Tag Archives: disagreement in the board

DISSENT IN BOARDROOM


The Board is charged with the responsibility of making decisions that guide the company. In the process there will be occasion for disagreement. This is healthy. A board that is always in agreement probably lacks robust debate. The usual result is poor decisions. The Board should aim for consensus after healthy debate.

Some people avoid confrontation on issues. So they simply give in, this is unwise in view of the legal responsibilities that directors carry. Other directors want to please executives to the extent that they would rather acquiesce with whatever is tabled even if outside the Board they would disagree. I remember a matter that came to debate on a Board I served on years ago. The majority of the non executive directors disagreed with management. However when the matter was put to a vote, one non exec abstained from the critical vote. Although he was as opposed to the management position as all the others, he did not want to be viewed as being disloyal especially to the CE. Abstention cannot be viewed as being opposed to a decision.

Disagreement may be minor or significant. The aim of the Board lead by the Chair is to have sufficient debate and inquiry into the matter leading to an agreed position. Sometimes however there is significant ad irreconcilable disagreements of opinion. This leads to dissent.  Dissent does not mean disloyalty but implies that the director takes her fiduciary responsibilities seriously.

I should highlight that dissent should not be based on avoiding business risks as business entails taking risks to achieve its goals. Some directors are so risk averse that they can easily sabotage any attempt to grow the business. This rejection of any initiative is not in the best interests of the organization as it affects the possibility of growth. Businesses always take calculated risk.

Most significant differences occur  in any of the following matters:

  • Disagreement on whether the objectives of certain courses of action are consistent with the strategic vision of the organization
  • Disagreements on whether to declare dividends or not when the organization is not compliant with statutory regulations.
  • Disagreements in implementation of certain projects on the basis of perceived risk. This can be reduced if the organization has clearly defined and agreed risk appetite and risk tolerance levels.
  • Disagreements on ethics and principles within certain transactions
  • Disagreement on fundamental issues such as fraudulent, reckless, grossly negligent or unlawful conduct.

If the matter is important but not fatal and yet the director feels strongly on it, he may insist on his dissension being formally recognized in the minutes. If the director feels that the matter of disagreement is not resolved but Board decides to go against him in a fundamental matter, after due discussion and arguing his case with factual information supported by independent professional advice, he may have to opt to resign.

In one Board the CE agreed to a resolution which he later unilaterally disregarded. When NED met they agreed to take a strong stand against the CE. However in the meeting, the majority softened. The matter was so material in my view that I dissented and ended up resigning from that Board formally in writing having expressed factually and accurately my reason for dissenting. A few months later the highly regulated organization was placed under business rescue by the regulators over the same matter.

Board members should be able to express their views effectively without being disagreeable or hostile. The key principle is always to act rationally in the best interest of the organization as a juristic person in its own right.