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Director's dissent: where your undue silence will be used against you

Terry Booysen

Time and again, business reports have revealed how many organisations have seen their demise as a result of their nonchalant board of directors. Yet in so many of these cases, the directors somehow seem to get off scot-free and stakeholders are left counting the costs. While there may be a variety of reasons for the collapse of organisations, one of the most often over-looked areas for an organisation's inability to perform optimally - and hence its failure - may be found in directors who don't take a stand against issues they know are undesirable, or even detrimental, for the organisation.

No matter how one looks at any of the circumstances or reasons for a director's inaction, there's no doubt that directors are expected to protect the interests of an organisation at all times. They must be able to demonstrate their fiduciary duties, including the fact that they are in full control of the organisation's affairs.

For this to happen, directors - be they executive or non-executive - need to have an enquiring, probing mind that interrogates all possible areas of risk which could expose the organisation to unnecessary, unwanted damages. If a director does not have a clear understanding of the organisation, its business and its full operating environment, including the ability to stand firmly upon their own convictions about that which is right for the organisation, this can become a sure recipe for disaster at a number of levels. Frankly put, if a director does not actually show their disapproval and verbalise such dissent in the boardroom upon any matter which can cause the organisation harm, then they are simply not doing their job of protecting the organisation, neither are they fulfilling their fiduciary duties owed to the organisation.

Penalties for non-adherence to director's duties

In ideal conditions, where legal sanctions are applied to individuals who fail to apply their minds to the myriad of matters placed before them, directors may be held jointly and/or severally accountable for their failure to dissent to matters which were actually deserving of such dissent. Indeed - through such accountability - where the organisation suffers damage and the director cannot prove they took reasonable steps to debate a particular matter robustly until such time that they were completely informed and in agreement with their fellow directors, their silence upon such matters (or inaction) is tantamount to their failure to protect the organisation.

Clearly, not performing the duties expected of a director - which may include upsetting the boardroom collegiality if need be - will surely lead to a variety of consequences, e.g. incurring some form of liability, be this at the level of the board or at the door of the laggard director. As the ancient axiom goes: "The fish rots from the head down". This says a lot about the role of directors and how this affects the ultimate success of the organisation.

The board of directors of an organisation is essentially a deliberative body

As such, they are expected to strive toward reaching consensus when making decisions on behalf of, and for the benefit of, the organisation. However, there may be instances when a director may not agree with the course of action proposed by the board. When this occurs, directors are expected to voice their dissent in the boardroom in a respectful manner, stating their reasons for such dissent. However, there may be a number of reasons why directors remain silent, and most often this is to the detriment of the organisation.

Remaining silent in the boardroom may potentially be enough to cause the company to suffer serious loss or damages and it may be - done often enough - the final nail in the organisation's proverbial coffin. Many directors have, in the past, remained silent when they should have dissented against a particular decision. This phenomenon begs various questions.

Why do directors refrain from dissenting?

There are three main categories detailing the reasons why directors may not express their dissent in the boardroom, namely:

1.  Lack of knowledge, including:

  • A failure to understand the duties owed to the organisation,
  • A failure to understand the director's liabilities attached to their fiduciary duties,
  • A failure to appreciate the general role and responsibilities attached to directors, and
  • A lack of skills or experience necessary to make business decisions.

2. Lack of preparation, including:

  • Not preparing sufficiently for board meetings, and
  • Not preparing sufficiently for the role of director within that particular organisation.

3. Lack of interpersonal skills/psychological attributes, including:

  • Fear of being disliked, ostracised or viewed negatively by board members,
  • Lack of confidence in their opinion or lack of confidence to voice their opinion in front of the board, and
  • The desire for social harmony.

The first two categories - lack of knowledge and preparation - may be easily remedied should directors, for example, undergo training and commit to their duties as a director. However, the last category - lack of interpersonal skills/psychological attributes - may indicate that the director does not have the necessary qualities to fulfil the position as a director.

What qualities do directors need to fulfil their role effectively?

The qualities and attributes directors possess will ultimately determine if they are fit for the role of directorship. The following three qualities will influence their ability (or willingness) to dissent:

  1. Independence - Independence of mind promotes constructive scepticism and the freedom to express differing views.
  2. Informed and involved - Being fully informed of the organisation's business will put the director in a better position to dissent. The dedication of time to carry out fiduciary duties will affect whether a director has a sufficient understanding of the business of the organisation which is necessary to dissent constructively.
  3. Initiative - Taking the initiative by asking questions, listening and insisting on answers is a quality that will lend itself to the expression of disse

Terry Booysen is the CEO of the CGF Research Institute and has presented numerous interventions to public and private audiences in and out of South Africa. He has received many accolades directly linked with corporate governance. He is a regular presenter and has produced many governance, risk and compliance reports and articles over the years.