As with most things of this sort, it depends on the context. Sometimes it will be a procedural issue that contributes to dysfunction and at other times it will be behavioural. IMHO, there are no universal truisms explaining board dysfunction.


Having said that, there are many reasons that boards are dysfunctional or sub-optimal.

1. Certainly, if the business of the board is not managed well, then it will be harder for appropriate decisions to emerge. This mismanagement may be a product of the way the board does its business (i.e. process), or may be a product of the way the Chairperson manages business (i.e. leadership). In either case, it may be a hurdle to effective decison-making.

2. Directors, like the managers they oversight, are human beings too and suffer from similar subjective perspectives. Directors may fear the loss of their incumbency, the loss of status, the loss of their entitlements, the loss of their relationships within the company, or the loss of their ability to leverage their career into more prestigious boards. All of these very human attributes may/will impact and sometimes impede rational board-level decision-making.

3. Inadequate skills will impede decision robustness on certain issues. It is unlikely, for example, that a board that has never undertaken an M&A will have suitable M&A experience on the board (they may be lucky and have those skills but it is unlikely to have been a part of the director search criteria). Therefore, in all likelihood, the board may rely more on management recommendation than they would otherwise, and they may not have the skills to know which critical questions to ask.

4. The other reality is that a board is unlikely to remain "dysfunctional" on all things at all times or to make optimal decisions about all things at all times. Like most things, the effectiveness of the board will be judged on its ability "on balance" and certainly on the big issues. If there are a lot of poorly resolved "big issues" then the board will be probably deemed as ineffective or poorly performing.

5. Then there are those directors who sometime erroneously make the assumption that "because it's not their specific responsibility", someone else will "look after it". That is the problem with many group structures: unless responsibility is explicity assigned, then a chance of getting an optimal outcome is unlikely.

6. It terms of "Boards that couldn't think straight", my experience is that this occurs on so many different levels and I've seen all the errors made: ignoring shareholders; accepting the CEO's vision when it wasn't in the investor's interest; poor CEO appointment practices; lack of CEO briefing of organisation required outcomes; poor operational decisions; no oversight of strategic plans; poor marketing; poor crisis management; etc.

The board and its directors have certain specific accountabilities and responsibilities. As a minimum, directors should be able to deliver these at a level that is far above average. The board should then have the wisdom to know when it has outreached its existing skillsets and when it needs to call in independent expert opinion to assist them in making suitable decisions. Instead of doing this, many board merely accept management's recommendation with little interrogation or understanding.