ADDRESS BOARD CULTURE TO MITIGATE RISK
Proving a direct correlation between poor boardroom culture and business failure is not an exact science, but increasingly commentators are concluding that there is a link between the tone that is set at the top and how well a company fares. So how does boardroom culture affect organisations, and what is the risk of failure if the culture at the top stinks?
When things go wrong, it is often the chairman or chief executive officer who falls on their sword, but they may not be entirely to blame. Fred Goodwin, former CEO of RBS, has been pilloried by the media and almost exclusively blamed for the entire UK banking crisis, but the board went along with him and the majority of shareholders signed off on the proposals that were put to them. True, market conditions were considered favourable and the banking crash unforeseen at the time, yet with hindsight the point is not “what if the deal with ABN Amro had been made a few years earlier?”, but how he managed to convince people to pursue his dream of banking supremacy in the first place.
Constructive challenge is key
RBS is a good example of what can go wrong when a CEO is not sufficiently held to account by the board. Presiding over the largest annual loss in UK corporate history is not just a question of bad timing. Rumour has it that Mr Goodwin’s personality was such that nobody felt able to challenge his opinion and if they did their voice was drowned out by the sheer force of his personality. The success of a board is undermined when directors are unwilling to listen to others, so it is essential that all board members practice the art of listening and participate in genuine conversations to ensure that a measured approach can be taken. A good boardroom should be a place of constructive challenge, not a shrine to the cult of personality.
Jan-Mar 2016 Issue