Should board behaviour evaluations under FRC/QCA/Wates be substantially oral, not written?

In an ideal world boards should focus on fixing the matters arising from their board evaluations. They don’t because the purpose of board evaluations of many boards, despite pleas by regulators, is to tick boxes for annual reports and/or to use them as sticks to beat colleagues.

Even organisations who pride themselves on carrying out rigorous board evaluations including on behaviour issues can miss important systemic weaknesses because of the key limitation of written board evaluations: fear of writing down, for example, the belief by most directors that the CEO, CXO or Chair is a narcissistic bully who brooks no challenge. Delete as appropriate.

The collapse of Carillion is a chilling example of the limitations of written evaluations. Its annual report in 2016 noted that its board evaluation had “confirmed that the board, each of its committees and directors continue to be highly effective’.

I suspect there were were no boxes to tick on “recklessness, hubris & greed” in its (Carillon’s) board evaluation questionnaire because that’s precisely how the behaviour of the directors was described in the subsequent joint select committee inquiry.

To be fair to the Carillon evaluators they were and are not alone in struggling to cope with a UK governance structure which, despite widely acknowledged improvements in the FRC, QCA and Wates codes, nevertheless has failed to deal with the box ticking problem. Simply asking boards not to approach evaluations in that manner will not lead to compliance.

Which Chair will sign off an annual report which includes a statement from the board evaluation that they have low emotional intelligence, talk over colleagues at meetings, and don’t read the board papers?

Since boards will continue to publish broadly self congratulatory board evaluation statements where required to publish them and often ignore behaviour matters arising in confidential internal written board evaluations I propose they should, alongside current box ticking, use facilitated oral workshops to address behaviour issues if they are serious about improving board performance.

All but the most pathological Chairs and CEOs genuinely care about improvement in board performance especially at a time of pandemic and at a time when society, investors and customers are hyper alert to ESG defaults.

I propose three steps:

Step 1:

1-1 oral interviews with each director on board behaviour issues. No notes.

Step 2:

Facilitated oral plenary sessions of the board where key concerns on each other’s behaviour are aired and mediated. No notes.

Step 3:

As many 1-1 and plenary sessions as required to facilitate new ‘behaviour contracts’ between colleagues with due regard to legislating for the breach of these. No notes.

I have facilitated these steps and they work.

I agree that they won’t work with personalities “not for turning”. But in that case the board is already broken anyway and failure or a major “risk event” is only a matter of time.

Surely the pain of confronting the truth in private is worth it in the service of personal and shared purpose and that of society?

Ciaran Fenton

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