How to manage boardroom disputes

Things have been getting distinctly tetchy in your boardroom lately and two of your directors are at loggerheads. How can you stop open warfare breaking out? Here's a crash course.

by Alexander Garrett
Last Updated: 23 Oct 2015

Conflict can be constructive. Arguing is a sign of a healthy boardroom, says Ed Weeks, a partner at law firm Cripps Harries Hall. 'A board should be debating strategy and stress-testing ideas, otherwise it is just standing still. It shouldn't be rubber-stamping decisions made by managers.' It's when the disagreement becomes entrenched and personalised that conflict turns toxic.

Put it in the constitution. In private companies, disputes can arise over issues such as a perception that some partners are contributing more or benefiting more, says Rowena Herdman-Smith, a litigation partner at Mishcon de Reya. 'A good shareholder agreement and company articles will make it easy to police,' she says.

Take pre-emptive action. Good boardroom practices can mitigate the risk of serious disputes, says Oliver Johnston, a board-level coach at HR services group Penna. 'There must be a clear decision-making protocol, so that if you can't reach a quick consensus you are clear how a decision will be made. And all board members must have the space to say what they want to.' A good shareholder agreement is key to avoiding disputes among directors in private companies.

Show leadership. The chair of the board has to assert authority. 'The chair should set signature standards about how the board will be run in terms of behaviours and attitudes,' says Johnston. 'For example, a chair might stipulate that all members will abide by every board decision, whether they agree with it or not.'

Remind people. Directors need to be clear about the purpose of the board and that their role is to provide governance and strategy on behalf of the whole organisation - not just represent their department's interest.

Act early. When disagreement becomes personal, it can escalate fast. The quicker the chair or other board members respond, the more a dispute can be averted. Individuals should be assessed against the standards that have been set. A quiet word with transgressors should be the first response, says Johnston.

Keep it inside. If you want to resolve your differences, what happens in the boardroom should stay there and not be leaked to the media or used to rally support from investors. 'Day-to-day running of the company is down to directors, and shareholders have no rights to vote on board matters,' says Weeks. But they could be useful in voting somebody off the board.

If all else fails. If one or more members of the board have to leave, make sure you stick rigidly to the rules. 'People often sack their fellow directors when they don't need to and give them a course of action under employment or company law,' says Weeks. 'And don't resign in haste - you lose all your cards.'

Do say: 'This dispute can only be resolved by following the rules and processes we have agreed for decision-making.'

Don't say: 'Anyone who doesn't vote "yes" is a traitor.'

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