Is a conflict on the Board of Directors common practice or alarming in the company? What is the nature of conflicts and what measures should be taken to ensure that the dialogue between business partners proceeds in a constructively?
Communicative principles in Board of Directors
The Board of Directors is a collegial management body of a business company that exercises general management of its activities.
The hallmarks of a dynamic, effective Board of Directors are stimulating the exchange of ideas aimed at identifying key issues, considering alternatives, and making dynamic decisions. However, all this is impossible without discussion and debate. The debate mustn`t turn into disagreements that escalate into hostility that can make the board ineffective and even jeopardize the company’s very existence. What is the nature of board conflicts, and what steps are needed to keep the discussion constructive? Which of the following actions does not help managers defend against a hostile takeover?
The main reason for the emergence of conflict situations is the discrepancy between the interests of the members of the Board of Directors dealing with hostile board members on a number of issues, including those of a management nature. The reason for confrontation can also be an imperfection in the company’s internal documents, which are designed to regulate relationships within society.
The other reasons for inconsistencies in the Board of Directors are usually:
- the presence in the council of independently thinking, educated and competent people who can formulate and present an alternative opinion;
- the interest of such people in the maximum success of the commercial organization on the Board of Directors of which they are members;
- the CEO’s tough management practices that make the board unable to respond to changes in the financial situation;
- the presence of factionalism in the council, leading to manipulation and behind-the-scenes negotiations;
- ignoring the opinion of the rest by the majority shareholders.
The absolute unanimity in the Board of Directors and related structures testifies either to the low competence of the board members or to some shenanigans that are secretly carried out by at least some of them. But how often does constructive discussion turn into conflict?
Main strategies to resolve conflict
Relations in the Board of Directors are governed by the law “On joint-stock companies”, the Civil Code, the code of corporate ethics of the company, its local regulatory legal acts, the charter of the company.
As for the issue of a conflict, in this case, we are talking about a situation in which the members of the Board of Directors cannot come to a common decision. In this regard, a kind of corporate crisis arises, which leads to the suspension of work on the agenda item, on which the members of the Board of Directors could not come to an agreement.
Do not forget that the crisis in the company demonstrates the level of corporate culture in it, therefore, if it occurs, it is necessary:
- First, to modernize the code of corporate ethics – to introduce norms of responsibility for violation of its provisions and norms on mutual respect between management bodies. All updates should be focused solely on the interests of the company.
- Secondly, it is worth introducing internal acts of society that regulate the issues of interaction and behavior of its participants and governing bodies. For example, regulations on the Board of Directors, regulations on the work of the board of directors. These acts may contain norms governing relationships within these bodies.