Top Ten Signs of a Dysfunctional Board of Directors
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A company's board of directors is elected by the stockholders to set goals and make strategic decisions for the organization, while leaving the operation of the company to its executive officers. While most boards handle their responsibilities well, differences of opinions can give way to dissension and sometimes dysfunction. Boards headed in that direction send out many signals.
Directors are supposed to make decisions and act in their company's best interest, but they may compromise that duty if they have hidden agendas. A divergent interest, whether it is promoting a cause or a pet project, can deflect a director's interest from his responsibilities.
Directors are supposed to make strategic decisions that will lead a company on a solid growth path. If directors get bogged down in micromanagement, they will lose their vision for the future and put the company's future at risk.
Meetings of the board of directors should be scheduled for all to attend and share their views. Off-the-record meetings are not likely to include all board members and are almost always divisive. To have decisions reached in off-the-record meetings is a subversion of the directors' duties.
Not Taking Responsibilities Seriously
When directors meet they should be prepared – meetings should be planned in advance, agendas written so that directors can make their preparations. If the meetings are not structured, having no agendas, they will drift, be unproductive, impromptu and ineffective.
Lack of Mutual Respect
Directors can disagree but still respect each other. When civility breaks down, infighting begins and a board can be split into antagonistic factions. At this point, a board cannot lead a company.
No External Advisers
While board members are generally smart people, they cannot know everything and frequently rely on external advisers. A lack of advisers may indicate a collective arrogance that can lead a company astray.
Out of Control Management
Management should receive its directions from its board of directors. When management makes its own strategic choices without the advice of its board, it is a sign that the board has abdicated its responsibility and that management has preempted that role.
CEO Dominates the Board
A CEO may be a member of the board of directors, but as a board member, his contributions should be placed in perspective. A CEO has one vote, but when a CEO, by force of personality or charisma, oversteps his role and dominates the board, he is preempting the board's function and responsibilities.
Preoccupation with Procedures
When a board becomes preoccupied with procedural matters and worries more about parliamentary procedure than the big issues its company faces, the board is clearly not acting in the company's best interest.
When one director attempts to control the board, causing dissension and exhibiting a lack of cooperation, the board's ability to function becomes compromised. Such a director may have issues with the CEO or other executive officers and turns his issues into a vendetta against that person.
Thomas Metcalf has worked as an economist, stockbroker and technology salesman. A writer since 1997, he has written a monthly column for "Life Association News," authored several books and contributed to national publications such as the History Channel's "HISTORY Magazine." Metcalf holds a master's degree in economics from Tufts University.