Leadership

When a Good Board Is Bad News

By / May 19, 2014 (iStock/Thinkstock)

A recent study suggests that too much agreement on a board can weaken a company, even increasing the probability of fraud. Why you need to (nicely) cultivate dissent.

Is an agreeable board bad for business?

The Harvard Business Review recently highlighted research that suggests that when a board’s politics align with the CEO’s, the company suffers. The study, written by two business scholars and a Security and Exchange Commission staffer, found that such businesses had lower valuations, lower profits, less of a likelihood of dismissing a poorly performing CEO, and—perhaps most troubling—“a greater likelihood of accounting fraud.”

Too much agreement can weaken the board’s enthusiasm for oversight, and that gets costly.

The difference is modest (a three percent uptick), but it’s still worth noting. And though the research focuses on the corporations and not associations, it’s easy to see the risk for nonprofits, particularly those with robust lobbying activities. You want a board that speaks strongly, with a unified voice, but too much agreement can weaken the board’s enthusiasm for oversight, and that gets costly. In a lot of ways.

Everybody’s Happy. Now What?

When I’ve written about CEOs and boards, the problem to be solved is usually resolving a conflict: Dealing with rogue board member, say, or general disengagement. Alignment and agreeability is what you’re striving for, right?

But the study highlights the fact that there’s a distinction between alignment and engagement. “Alignment” gets everybody on the same page, but it doesn’t mean the board is recognizing their role—their fiduciary duty, in fact—to police organizational drift. (One thing we know about high-performing boards is that they’re highly engaged.)

Associations Now‘s Joe Rominiecki recently wrote about the consequences of this drift. In an article about embezzlement at associations, he spoke with one executive who cited “Too Darn Nice Syndrome” as the reason behind the board’s neglect of a staffer who made off with approximately $100,000. “People who work with each other … tend to get to a point where they’re familiar with each other and tend to like each other, and there’s a temptation to avoid confrontation and to assume the best motives of the other person,” consultant Michael Wyland told Rominiecki.

Do You Have to Be Too Darn Mean?

A bit of robust dissent among the board and CEO—political or otherwise—isn’t just important to for avoiding fraud. That sort of back-straightening activity is crucial to stoke critical thinking among leaders as well.

The chief concern about this sort of disagreement is that it risks poisoning the culture of board and sparks angry and unhelpful squabbling. But David M. Patt, CAE, owner of Association Executive Management, says those fears are generally unfounded. “[C]onformity can stunt association growth and innovation. New ideas must be raised and discussed, and that means conflict and disagreement are inevitable,” he recently wrote in Associations Now. “But in my experience, that conflict will probably be very polite.”

Bubbles and echo chambers are real problems among leadership, and my unscientific suspicion is that it will become more pronounced in the coming years; the tools that allow us to customize our media intake also allow us to block out ideas we might find distasteful, making us more eager to push away dissenting opinions. But it’s the job of the people at the top to let those disagreements out into the the open. Not doing so, on the evidence, can carry a hefty price tag.

What do you do to sensibly cultivate dissent among your board and top leaders? Share your thoughts in the comments.

Mark Athitakis

Mark Athitakis, a contributing editor for Associations Now, has written on nonprofits, the arts, and leadership for a variety of publications. He is a coauthor of The Dumbest Moments in Business History and hopes you never qualify for the sequel. More »

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