The Director’s Dilemma – March 2024 Edition

March 01, 2024 Share this article:

Directors Dilemma March 2024

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

Contribution by Plácido Fajardo, is the Managing Partner at Leaderland Iberia S.L / AltoPartners Spain and has managed over 300 executive searches, assessments and coaching projects across Africa, Europe, North America, LATAM and Australia. Member of the Boards of Fundación Máshumano; IESE Business School Alumni; Advisory Board to Human Resources at ESADE Business School; National Board at AEDIPE (Spanish Association for People Management and Development) and Chairman of the Organization and Talent Chapter in the Fundación Cre100do. He is based in Madrid, Spain.

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The Director’s Dilemma - March 2024

This month we advise a chair who has encountered a very unsatisfactory development in a recruitment process.

Kathryn chairs a small not-for-profit board. The directors are paid, and the company is in a highly regulated financial services sector. Recently the board has been looking to appoint a new director and seeking someone with strong financial services and technology expertise.

One of Kathryn’s colleagues recommended a potential director. She seemed ideal; she had a good executive career in IT within the sector, had senior executive experience, and had recently completed a company director qualification. Interviews and reference checks went well so Kathryn sought the board’s approval for an offer to be made. On receiving the offer, the candidate revealed that the same director who had recommended her to Kathryn’s board had also recommended her for another board. The candidate offered to consider the role but only if the director fee was increased to exceed the fee offered by the other board.

Kathryn is torn. She liked this candidate right up until discovering that she is playing the boards off against each other to raise her fee. The candidate is a lot better than the second best from the selection and Kathryn is reluctant to start again and source a fresh bunch of prospects.

She is also quite cross with the director who recommended a candidate to two boards without mentioning that she was recommending this candidate elsewhere. It feels like a conflict of interest.

What should she do?

Plácido’s Answer

Motivation to serve on a board should be an important factor in choosing a board member. Money and non-profit organizations do not fit in the same statement. It seems that the main motivation of this candidate is about money, so I would say this candidate is not adequate to become a board member for a non-profit organization.

Recommending a potential candidate for a board should consider his or her motivations, and the fit of these with the organisation’s purpose and culture.

I understand Kathryn being reluctant to re-start again, but she has to consider that in the long term she will be happy to make the right choice. The re-orientation of the new search process should consider values and integrity of the candidate, on top of experience and skills.

Our response to this situation, as Kathryn’s advisors, would be:

  • “Questioning” the director who recommended a candidate for two positions, one of which is the company he or she serves: apply the conflict-of-interest rules according to the board regulations.

  • Rethink the offer made, given the reaction of the candidate. Ensure that the cultural and value aspects of her fit with those of a non-for-profit organisation. Playing the boards off against each other to raise her fee is not a “fair play” and should not be acceptable.

Julie’s Answer

I feel like I just stepped into Dragon’s Den or Shark Tank - “That’s a no from me”!

Directors need great judgement; for your first board appointment, the prime consideration should be the quality of the experience and the network that will be gained from accepting the position. Affinity with the mission is important. Fee is not. This director shows poor judgement and likely doesn’t understand that upping one director’s fee will change the fees of the whole board. She also perhaps shows a bias towards short-term thinking.

Kathryn should start over, as none of the other candidates came close. She should also look for candidates from a wider pool than recommendations from her directors, friends, and acquaintances. If possible, use a professional search (many firms will reduce fees for non-profits) but, if not, at least use a database from her local governance institutions’ or organisations such as Women on Boards, Next Director, Board Direction, etc.

Clearly the board lacks understanding of Conflict of Interest and how it is disclosed and managed. They may also misunderstand of other aspects of governance. A director’s prime duty is to the interests of the organisation; interests of an individual they suggested as a board candidate should not take precedence and, once in a process, a director should not also refer the candidate elsewhere.

Rather than risk more disruption by tackling the director head on (especially if she still feels cross), Kathryn should arrange for a board review and some director development training to lift the collective understanding and value add from all her directors.