services of an independent third party to facilitate the evaluation if you are to uncover many issues and opportunities for improvement that go well beyond their normal assessments. In my experience leading these evaluations, CEOs and directors tell me things that they would never tell each other and, as an outsider, I can put difficult issues and solutions on the table that would never otherwise be addressed.

Without these mechanisms for airing issues and grievances, a millstone may well grow large enough to crush the very value of the board.

For the past 15 years, Martin Coyne has served as a board director, adviser and governance evaluator for a diverse group of public, private and early-stage companies.

Authors

  • Martin Coyne

    Contributor, Korn Ferry Institute