Overview

This document contains the case study and audience responses from a session conducted at the 2016 Annual Meeting in New Orleans in 2016. The session, titled Does Your Board Suffer from A Director Who Has “Checked Out”? was facilitated by Pat Mangan, Director of Governance Education at NRECA. The session was promoted with the description below –


What happens in a situation where a director becomes infirm, disengaged, or is otherwise unable or unwilling to make the effort that is required to be a fully engaged and effective director? What risks does the board face if it allows this board member to continue to just warm a board seat? What courses of action are appropriate? Who should be involved in addressing the matter? This interactive session will have participants explore options and offer guidance in addressing this delicate matter.

 Following a brief PowerPoint presentation the audience, including directors and CEOs, was asked to –  

 Read the case below and answer one of four sets of questions calling for different approaches to the situation described in the case.

  1. Come to consensus at their table (simulating a board) on responses to the assigned questions.

  2. Participate in a full group discussion led by the facilitator on responses to the questions.

  3. Share their responses with their peers via an app.


 Case: Director Max
Max is 56 years of age and owns a construction company.  He has been on the Board for 13 years. Once an engaged and enthusiastic director, Max has lately fallen into a pattern of arriving late to board meetings. Most troubling to his fellow directors is that Max now seems unprepared for boardroom discussions and seldom asks questions. Fellow directors have noticed that Max regularly nods off in meetings, sometimes for an hour at a time.

 

 Scenario 1: “Hope He Gets the Clue”

 Directors were asked to come to consensus on the following items:

  1. Come up with at least 5 “subtle hints” and tactics try to encourage Max to reengage with his board responsibilities.

  2. On a scale of 1-5, rate how likely these tactics would be to actually work (1=likely to work, 5=unlikely to work).

The following responses were shared by participants working on Scenario 1.       

  • What about the members that voted for him?  Put coffee at his seat.  Ask for his opinion in discussion.  Call on him when he is napping.  Give him some special responsibility.
  • Address the entire board instead of focusing on one person. Reiterate how important their representation is and how they are the key decision makers. Their involvement is not an option, it is crucial that they are committed. This approach usually makes those that are guilty feel that they are being addressed without actually singling them out. 
  • 1. Ask Max: How’s your health? Problems sleeping?  2. Generally ask, any problems? Anything you want to talk about?  3. Ask Max what he would do in the same situation with another director?  4. Ask the board president to have private conversation with Max.  5. Ask Max if he is still interested in serving on the board?
  • Board president should make initial contact with Max. Before he talks to him, however, he should discuss the situation with the board’s attorney.  As far as “subtle hints”, we think the first hint would be to inquire “Is everything okay?”  This lets Max know that we recognize that he is distracted.   Another “hint” might be to have a handout with general board etiquette (director expectations) printed out and attached to the agenda for the meeting. Since Max is so distracted, he may require more than “subtle hints.”

 Scenario 2: “Proactive Board Chair”

 Board Chair Mike is going to take responsibility to speak with Max. Directors were asked to come to consensus on the following items:

  1. Who is involved?

  2. What should be said?

  3. How and when it will take place?

The following responses were shared by participants working on Scenario 2.

  • Discussion
  • Board under the gun by membership
  • Board chair one-on-one  first step
  • A knowledgeable and proactive board president would be the board would have a Board Policy addressing board member tardiness and unexcused absences.
  •  The Board President should talk privately to the affected member to discuss the situation and ask for input from the affected director to further address the situation.
  • If the behavior doesn’t improve within a certain (agreed upon among the president and the director) period of time, an active recruitment should be undertaken by the board.
  • This situation needs to be discussed in executive session.
  • Max’s disengagement could be due to medical reasons.
  • Board performance appraisal.
  • Engage the board chair to speak with the director individually. If there is an issue that needs to be brought to the rest of the board it should be done in executive committee or executive session with only the board and co-op’s attorney present.
  • Address the behavior not the person. Check the bylaws. Ask Board Chair to check what would make him more engaged.
  • The path taken should be between the Board President and the checked out director.  Honest communication is the key and the conversation should include expectations of the board member.
  • Board chair with Attorney should meet with Max.
  • Say something like: “Max it seems like you’re distracted when it comes to your co-op duties.”
  • Start with full board appraisal.
  • Ask chair to visit with Max. Then, if problem persists, have chair and attorney address Max. If that doesn’t help have executive session with Max.
  • This is known as being a leader! Weak leaders always abdicate their responsibilities to others, but mostly to attorneys.
  • Ask the Board chair speak with Max individually to see if there are any major issues that are not allowing Max to fulfill his board responsibilities.
  • Perhaps a medical issue has developed or depression, board chair should investigate, talk to the director to see if there is a way to mitigate the problem before asking the director to step down.
  • Take Max aside after a board meeting and ask if he’s having personal issues.  Tell him that you and other board members have noticed he is not engaged like he used to be. Ask what the board can do to help?   
  • Max may not be capable of making positive contributions in decision making process for the coop.
  • The Chair should speak with the disengaged Director regarding his/her underperformance. The Chair should discuss the potential perception of the co-op members that the board as a whole is not fulfilling its duty of care by tolerating such behavior. The Chair should consult with the Attorney whether or not there is a policy in place that addresses such situations. There is a need for such policy, as the elected Director may retaliate.
  • The board chair should handle the situation along with the vice chair. We think 90 percent of these type of cases can be resolved in this manner. The attorney can help in the other 10 percent.
  • Chair and vice chair should sit down with Max ask what they could do to help the situation.
  • The board chair is responsible. Should meet with Max in a one-on-one meeting and explain impact on board functions and membership. 
  • Look for understanding and agreement on issue between Max and the Chair.  Try to get a solution. Set up trial period or probation period for Max.  If (after probation) there is no change in behavior, bring in the full board for a discussion with Max in executive session.
  • As board chair, I would ask our attorney to meet with Max and discuss his responsibilities as a Director.  Outline his need to be prepared and engaged and show up on time.   If after 2 board meetings, he hasn’t reformed then vote to remove him from board.

