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Wearing the right hat to avoid board dysfunction

May 18, 2018
Given that Ireland's first governance code was only developed in 2008, we are still getting to grips with governance and what it means for boards and directors in Ireland. We have a lot to learn. I wonder how many people say yes to a board appointment without thinking about the role, responsibilities and skills they need to know to carry out their new job. Once on a board, a new member can be overwhelmed by the breadth of knowledge that is required. This could include the Companies Act 2014, tax law, finance, health and safety, the relevant code (if there is one), on top of understanding how a board works.

The key challenge is understanding how one, as a new board member, can uphold the responsibilities of board membership, such as voicing opinions and contributing to the group. Good induction can help and should include an induction pack that contains not only the necessarily documents and an explanation of the organisation's functions and services, but also an insight into the corporate culture of the organisation, as well as the roles and responsibilities of board members. This can help a new board member put on the correct hat as soon as they join, and avoid dysfunction later on.

Board responsibility

Regardless of what introduction into the organisation a new board member has, the early days of board membership can be intimidating. It may take some time before a new board member is comfortable contributing on a spontaneous basis and, in the process, taking a chance at inadvertently upsetting the status quo. However, it’s important to remember you still have the same collective responsibilities as all the other board members, which includes voicing your opinions and only representing your board while in that boardroom.

Many directors do not know that the board is collectively responsible for all its decisions. They should know that even if a member disagrees with a particular decision where the majority is in favour, they must respect the decision and support it outside the boardroom. This can be hard for some board members if they are there are in a representative capacity, such as for a VC fund or for a province of a sports organisation where they sit on the national board. They have multiple hats and sometimes it's hard for those people to remember which one they have to be wearing.

All members of a board must remember that a director can only wear one hat in the boardroom and that is the hat of the board they sit on. If they are there in a representative or other capacity, they need to leave that hat at the door. If they don’t, the whole board will become dysfunctional, unknowingly catering to the interest of another organisation before looking out for the best interests of their own. Board members elected in a representative capacity will find this the most challenging, but most important, aspect of their membership.

David W Duffy – is the founder of The Governance Company and author of A Practical Guide for Company Directors published by Chartered Accountants Ireland.