Conflict in the Boardroom
As with every relationship, conflicts are an inalienable fact of life that also feature in boardrooms. A conflict in itself is not necessarily bad as it signifies that board members express independent thinking. It is in resolving conflicts that the rubber meets the road.
A IFC global research on conflict in the boardroom found that the most common subject matter of board disputes is “financial, structural, or procedural workings of the organization,” closely followed by the “personal behavior and attitudes of directors.” Other sources of conflict include disagreement over strategy, risk appetite and risk management, board process issues, such as structure of meetings, etc.
According to Dr. Solange Charas, writing in the Harvard Business Review, it matters whether a conflict is cognitive (task-oriented) or affective (emotionally oriented). Boards that recognized affective conflict and addressed it quickly were associated with high governance quality, whereas boards that were less willing to address affective conflict or ignoring it altogether were associated with low governance quality. High governance ratings were also more common for boards that had engaged directors generating high levels of cognitive conflict.
Regardless of the cause of the conflict, when left unresolved, conflicts could result in reduced trust among board members, distract from core business priorities, and adversely affect the efficacy of the organization, the long-term business performance and even the reputation of the organization.
As with all diseases, preventing conflict is better than cure. Some ways to prevent board conflict include clarify roles and responsibilities, establish a code of conduct for directors, and implement a grievance procedure. Negotiation and Conflict- Resolution training may also be provided to directors as a matter of course. When these measures are put in place, board members will have tools to handle disagreements when they arise and conflict need not turn acrimonious.
When conflicts do however arise, it best to deal with it frontally. Ignoring conflict can breed resentment and lead to disengagement on the part of some directors who feel that their concerns where not suitably addressed. Some ways to address conflict include negotiation to arrive at a joint decision or internal mediation led by an independent party to a conflict, which could be the Chairman of the board or the head of Governance Committee. Where internal methods fail, external help from respected third parties could be sought for an external mediation or an arbitrated settlement.
In sum, conflict prevention and resolution must be hard-wired into the board process and systems in order to ensure that a board remains congruent in order to provide the strategy and fiduciary oversight that the role entails.
