“Challenges are what make life interesting, and overcoming them is what makes life meaningful.” This sentiment could certainly apply to the ups and downs of board service. Let’s say you’ve selected a coveted board seat, yet there are aspects of how the board is operating that are making you uneasy. What are the signs you may be on a bad board? What if there are more downs than ups in your board experience? When is it time to part ways?
Before we get into what constitutes a bad board, let’s consider what you should expect on a good board. As a board director, you should feel that your expertise is well leveraged, that you’re heard, and that your advice is being followed. You should have engaged and lively interactions with other board members. You should reach good decisions in a timely manner. Information and ideas should be shared freely. Members should be open to innovation and novel approaches. Clear and honest communication should be common practice. All of this doesn’t mean the absence of conflict is a good sign. In fact, an effective board should have healthy, heated debates over ideas, strategy for the company, product road maps, external threats, etc. A board that agrees on everything and rubber-stamps most requests is a complacent and ineffective board.
Being on a board isn’t unlike being a newlywed. After the excitement of the wedding ceremony, a couple starts to settle into their new life together. A newly married person might find that disagreements arise over seemingly innocuous issues: Which brand of toothpaste should we use? What’s the “proper” way to load the dishwasher? What temperature should the heat be set to? Much like in a marriage, there are some aspects of a board that you don’t really learn about until you’re actively engaged in the inner workings of the boardroom.
What are the signs of a bad board? As you sit through meeting after meeting, you may start to see the warning flags: lack of participation, or a disengaged board member. Too much participation from a domineering board member. Directors pushing their own agendas or fanning the flames of a conflict. A mismatch of board skills with company needs. Lack of trust. Lack of confidentiality. Dysfunction. Poor decision-making. Unwarranted hostility.
There may be clues to dysfunction that manifest before you join a board, but you must be attentive. I was once recruited by an activist investor to join a board that the founder/CEO had populated with his close buddies. The activist wanted the company to get into a new sector that was within my realm of expertise. But I asked myself: “Will I be able to get other board members to consider novel ideas when they’re so tight with the CEO?” And: “What if the company doesn’t enter the new sector? Then I would be on a board where my expertise isn’t relevant … so then what?” After assessing the risks, I passed on the opportunity.
Early on with another board, I was shocked to learn that although it had been operating for 10 years, the members had never had a single board dinner or structured time together outside the board meetings. That was a red flag. The more I got into the inner workings of the board, the more I realized there were culture, collaboration, and trust issues.
Questions you must ask yourself when you’re assessing the ups and downs you’re experiencing on a board are:
- Is this a temporary situation?
- Are outside forces causing this strife, or is it a fundamental internal issue?
- Are the negative aspects likely to change?
If after much consideration you believe the status quo is untenable, it may be time to pull the cord and evacuate.
So, what’s the exit plan? Getting back to the marriage analogy, it can actually be easier to get out of a bad marriage than to get off a bad board. Across the world, the average length of a marriage that ends in divorce is about five years, with the shortest marriage on record clocking at just three minutes. The expected period of board service for a U.S. public company is closer to 10-plus years. Since many companies lack board term limits, you might find some members remaining for a long time; in fact, there are some companies where board directors have served for 50 years.
When it comes to private boards, it can be awkward but still possible to exit in a timely manner. This requires that you discuss your concerns with the board chair and submit a concise letter of resignation. Be prepared to have conversations with other board members and the CEO, and aim for a graceful exit. It’s much more difficult to exit a public board, and it requires a mandatory 8K filing with the SEC, which makes public both your resignation and your resignation letter. With significant advance planning, it’s possible to leave a public board (especially after many years of service) by not standing for reelection at the subsequent annual meeting. But the optics of losing a board member may not be great, so it’s in the best interest of the board member, board, and company to make this transition as smooth as possible.
Whatever you decide, it’s also important to consider the reputational risk of staying on a board when you believe its decisions aren’t being made in the best interests of shareholders, employees, and the greater community. We all have limited time on this earth, and life is simply too short to remain in a miserable situation. As someone once said, “Sometimes, the hardest part of a relationship is knowing when to let go.”
Shaz Kahng WG89 is a multiple-time board director and CEO and a founding member and board director for Wharton Alumni for Boards. She has served on boards for public and private companies, including GoPro, InsideTracker, and Gymboree. She is also a board director for the nonprofit LiveGirl. Previously, Kahng was the CEO of Gymboree and Lucy Activewear and led global businesses at Nike. She is the author of the award-winning Ceiling Smashers series of novels that spotlight what it takes for female business leaders to succeed.
