Many boards are not equipped to deal with big disruptions to their businesses, and conventional governance is not “fit for purpose” in such situations, according to new research.
Things that can get in the way of effective board performance in a crisis include a powerful and successful chief executive or a weak chairman — either of which can make it difficult for non-executive directors (Neds) to draw attention to problems at an early stage. There may also be market pressure to take the company in a direction that ignores the real problem, write the authors of Boards in Challenging Times: Extraordinary Disruptions, by Henley Business School and Alvarez & Marsal, the professional services firm.
In a crisis, the first step for boards is to be as “clearheaded as possible” about what the issues actually are, said Stephen Hester, chief executive of RSA Insurance and a member of the report’s steering committee: “In many cases of corporate crisis there’s an initial process of denial, in part because the people who have been associated with the weaknesses don’t like confronting the fact that there are weaknesses. Clearly the quicker you get through the denial and the clearer-headed you are about exactly what’s wrong, the easier it is to start fixing things.”
Read more in The Sunday Times