Good morning,
Last week, the National Association of Corporate Directors (NACD) published its latest Blue Ribbon Commission report. This year’s topic is as intriguing and complicated as the humans who sit as directors: board culture.
While group dynamics are often challenging, the report recognizes that the psychosocial landscape for directors has become especially complicated. Boards are diversifying—finally welcoming executives who have truly different life experiences and perspectives—while responding to intense economic, social, and regulatory demands. The pace of change, thorny new issues, and the sheer volume of work have arguably opened the door to insecurities, ruffled feathers, and toxic behaviors in board meetings.
That’s a problem because the best, high-functioning boards “operate collaboratively with agility and speed to tackle whatever is coming down the pike,” says Mary Winston, cochair of the NACD’s commission and a former CFO at Family Dollar and Giant Eagle, who has spent more than 20 years as a corporate director. To be prepared for anything, she says, boards must be deliberate about creating strong interpersonal relationships, trust, and cohesiveness.
The new report offers dozens of tips for building new patterns and several questions directors can ask themselves to reflect on their own habits. It also lists signals that suggest your board is becoming dysfunctional. Fortunately, those indicators are not subtle, says Oscar Munoz, the commission’s other co-chair and the former chairman and CEO of United Airlines. “The signs are quick and ominous,” he says.
Here are some examples of board culture red flags:
—Side conversations and cliques. When directors have one-off sidebar conversations—old-guard board members or newer directors splintering off, or when people with similar opinions band together—it’s obvious, and it’s a problem, says Munoz, a director at Archer Aviation, CBRE, Salesforce, and TelevisaUnivision. He adds that if siloed discussions and gossip aren’t brought into the open, the issues behind them fester and “will absolutely magnify and explode when you hit a crisis.”
—Constant conflict. Having productive debates with people openly sharing differing opinions is a sign of positive board culture, says Winston, a director at Chipotle, Northrop Grumman, TD Bank Group, and the NACD. But she warns that frequent, heated conflicts are a symptom of something deeper: some issues or frustrations are being suppressed.
—A ‘veneer of collegiality.’ The report notes that boards sometimes take on a “go along to get along” attitude that can actually stifle honest debate and “allow the board to tolerate inadequate director performance.”
—The board agenda is too full. Meeting schedules that don’t allow enough time for robust conversations or have become “stale” and unresponsive to a company’s reality should also raise concerns, the report states.
The NACD commission focused its attention on practices boards can adopt to start reinforcing or rebuilding their codes of conduct, whether to prevent or repair glaring issues. For example, it suggests that boards assign leaders to monitor board behavior and add “board culture” to meeting agendas at set intervals. The report places special emphasis on topics like onboarding, offboarding, board evaluations, and inclusion.
“Bring it up to your board, work through these things,” Munoz says of the document. He adds that examining how you interact with each other is a good first step toward improving how you lead the companies you oversee—and it’s best done before an emergency.
Read the full report here.
Lila MacLellan
lila.maclellan@fortune.com
@lilamaclellan
