Produced by Julie Garland-McLellan, Consultant at AltoPartners Australia and non-executive director and board consultant based in Sydney, Australia.

Contribution by Julia Zdrahal-Urbanek, is Founder and Managing Partner, ALTO Executive Search GmbH / AltoPartners Austria; a member of the AltoPartners Global Operating Committee; co-founder and initiator of the Women Corporate Directors (WCD) Austria Chapter; and a Non-Executive Director on a large family-owned business. She has profound experience in filling board and top-management positions in Austria and Europe for global conglomerates as well as family owned and start-up/scale-up businesses.

This edition of the newsletter was first published on The Director’s Dilemma website and the full newsletter is available for viewing here. To subscribe to future editions of the newsletter, click here

The Director’s Dilemma - February 2024

This month we advise a director who is wondering whether to remain on a board where his questions don’t elicit any engagement.

John joined the board of a listed company that was surviving, but not growing or reaching its targets. He had a background in a similar business and some board experience. The CEO, who was also a Co-founder, was dismissive and defensive which made it hard for him to get good answers to his questions. The Chair, who was the other Co-founder, sympathised but preferred to preserve his relationship with the CEO rather than push for answers that might embarrass the CEO. The two other non-executive directors were very passive and looked to the Chair for guidance.

After a very unsatisfactory five months, John was elected by the shareholders at the AGM. He then watched as the shareholders vented their anger and disappointment at the poor results. After the AGM the company’s brokers and a major shareholder contacted the Chair and demanded that the CEO be removed and replaced. The CEO resigned and the Chair stepped into the role. John was relieved. He hoped that now the board would reassess their strategy and align behind a plan to deliver better results. Unfortunately, at the next board meeting, he found the Chair acted exactly as the CEO had; deflecting or dismissing questions and just wanting to report the past period’s activities without any meaningful interaction or input.

Although John feels that he is letting down the shareholders who so recently voted him onto the board, he is fed up and feels his time and effort are not appreciated. He is seriously considering resignation.

What should he do?

Julia’s Answer

John faces a complex dilemma, balancing legal, ethical, shareholder expectations, reputation, and potential influence. Evaluating his capacity to effect change is crucial. While his expertise might be pivotal in guiding strategic discussions, continuous resistance to his initiatives could render his role ineffective and harm his reputation, especially if the company’s performance worsens.

Understanding shareholder expectations and the implications of a potential resignation in a critical company phase is essential.

Every Non-Executive Director should evaluate whether their expertise and insights are beneficial for the company’s progress and potential turnaround. John’s role could be crucial in directing the board towards meaningful and strategic dialogues. However, if John feels that his attempts to instigate change are consistently blocked and does not see any way to influence, even after multiple conversations to resolve the situation, his continued presence might not be effective or rewarding – even if the Shareholder believes in his potential.

Furthermore, staying in a dysfunctional board might pose a risk to John’s professional reputation, especially if the company’s performance continues to decline. Finally, it’s essential to understand the legal and ethical implications of John’s (potential) resignation, especially if the company is in a critical phase.

If John opts to remain, he should:

1. Consider candid discussions with the Chair for a collaborative approach,
2. Establish personal boundaries to navigate board dynamics,
3. Foster alliances with like-minded board members or shareholders,
4. Consult a mentor with board experience, without breaching confidentiality, to gain valuable insights,
5. Meticulously document board proceedings is advisable to address shareholder concerns or formal inquiries.

Ultimately, John’s decision should resonate with his values, career aspirations, and perceived impact on the company, ensuring a choice he can confidently stand by.

Julie’s Answer

Every director on every board should have the ability to influence the board’s decisions and to enhance its understanding; if you can’t do that then you are wasting your time and, potentially, taking up a board seat that could be occupied by someone who is more capable of having an impact.

If John is not getting a hearing at the board table, he should first look in the mirror; are his questions adding value? Do they help to uncover opportunities or mitigate risks? Or is he just critical? If he is the problem, he can change his behaviour or leave.

Are the other directors really passive or are they having an impact that John can’t see and getting their answers outside the formal meetings? He could have a coffee with each of his colleagues and find out their opinion. He should avoid proselytising his own opinions.

If he is convinced the problem is not his, he should privately meet the chair to outline his concerns about the dismissive conduct. He needs to prepare carefully for this meeting; it will be a watershed. Ideally, he will already know the chair’s communication style preferences and be able to put his case, with examples, in a way that will help the chair to understand the issues but without giving (too much) offense. Then he needs to offer a positive way forwards.

If the chair is open to making changes he should stay and help. If the chair prefers to remain on the current course, John should resign. He has given it at least six months and is clearly not going to make any progress. Hopefully, his leaving will be the catalyst for some added impetus to change.