Board Composition,Corporate Governance,ESG,Leadership
October 17, 2019
Is Collegiality Clouding Your Boardroom?
October 17, 2019
Is there such a
thing as being too collegial? This is a question boards should be asking
themselves. Having a collegial culture is something that has been important to
boards for a long time, and it certainly helps foster a productive and
respectful setting in the boardroom. But at some point, collegiality can become
too much of a focus and start to stifle other important board activities. Boards
should consider balancing collegiality by having more dissenters in the room, because
too much collegiality can prevent healthy debate and disagreement—and even
Our 2019 Annual Corporate Directors Survey highlights where collegiality is clouding the board’s effectiveness and where boards may be stepping up. Here are some of our top findings:
- Does someone on your board need to go? More than ever, directors say yes. Dissatisfaction with fellow board members keeps going up—but it’s more than just that. Nearly half of directors say that one or more directors on their board should be replaced—up for the third year in a row. Each director on the board has to actively contribute and participate in order for the full board to be effective at oversight. But not everyone always is, and there is some inertia when it comes to actually replacing those underperforming directors. Some of the problem may be due to that collegial nature of boards, where directors are reluctant to break up the group or suggest retirement to one of their peers.
- Collegiality can inhibit debate. One of the most important board roles, and sometimes the toughest, is to be able to debate and dissent openly, honestly, and productively. Asking questions and challenging assumptions is how directors determine if the company is making good strategic decisions. But directors don’t always feel like they can veer from the party line. In fact, 43 percent say it’s difficult to do so on at least one of the topics asked about in the survey. The collegial nature of boards may be causing some directors to pause on pushing back, and the results could be damaging.
- Directors may take the easy path with assessments. Conducting individual director evaluations can help drive continuous improvement in director and board performance. So it’s promising to see an increase in how many boards are making changes in response to their last assessment process—72 percent of directors say their boards did so in 2019, up from 49 percent just three years ago. When you dig a little deeper, though, you see that many boards are focusing on some of the easier changes. They are adding more expertise to the board or changing up committees. Those changes are certainly great to see, but boards seem to be avoiding the tougher topics, like counseling an underperforming director or choosing not to nominate someone to the board again. The collegial nature of boards may be a hindrance here, too: Conversations about poor performance can be uncomfortable and hard to have, and may be perceived as breaking with the traditional sense of collegiality aspired to by many boards.
- The board diversity discussion has dimmed. There has been slow but steady progress for board diversity over the past five to ten years, and the majority of directors say diversity enhances board performance. Just a few months ago, the last S&P 500 company without a female director added one to its board. But while directors recognize the benefits diversity brings to the boardroom—including its ability to encourage debate and keep collegiality from interfering with proper oversight—they may be getting tired of hearing about it: There’s been a drop in the percentage of directors who say that both gender and racial and ethnic diversity are very important to their boards. Directors—male and female alike—also feel strongly that laws mandating gender board diversity are not the right way to get diversity on boards.
- Directors: Investors focus too much on ESG. Directors are also tired of investors talking about environmental, social, and governance (ESG) matters. The percentage of directors who say investors spend too much time on environmental and sustainability issues nearly doubled in 2019 from a year ago. This, even though half of directors say ESG issues are important to company strategy. It could be that directors’ interest in having a collegial boardroom factors into some pushback on the growing investor influence over board agendas. Nevertheless, the ESG conversation isn’t likely to go away—it continues to be a big focus for institutional investors, which means boards will continue to hear about it, like it or not.
To find out more about
what 700-plus directors told us of their thoughts on corporate governance and
other board issues, read our 2019
Annual Corporate Directors Survey.