Top Ten Signs of a Dysfunctional Board

More than ten years ago I wrote an article bearing the above title.  The article has resonated with the boards of many of my clients, as well as association executives.  It seems to me there are still plenty of barely functional boards around, so I am republishing the article again at this time.  This time, however, I will add a few comments from a legal perspective where applicable.

I hope this article will help board members and association professionals learn to identify the underlying causes of dysfunction, and to avoid and/or minimize the negative behaviors that cause it.

ATTORNEYS AND CONSULTANTS who work with associations see their share of troubled boards of directors.  In fact, I believe troubled boards outnumber focused, efficient boards by a substantial margin.  Notwithstanding their problems, most boards seem to get by, but they could be better.

This article will point out some key indicators of a dysfunctional board.  While every association has a different way of working, the presence of more than a few of these signs is cause for concern.  Key indicators include:

Focus of Negative Attention on the Executive - when one or a minority of directors is openly critical of an executive, a great deal of resources tend to be devoted to that issue.  Distrust and struggles are likely to occur,along with frequently unfounded accusations against the executive.  Many times, if not most, the problem is with the board itself, not just the executive.

This behavior highlights the corporate rule of limited authority, which provides that directors (and all others, for that matter) have only the authority that is specifically delegated to them by law, bylaws or other corporate documents.  Here, a director’s opinions of the executive are irrelevant except to the extent expressed during a board meeting.  What matters is what the board thinks, not what one or two directors might think.  Further, directors acting on their dissatisfaction of an executive without board authorization is an interference with the board’s authority.

Overly Powerful Executive - sometimes executives amass so much “control” over the association that board members feel no need to do their job, or are reluctant or too intimidated to openly question what is happening.

It is lawful for a board to delegate substantial powers to its executive, however the ultimate responsibility for the organization remains with the Board, and fiduciary duties of each director remain in place.  Here, the fiduciary duty of care and the duty of inquiry require that directors be free to ask questions and challenge any organizational decision or action.

Last Minute Proposals - if important or controversial items of business are handled via last-minute (read: sneaky) proposals when there is no true emergency, the board is probably being manipulated.  Likewise, a board that is swayed by last minute proposals, and shallow or slick presentations without full analysis and discussion, is not doing its job.

Fiduciary duties of directors require they serve with the care of an ordinary prudent person.  A prudent director would want to carefully review, consider and discuss a proposal prior to acting on it, and should refuse to act on a last minute proposal, except in the case of a genuine emergency.

Power Struggles - power struggles shift the board’s focus from the business of the board to individuals or sub-groups gaining/maintaining “control.”  A board that is controlled by an individual or sub-group is inherently dysfunctional. So, whether right or wrong about the issues, controlling the board is harmful, while use of vision, influence, knowledge and ideas is completely appropriate and desirable.

Power struggles are not necessary illegal.  Instead, they highlight the probability that the group has strayed from its governing principles.  These principles are most likely grounded in the democratic process, rather than who can amass the most power.

Vote-Counting Prior to Meeting - counting and collecting vote commitments prior to a meeting is always inappropriate.  It generally results in conflict, distrust and weak decisions because decisions are made prior to full discussion and analysis.

Vote counting prior to a meeting is not illegal, but it presupposes a willingness to commit to a position without having heard the full discussion in the boardroom, an apparent violation of the statutory fiduciary duty of care.

Lack of Civility and Respect - a board that tolerates hostility, aggressiveness, or disrespect among board members, weakens itself and wastes time and leadership input.  A weak board finds it difficult to stop abuse, personal agendas and other disruptive acts.  It may have difficulty recruiting quality members.

Neither civility nor respect is legally mandated, but it's absence clearly weakens a board.

Board Micro-management - whether you are micro-managed or not, you already know what I mean.

Board micro-management may well violate an employment contract or existing policies, but it does not violate law.  A board is free to micro-manage its executive to the extent that it can afford to waste the time and resources of the organization.

Preoccupation with Bylaws and Parliamentary Procedure - while bylaws must be adhered to, and on occasion may require clarification or interpretation, disputes about bylaws or parliamentary procedures usually indicates more serious problems beneath the surface.  See “Power Struggles” above.

See comment at Power Struggles above.

Directors as “Representatives” - when directors act as representatives of their constituents rather than in the best interests of the whole, difficulties will abound.  Some directors go so far as to criticize the decisions of the board to their constituents -- a particularly disloyal and disruptive act.

Directors owe fiduciary duties of care, inquiry and loyalty (sometimes called duty of obedience) to the corporation, first and foremost.  While directors should be keenly aware of, and even biased in favor of local/regional points of view, the director must act in the best interests of the organization as a whole.  Thus, if a director knows that a certain action is of great importance to a certain region, but that the interests of the group as a whole require a different action, the fiduciary duty of loyalty requires the director to support that different action.

Rump Sessions - while discussing problems and ideas outside of a meeting is fine, unofficial group discussions outside of official meetings nearly always exclude at least some key stakeholders, and therefore undermine communication and trust.

Notice of all directors meetings must be given to all directors.  Meetings to which only some directors receive notice is not a meeting, and persons present at that so-called meeting can take no actions.  More importantly, when corporate business is discussed among subgroups of the board, other directors are excluded, and distrust is cultivated.  This does not mean that directors should not communicate with each other about important issues.  It merely means directors should be careful about such meetings in order to avoid cultivating distrust.

These are the basic signs that I have observed in my practice.  Are there others you could share?  Please let me know.  Next broadcast, I will present some ideas and methods for improving the functionality of boards.