What a board of directors should not do

What a board of directors should not do: A guide to some of the most crucial pitfalls and how directors should avoid them. The decisions of the board can make or break a company’s success. As a director, you could read endless guides about how to succeed at a company’s helm, but despite the negative tone, it can be equally important to understand what boards should not do. Knowing the dangers in advance makes you far more likely to avoid them. What a board of directors should not do Neglect succession planning Ignore the concerns of stakeholders Fail to address long-term sustainability Let toxic cultures develop The above are integral parts of a director’s fiduciary duty, and getting them wrong could mean anything from penalties to curtains for an entire company. Ultimately, directors must always put the company's welfare above their personal interests or a desire to “phone it in,” - meaning the above points are an absolute concern. Ignoring the concerns of stakeholders This is one of the first rules you should learn when you accept a seat on a board. Stakeholders shape your company’s strategy; if you ignore them, you create a situation where the communities you work with think the company is going one way, while those at the governance level think it’s going another. There are many stakeholders, from investors and employees to consumers and nearby residents. The ramifications for ignoring depend somewhat on which groups you’ve done it to. In general, though, ignoring stakeholders encourages mistrust, dissent, legal pushback, activist investors, and PR disasters. The remedy Open and honest communication channels that work both ways. Your stakeholders need to feel confident that the governance levels hear them, and you need to make sure that your decisions (and reasons for them) are communicated back promptly. Neglecting succession planning Succession planning means ensuring that roles can pass seamlessly from one person to the next. At the governance level, this is essential - you don’t want a board falling apart because a critical director’s departure wasn’t planned for. Neglecting succession planning doesn’t just mean failing to plan in the few months before a director leaves. It means failing to plan in the years before. The period when a director is comfortable with no immediate plans to leave is precisely the time a board should start thinking about what will happen when the departure arrives. The remedy Investing in professional development. Boards should always take advantage of opportunities to enhance the skills of potential leaders if this means training or new roles to gain experience, perfect! Failing to address long-term sustainability It is incredibly tempting to focus on short-term financial gains. In some business models, it’s even the primary goal - but at what cost? Take the pandemic-era recruitment surge in the tech industry as businesses move online. It worked well then, but when the world opened back up, the number of people hired was unsustainable, and mass layoffs ensued, leading to significant PR and legal headaches. The remedy As you would expect, the remedy lies in planning. Boards should develop robust blueprints for the future that account for things like market shocks, ESG responsibilities, as well as how it fits into natural growth. Letting toxic cultures develop The real danger here is two-fold. Toxic cultures can create massive fallouts once criticism ramps up. Toxic cultures can develop slowly, becoming huge issues without anyone at the governance level knowing a thing. Letting this happen is one of the biggest mistakes a board can make. At the minimum, it will hamper working relationships and productivity if it doesn’t lead to infighting and PR disasters. After all, no one falling victim to a toxic work culture will feel passion to see the business succeed. The “go get’em” attitude can descend to “good riddance” overnight. The remedy Pro-activity. The board needs to lead by example. It needs to establish a working culture and ensure it filters down to the rest of the business. It should not wait for toxicity problems to develop and then race to solve them. It should instead stay on its toes, deciding what it wants culture to look like and encouraging it as far as possible. If not, then what? What happens when you ignore the list of what a board of directors should not do? In short, they become dysfunctional - and that’s a horrible situation. A dysfunctional board of directors can cause many issues for the organisation, ranging from poor productivity to severely damaging the business’ reputation. In addition to falling into the pitfalls above, boards can also become dysfunctional when: Directors have conflicting agendas or are unengaged Secret meetings occur with only some directors - deliberately excluding others One or two board members are allowed to dominate meetings The remedy The cure for dysfunctional boards depends on the cause. But there are two things which underlie any remedy: communication and knowledge. Ultimately, boards don’t function properly without frequent, consistent communication. So, if you think your board lacks in this area, address that now. Similarly, board members who simply don’t know how to handle their responsibilities will never be of much use, so ensure this never happens. Every director should be informed, trained, and ready to tackle the organisation’s most significant issues. A trained board member is far less likely to fall into the cracks described above.

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Rapidly acquire the skills and knowledge you need to lead.

Diploma in Corporate Governance

Certified Company Secretary Professional

Diploma in Environmental, Social and Governance (ESG)

Technology & Governance for Boards

Company Secretary

Overview of Corporate Governance

AI Governance

CSRD Reporting

The director's challenge

Attend online and in-person events to get the practical skills and insights you need to make an impact as a leader.

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