You’ve got to know when to go

January 31, 2012

Hewlett-Packard has announced that Lawrence Babbio will be stepping off its board, and this comes hot on the heels of the news that Sari Baldauf would also not be standing for re-election. GlaxoSmithKline Pharmaceuticals has announced that James Murdoch will not continue to serve on its board. He has served on GSK’s board since 2009, on its Ethics Committee. Murdoch has been embroiled in controversy this year, which led to loud rumblings as to whether it was prudent for him to remain on the board.

This news brings to mind an issue that comes up time and again when independent board directors gather: inactive, unproductive, distracting or simply “dead wood” board members. It is often discussed in hushed tones, but it is time to address it openly and frankly, and to look upon it as the responsibility of each of us as individual board members, rather than simply an issue for the board or the board chair to tackle.

There are a number of reasons that you should consider stepping off a board:

You’ve served too long.

There is a finite amount of time that anyone can serve on a board in a truly independent manner, yet a surprising number of “independent” directors have served for 30-plus years. The UK Corporate Governance Code‘s guideline on this issue sets out nine years as best practice. It seems hard to fathom that independence would stretch to 36 years, the tenure of Coca-Cola board director James D. Robinson, or 41 years, as is the case with Douglas G. Houser, a director on Nike’s board. Questioning their length of service is not a reflection on their abilities as board members, but rather stating the obvious: It is impossible to remain independent and to serve for that long.

Your expertise is no longer required.

Flux is an integral part of business. Innovative companies shift their priorities and direction routinely, in large and small ways. The object is to have people around the table who reflect the expertise needed for today and tomorrow. As the business changes direction, it may be that the reason you were brought onto the board no longer exists. It is not personal, and it can be awkward to say, but if this is the case, recognize the change and make room for someone else whose expertise is a better fit.

You’re not pulling your weight.

No one joins a board with the intention of going along for a ride. Work and personal circumstances change, and sometimes interest simply wanes. If you find you are missing board meetings or committee meetings, or are not engaging in, let alone beyond, what you are duty-bound or required to do, it is time to look again. If you are “phoning it in” by attending meetings but not reading your board papers fully or are not participating in the meetings you do attend, you can guess that everyone around the table has noticed. Be honest with yourself and exit gracefully.

You’re obstructively disruptive.

I am a strong proponent of healthy creative tension. It is vital to ask hard questions and to be confident about stepping up and taking an active interest in the discussion. However, there is a line. Your behavior should not be a distraction or deliberately combative. It is one thing to have creative tension; it is another to have an all-out war. If discussions become ego-driven, if your contributions are based on concern for your reputation, and if the best interests of the organization and its stakeholders you are there to serve and protect take second place behind that, you have outlived your usefulness to the company.

Your actions, inside or outside the boardroom, bring distraction or disrepute.

We’ve seen a couple of cases of board directors behaving in a way that taints everything in which they are involved. This runs the gamut from insider trading to saying things in public that are ill-advised or off-color. It could also mean being strongly associated with unfortunate decisions made by the board you sit on. If your personal or business actions are bringing disrepute to the company, if you have become the story and thus a distraction for the company, do the decent thing for the sake of the company and step off in short order.

No one wants to be the person everyone around the table feels is not contributing, and you never want anyone else to have to tell you that you have outstayed your welcome. Even worse, you don’t want to be the subject of shareholder activism about whom the things that are said ring true. Although humbling to admit, no one is irreplaceable, and the best service you can give is to step down and help encourage board refreshment. There are several mechanisms that can be put into place to make this process easier for boards to deal with, including term limits, clear job descriptions and regular board evaluations; but really, it shouldn’t take that for directors to figure out the right thing to do — and do it.

When it is time to go, don’t leave it too long, don’t wait to be pushed, step off gracefully, and finally, don’t try to “manage from the grave.”

PHOTO: BSkyB Chairman James Murdoch speaks at the BSkyB Annual General Meeting at the Queen Elizabeth II Conference Centre in central London, November 29, 2011.  REUTERS/Timothy Anderson/BSkyB/Handout


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More reasons for stepping off the board:
1) hooks and cutlasses at your back;
2) the waves are too big to ride;
3) you’ve just lost your knighthood.

Posted by Dr_JAH | Report as abusive

Another reason to go: You’ve lost religion. You no longer believe and you’re the only one who feels that way.

Posted by GMAFB | Report as abusive

I would add:
when you are unable to make decisions through a Corporate Social Responsibility (CSR) lens, balancing Social, Environmental as well as Economic factors.

Posted by MartinBrown | Report as abusive

How about the company’s owners (i.e. shareholders) have much, much more say in who serves on corporate boards and on what proposals get presented for votes?

Corporate governance in the USA is about as well structured as the sub-prime mortgage market. They are both disasters. Self-governance has been a national disaster.

Posted by txgadfly | Report as abusive

“How about the company’s owners (i.e. shareholders) have much, much more say in who serves on corporate boards”

This. The entire article flies in the face of human logic, which is that board members are never going to “voluntarily” give up board positions unless there is a stick or a carrot for them to do so. You’re fighting human selfishness, and a job where you can be payed well while not needing to “carry your weight” is actually an ideal ratio of lots of reward for no work.

There needs to be clear transparency into who’s actually productive and useful on boards, and a structural incentive for shifting board composition. Its the same problem with asking bankers to voluntarily report white crime, unless there’s a substantial carrot, or a vicious stick, they’ll never do it because the internal cost-benefit judgement doesn’t support it.

Posted by Araes | Report as abusive