Boardroom conflict: when does debate become dysfunctional?

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Bothwell P. Nyajeka

WHEREVER human beings interact, conflict is almost inevitable. The boardroom is no exception.

Boardroom conflict can broadly be described as the disagreements or clashes that arise between members of a company’s board of directors, or between the board and management, during meetings, deliberations and de­cision-making.

Some boardroom conflicts eventu­ally enter the public domain, through company announcements, shareholder disputes, court proceedings, resigna­tions or leaks to the media. I believe the majority, however, remain silent, contained behind the closed doors of the boardroom.

Conflict itself is not necessarily bad. In my board training sessions, I always encourage participants not to shy away from it. When properly managed, con­structive conflict can produce brilliant ideas and solutions that steer a compa­ny to greater heights. Directors should be able to challenge assumptions, inter­rogate proposals and disagree respect­fully.

In my opinion, a board with no dis­agreement at all should sometimes be cause for concern. A complete absence of conflict may be a sign of group­think, excessive deference to powerful individuals, or the rubber stamping of management decisions.

Directors are appointed to boards, among other reasons, for their ability to think independently. That thinking must be voiced. A director who remains silent, or who fails to clearly articulate concerns, may be doing a disservice to the company and to the shareholders who appointed them. Other directors cannot know what a colleague is think­ing unless that colleague speaks. Direc­tors therefore need to engage, question, challenge and interact.

The problem arises when construc­tive disagreement becomes destructive conflict. Negative conflict can render a board dysfunctional, undermine gover­nance structures, damage relationships between directors and management, and ultimately affect the performance of the company.

One common source of conflict arises in founder led businesses. Founding shareholders may have built a business from nothing, spending years making virtually every important decision. When the business grows and establishes a formal board of directors, some founders find it difficult to sur­render decision making authority to that board. The situation becomes even more complicated when the founding shareholder is simultaneously a direc­tor, board chairperson or chief execu­tive officer.

Conflict can arise when the inde­pendent judgement of the board differs from the founder’s wishes, or when the board attempts to hold the founder accountable. The problem is particu­larly serious where a founder adopts a bullying leadership style, insisting on having things his or her own way with­out respecting the board or listening to contrary views.

A second major source of conflict is the failure to clearly define and re­spect the respective roles of the board and management. In broad terms, management operates the business. It is responsible for day-to-day opera­tions and for executing the company’s approved strategy. The board, on the other hand, provides strategic direction and oversight. Management remains accountable to the board.

To fulfil its oversight responsibil­ities, the board has the right and duty to ask questions. Management must provide sufficient, accurate and time­ly information to enable directors to exercise informed judgement. This re­lationship can become strained when management regards legitimate board questioning as intrusive, petty, or an attempt to micromanage. Management may then become defensive or delib­erately withhold information, and the board, in turn, becomes frustrated.

I have sat in boardrooms where directors interpreted management’s reluctance to provide information as sabotage, or as disrespect for the au­thority of the board. Once this happens, trust begins to erode: the board grows suspicious of management’s actions, management becomes more defensive, and a self-reinforcing cycle of conflict takes hold.

Another major source of board­room conflict is the pursuit of personal interests. A director, for example, may attempt to influence management to purchase goods or services from a busi­ness in which that director, or someone connected to them, has an interest, without following proper procurement policies and procedures.

Management may also pursue its own interests. Executives may, for ex­ample, seek significant salary increases or bonuses despite the company failing to achieve agreed operational or finan­cial targets.

Where personal interests begin to compete with the interests of the com­pany, conflict is almost inevitable.

Directors and management can also disagree about the future direction of a company. One director may favour rapid expansion; another may advocate consolidation. Management may want to acquire another company, while some directors believe the acquisition carries unacceptable risk. The chief executive may want to enter a new market while the board believes the organisation should first strengthen its existing operations.

These disagreements are not nec­essarily unhealthy. The danger arises when strategic disagreements become personalised, and directors begin de­fending positions simply to avoid los­ing an argument.

Communication breakdown is an­other frequent cause of boardroom conflict. Directors and executives sometimes fail to raise concerns direct­ly with the people involved. Instead, conversations take place in corridors, WhatsApp groups, private telephone calls and informal gatherings. The ru­mour mill begins. Positions harden before issues have even been properly discussed by the board. Once directors start forming camps and discussing board matters outside formal gover­nance structures, resolving disagree­ments becomes much more difficult.

Some disputes are fundamentally about power. Where governance struc­tures are unclear, or are deliberately ignored, competition for influence can quickly develop into destructive con­flict.

Directors are human beings. Friend­ships, business relationships, loyalty, peer pressure and personal history can all influence judgement. A director may hesitate to challenge a chief executive who is a close friend. Another may consistently support a fellow director because of a longstanding business re­lationship. These ties can become bar­riers to objective decision-making.

Another source of conflict is what directors sometimes perceive as man­agement arrogance. This can manifest as late circulation of board packs, dis­regard for legitimate board requests, failure to implement board resolutions, and even administrative slights, such as persistent delays in paying direc­tors’ approved fees despite repeated follow-up.

Individually, some of these issues may appear minor. Collectively and re­peatedly, however, they send a power­ful message to directors that the board is not being respected, and this can severely damage the relationship be­tween the board and management.

Boardroom conflicts cannot simply be ignored in the hope that they will disappear. Left unchecked, destructive boardroom conflict can paralyse de­cision-making, undermine corporate strategy, divide directors into com­peting factions and ultimately destroy shareholder value.

In my next article, I will examine how boards can resolve conflict before disagreement becomes dysfunctional, restoring effective governance and pro­tecting shareholder value.

l Nyajeka is a business consultant and board advisor. He has vast ex­perience as a corporate executive and has sat on various boards in Zimbabwe, Botswana, South Africa and Uganda. He is currently chair­man of ACR Solutions and is also a seasoned trainer and facilitator for the Institute of Directors Zimbabwe (IoDZ).