Ethical Governing BoardsMay 16, 2018 12:52PM ● By Beverly Kracher
When a company scandal hits, we can often trace difficulties and challenges back to its board. That’s why it is important to spend some time designing and maintaining the ethical cultures of governing boards. Here I am referring to the formal structures and informal practices that shape the board’s experience and effectiveness.
The formal aspect of a board culture has to do with the written policies and processes. The No. 1 ethical issue facing boards is conflict of interest. That is why board members are asked to sign conflict of interest statements. Other typical policies include member rights and responsibilities, and a code of ethics. The best governing boards have developed orientation packets for new board members that include these policies and ask them and existing members to read and sign them each year they serve.
The informal aspect of board culture is more elusive. This has to do with the way things are actually done rather than the way the policies state they should be done. Informal culture is driven by individuals rather than the written word. It is messy and human, filled with honorable intentions as well as blindspots.
One of the best articles about designing the ethical culture of boards is a Harvard Business Review article written by Jeffrey Sonnenfeld titled “What Makes Great Boards Great.” He identifies key ethical aspects for governing board success. Three important ones are:
- Create a climate of trust and candor: A climate of trust is built on respect. Board members who respect each other can challenge each other in civil debates, which result in better decisions for the company. CEOs and executive directors can create a climate of trust and candor by distributing materials in a timely fashion, sharing difficult information, and openly asking for feedback.
- Foster open dissent: It is the duty of each board member to be willing to question each other’s assumptions and beliefs. The best boards create environments that nurture these exchanges, and, in doing so, help members overcome the conformity bias and groupthink that are deadly to an organization. It is important to note that open dissent is different from disloyalty—the first is healthy and the second is toxic.
- Ensure individual accountability: Governing board members are expected to take their roles seriously and follow through responsibly. This can be hard to do, especially when leaders accept offers from too many good causes and end up with too little time. We have to be honest with ourselves about the number of things we are capable of doing well. Board members need to hold each other accountable, which is the best insurance against irresponsibility.
This column was printed in the June/July 2018 edition of B2B.