Read Lubna’s blog insights where she takes a fresh look at governance to create stronger countries and business
Silence. Are directors protected if they stay silent around a board table?
Governance is still a relatively new concept around the world and many who sit at a boardroom table are still getting to grips with ‘what does this mean for me?’
I want to look at the issue of silence around a board – and whether directors think they are protected if they stay silent. And is being in a silent chair, a cold and lonely place to be – or do you need to be silent to be part of ‘the club’?
Brian Cheffins of Cambridge University writes in his History of Governance,“Corporate governance first came into vogue in the 1970s in the United States. Within 25 years corporate governance had become the subject of debate worldwide by academics, regulators, executives and investors.”
So it is understandable that in the UAE – a country still only 47 years old – there are many directors who are still working out their personal roles and risks as a member of the board?
I have sat on boards for the last ten years – public, private and voluntary – and worry sometimes that too many directors are passive in board meetings. I fear that directors are thinking that silence will protect them and they will not be liable if later on, decisions are seen to have been unwise.
The simple answer is that boards are collectively responsible for decisions – the only way an individual can distance themselves from them is to resign, if they fundamentally disagree.
So why do board members stay silent? I think the key reasons are that people are worried about upsetting the chairman – the more prestigious and well-known the chairman, the more this becomes a problem. You also have problems where directors sit on 20 or 30 boards – they do not want to be seen as difficult and put their other positions at risk. And finally, board members have been recruited by people they know, friends and family, so it becomes uncomfortable to be seen as outside that ‘club’.
A friend of mine told me a story of raising a sensitive issue around the board table. He said that a fellow board member texted him after the meeting to say ‘you were right to put your head above the parapet’. While he appreciated the support, he said the interesting thing was he hadn’t thought he was putting his head above the parapet – he just felt his concerns needed to be raised.
What is also interesting about this is that other board members had not addressed the subject, yet clearly one or more felt there was an issue to raise. And I have numerous other stories on these lines where several board members are worried about a risk and they are looking to a ‘courageous’ fellow to speak first.
It really makes the point about needing diversity on a board. This is not just about gender but also age, experience and expertise – diversity increases the likelihood of good, constructive discussion and challenge as well as spotting and managing risks.
How you achieve this diversity can be difficult. And it is important that those on the board are encouraged to assess themselves periodically.
In my view the best governance comes from a wise chairman who is able to lead constructive discussion, take challenge and really listen. And this chairman also needs to explain to his board members about their responsibilities and that he or she expects his board to raise concerns. Board members then have to step up and do their part – actively contribute to board meetings. (I share other thoughts in this blog on good governance).
In the UAE we have been extremely lucky to have had our governance framework set from the top by HH Sheikh Mohammed Bin Rashid Al Maktoum. He and his fellow ministers are committed in their ambition for the UAE to be recognised for our transparency and as a great place to do business internationally. Regulation only does not create great governance – it provides guidance. Good governance is about ownership of corporate morals and ethics which has to be carried out by every board member and to do that, they have to speak out when needed.
We all need courage to speak up – not remain silent.