The Interview: Bookbag Talks To Gerry Brown and Randall S Peterson about Disaster in the Boardroom: Six Dysfunctions Everyone Should Understand

The Interview: Bookbag Talks To Gerry Brown and Randall S Peterson about Disaster in the Boardroom: Six Dysfunctions Everyone Should Understand

Summary: Sue was absolutely riveted to Disaster in the Boardroom: Six Dysfunctions Everyone Should Understand by Gerry Brown and Randall S Peterson. It's brilliantly readable but rather frightening: people's lives and livelihoods could be in the hands of company boards which are dysfunctional. Sue wanted to know more.

Date: 7 June 2022

Interviewer: Sue Magee

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Sue was absolutely riveted to Disaster in the Boardroom: Six Dysfunctions Everyone Should Understand by Gerry Brown and Randall S Peterson. It's brilliantly readable but rather frightening: people's lives and livelihoods could be in the hands of company boards which are dysfunctional. Sue wanted to know more.

• Bookbag: When you close your eyes and imagine your readers, who do you see?

Gerry Brown: I see the business community, academics - especially from Business Schools – and also any members of the general public who take an interest in business.

Randall S Peterson:Randall S. Peterson [RP]: I see anyone who is interested in business and the impact it has on society. So, business people for sure, but even an informed lay person needs to understand the role of the board in the life and impact of all of these large businesses.

• BB: There are numerous things which I can't do without a specific qualification or licence but I could become an independent director of a company with no training or qualification beyond that an influential member of the company thought that I might be a good fit. Do you think that training for directors and chairs should be mandatory? How could this be enforced to make sure it was effective? Shouldn't there be a rigorous skills assessment?

GB: Not only should training be mandatory but I should like to see the legal requirement for a professional qualification similar to other professions (for example, as they have in Accountancy, Law and Engineering).

RSP: Talent comes from many places, so I would not necessarily require training before appointment. But I could easily imagine that anyone who is appointed would have say two-three months to take a certified course on the role of the board and key issues. And then like other professions, have a periodic ‘continuing education’ say once a year that could even be an online module on current issues that boards should be talking about and dealing with. It does not even have to be time-consuming or onerous to make a significant impact on avoiding basic mistakes and getting the right issues into boardroom discussions.

• BB: Are family relationships on boards necessarily a bad thing?

GB: Usually yes, because of the inevitable conflict of interest which interfere with decision taking.

RSP: Like family business more generally, it has some large potential positives and large potential negatives. But generally speaking, for listed companies of the type we studied (i.e., versus a family business) I would say it should be avoided in order to maintain independence of non-executive directors.

• BB: Is strong leadership always an asset? In Disaster in the Boardroom there were numerous examples of the 'strong personality' (or group of such people) who pushed a company in the wrong direction.

GB: Strong leadership is not always an asset. It depends on the motivation of the leader. For example, if he or she is focused on the best interest of the company and its long-term sustainability it can be very good.

RSP: Strong leadership is often problematic! Research has shown over and over that leaders need to be dominant to get heard and noticed, but not so dominant that they become bulldozers and roll over people. Listening and learning from unusual places are the hallmarks of great leadership and a great board.

• BB: Is there much point in a board where independent directors are not in the majority?

GB: There does not have to be a majority although that is preferable. But one Independent Director is better than none.

RSP: There can be a point if the executive are truly open to alternative views and turn to these people of help and advice. But should a disagreement break out, they will not carry the day and that is the point I think you are making, and I would agree with. I have written a number of times on how majority-rule decision making (i.e., the tyranny of the majority) is a dangerous way to work, better off looking for qualified consensus in group/board decision making where everyone can live with the decision, even if it is not their chosen solution.

• BB: What's the best way of appointing a new CEO?

GB: Ideally a CEO should be appointed from within a company in order to avoid risks. So, succession needs to be planned so that potential candidates are groomed for future success. Ideally, of course, there should be more than one potential successor. There should also be a proper selection process run by the Nomination Committee and external candidates should be included.

RSP: The best way to choose a CEO is the best way to fill any vacancy, start with the skills you need before you consider any candidate, look far and wide for the best fit you can find, and pay them competitively.

• BB: Many businesses regard fines and bribery as a cost of doing business. I have heard it argued that if that folded note of local currency was not enclosed with a form then it would not get the necessary official stamp so the payment couldn't be avoided if business was to be done. Obviously, this is at the other end of the scale to the $500,000 paid to a foreign company to secure a contract. Is there a shading here, or should it all be regarded in the same light?

GB: Bribery is against the law and should not be supported.

RSP: I would consider all of it a bad sign. The thing is that if you bend a little it sends the signal that it is OK to bend (i.e., a lot!). This can pretty much only end badly.

• BB: Where do you stand on stakeholder engagement? How far would you go? Is there a danger of creating an unbalanced or unweildy board?

GB: Stakeholder Engagement is now a requirement for public companies in the Combined Code. I support the idea and would like to see its application extended to all businesses and wider society (for example, in University Councils). However, it has many implications including how to balance the different interests in practice and understanding the difference between governance and engagement so it requires much consideration and, of course, ideally training.

RSP: We have a whole chapter on this our book! Stakeholder engagement does not mean they are all on the board! And a giant board is likely to be an ineffective one. So the solution is in finding ways for the board to understand, engage, and learn from a wide range of stakeholders. In some cases this might be survey data, in others it will be consumer behaviour data, and in some cases we may well want some board representation.

• BB: I was impressed by the depth and scope of the research which was done for the book. How much time did this take?

RSP: Gerry collected data for 30 years, and the research team at London Business School spent a couple of years synthesizing it to get to the point you see in Disaster in the Boardroom.

• BB: What's next for Gerry Brown and Randall S Peterson?

GB: I am considering writing a book about Private Equity.

RSP: We have talked about boards for Private Equity owned businesses, dealing with their special challenges. On my own I am working on another book on managing relationships, on the board and more broadly in the world. It is based on: Peterson, R. S. & Behfar K. J. (2022). When to Cooperate with Colleagues and When to Compete. Harvard Business Review, March/April Issue.

• BB: Thank you both for taking the time to satisfy our curiosity.

You can read more about Gerry Brown and Randall S Peterson about Disaster in the Boardroom: Six Dysfunctions Everyone Should Understand here.

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