A good company board is one of the keys to a well-run business, and if it’s doing its job, it should identify key issues that need to be resolved for development to take place, generate a constant flow of ideas and engage in regulated decision making.
That all sounds beautiful, positive and progressive, but as we all know, it doesn’t always turn out that way.
The personal dynamism that the board relies upon can turn into disagreements which, if left to fester, can crystallise into acrimonious disputes.
Pushing disagreements under the carpet
If left underneath the surface these disagreements can undermine the smooth functioning of the board and thus the company’s performance and, ultimately, could threaten the company.
In the infinitely variable play of human conduct, disagreements can arise over strategy, financing of the company and remuneration, conflicts between Directors’ interest in the company and outside interests.
Most of these conflicts are underlined by:-
- Lack of a shareholders agreement;
- Personal differences.
So, what can you do about these conflicts?
Well, as they say, prevention is better than cure, so it would be my suggestion to work extremely hard to create a culture that minimises the two things that cause most conflicts.
Here are just a few ways to do that:
- Clarifying authority, roles and responsibilities;
- Establishing regular board meetings with an orderly process;
- Meeting outside the business – combining meetings with team activities;
- Ensuring the flow of full information to all board members;
- The Chairman being wise enough to draw out disputes between parties and drawing the poison (chair needs to be able to encourage Directors to reach a consensus during this process);
- Incorporating Alternative Dispute Resolution into the company’s culture.
Our next blog will look at how having a shareholders agreement, although it sounds dull and legalistic, can be an enormous help in preventing and resolving disputes.