 Scenario 3: “Call Your Attorney”

Directors were asked to come to consensus on the following items:

  1. What are the board’s expectations for how the attorney would handle the conversation with Max?

  2. How would these expectations be communicated to the attorney?

The following responses were shared by participants working on Scenario 3.

  • Bring in the attorney if a conflict of interest exists or an illegal activity occurred. Very difficult situation.
  • Have the co-op’s attorney express to Max his fellow board member’s specific concerns. Review with him legal ramifications both personally and for the board. Ask him if there is something of a personal nature causing his distraction. Help him if possible. Suggest alternative behavior if there is denial on his part.
  • Have the attorney advise the board on the legalities of the absent/”checked out” board member.
  • We have a yearly board appraisal that asks us if all board members are actively engaging in the meetings as well as coming prepared.  We would ask the attorney to use this evaluation form to address the issue with the director to begin communication that there may be a problem (with the director’s behavior) and come to a solution.  The attorney would be a neutral player but bring it to the director’s attention.
  • Advise the board how to proceed legally! 
  • 1.  We expect the attorney to talk confidentially with Max to try to find out what is causing the behavior change.  2.  The board chairman would visit with the attorney and express the board’s expectations.
  • We think Max should be asked to resign.

Scenario 4: “Phone a Friend”

Board asks a good friend (someone on or not on the board) or spouse of Max to talk to him.

Directors were asked to come to consensus on the following items:

  1. Brainstorm what this conversation should include.

  2. How effective might this be?

  3. What could go wrong?

The following responses were shared by participants working on Scenario 4.

  • To involve a spouse or close friend or even attorney — really depends on the circumstances. Any time you have an issue like this to address, the board really needs to think about who it’s sending in to have that conversation. Are they well equipped to have the conversation?
  • We consider the “phone a friend” to be less preferable among the Board action options. If the “friend option” was used we would ask the Board chair or a Board member with the best personal relationship with the director to contact the director, express concern about the behavior and the needed change, and then listen. We think this approach has limited effectiveness. We are concerned about privacy about the effect on Board relationships.
  • Have family member talk to him.
  • You do not ask an outsider.  The board chair should be the one to contact Max.
  • Contacting the director’s spouse or a friend is a bad idea altogether….too many risks. It opens the door to hurt feelings, bad family relations, bad director relations, and perhaps the potential for legal issues.
  • You should not talk to anyone outside of the board. This should be done by the directors.
  • 1) Meet with the director and review the fact that he has been a good board member, but depriving the board of his input by not being engaged means the board is only running at 8/9 capacity. By his not engaging he’s setting up the board for legal risk (failure of the duty of care). 2) Depends on the Director himself and his ability to accept the feedback. 3) He might want to hear from the whole board. This situation could create division on the board and/or make the Director mad.
  • Depending on circumstances and director’s relationship with his spouse, asking him/her to intervene could be effective. You may find out what’s going on at home or work that may be contributing to the situation. Our group was concerned about telling a friend — you wouldn’t want that info getting out. It’s the board’s responsibility to deal with the situation.
  • First find out if something else is going on in their personal life. Check with family and friends to see if the perception of disengagement is the exception or the rule. Next, find out if Max still has interest in serving on the board.  Offer to help with his problems.
  • Try getting a close friend or family member to be present when talking to Max so as to not make him feel that the board is ganging up on him.
  • The person close to him should be provided with specifics of how the board determined the lack of engagement. The person would discuss these things with the director.
  • Go to the spouse, not a friend. See if there are underlying issues at home, heath issues, etc. If a spouse addressed the director straight on, the director may not be so offended. He may be glad that someone noticed his issues. He might get mad if his fellow director went to his friend though. We think this would be an effective way of handling the situation. The only thing that this approach may go wrong is if the director may not like people to be “in his business.”
  • This situation should be handled in executive session.
  • By first talking with the board member involved.  Find out if there are any outside influences that may cause this issue.  If he needs to be relieved from his duties either temporarily or permanently, take those steps accordingly.   Hoping that it goes well and that a reasonable person would recognize the issue and step down. Explanations from the Attorney would help substantiate and give guidance on how the conversation should go.
  • Decide as a board who would be best person, friend, to ask Max questions. Have that person ask questions:  1.Why isn’t he interested?  2. Is there change in his personal life?  3. Is he having health issues?    Much will depend on how the message is received by Max – whether he feels it’s coming from a place of concern, or if he feels he is being attacked.

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