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Business Analysis

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These days, directors on corporate boards need to 'voice' what is on their minds

With higher scrutiny, board members can no longer play the silent type



Stock-Board-of-Directors
Image Credit: Shuterstock

Was the Great Resignation a mere hashtag? Or did 2022 see some happen on corporate boards of directors as well? Going by the many top-level resignations across the world, it certainly seems like that.

Resignations not due to old age, tenure end or ill-health, but of more serious fiduciary issues including value mismatch, transparency, governance lapses and so on. There always seems to be unanswered stories when someone departs from a board, even when it is a matter of just not seeking re-election.

Part of this is the status bestowed on being on the board of directors, from a local non-profit to major public corporations. A professional has achieved the top levels of an entity, finally made it into the company of the select few - and now he or she is leaving? Sounds suspicious?

Yet, the recent Adani episode has not resulted in any resignation from their boards or of their biggest funders, the public sector banks in India.

There are endless reasons for stepping away from a board role. Changes in time demands or job status are common causes. Everyone involved in board work, particularly in the corporate sector, knows that the time and effort required have exploded over the past decade, and more so in the last two years of the pandemic.

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A board role may be just too much on the plate. Shifts in job roles, as well as mergers and acquisitions, could mean that you now face a conflict of some sort with the entity, and should bow out gracefully.

Other reasons for saying sayonara may be more personal and subjective. Boardroom burnout becomes an issue. You put less time into pre-meeting information review and research, ask fewer questions in meetings, and bother less if some numbers don’t add up (assuming you still try to add at all).

A passive role

This ‘quiet quitting’ can also be driven by a stagnant strategy, bad meetings, and a governance role that just has the board saying ‘aye’ every few minutes. Maybe you are missing more board and committee meetings, and answering fewer calls. Quitting under these circumstances is actually a good idea.

Your input is offering little benefit, and life is too short to die of boredom.

But there is another category of board resignation that gets into more serious problems, and tougher decisions on your part. This raises the question of what your personal boundaries are, the lines you refuse to cross.

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Being cast aside

Management shuts down any board member who asks sensitive questions. You are asked to sign off on results you know are inaccurate. A board decision not only goes against you, but against your sense of right and wrong.

There are procedures and disclosure issues of noisy withdrawal from a board. Instead, step back and have a discussion with yourself, maybe even before you join a board in the first place.

What are your boundaries - actions or conditions that you cannot, and will not, accept as a board member?

Here are some instances where one should consider quitting:

• Board takes an action that is totally against your conviction and vote. You should evaluate the pros and cons and decide if it is worth continuing as an independent director for the sake of appearances.

• Conflict of interest such as financial transactions with the company. As a board member if you in another capacity have substantial financial dealings with the enterprise you serve, will you be able to do the right governance? Will analysts be kind if this is known? If you don’t resign, will the enterprise you serve get negative image?

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• Lack of transparency or suppression of information. Some enterprises do this. It should not be allowed at all. If you know that information is missing or suppressed, raise the issue and try to reverse the situation. If nothing works, make a noisy exit.

Dr. M. Muneer
The writer is co-founder Medici Institute.
Ralph Ward
The writer is a board advisor and publisher.
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