When vested interests should be of no interest

When board appointments are based on criteria other than skills, you’re just about guaranteeing that one of two things will happen – at best, you’ll deprive the board of a fighting chance to do the very best it can for the organisation in question; at worst, you’ll ensure that it will all end in tatters and tears.

That boards still tend to select directors on other grounds suggests that the notion vexes some.

But it is an inescapable truth…after all, logic tells us that when the best equipped (read skilled) are running the show, the chances of everything running smoothly are greatly enhanced.

The ‘select on merit, steer clear of muddying the waters with other factors’ approach is true across all board environments, be they in the government domain, in the not-for-profit sector (NFP) or in the cut and thrust of the commercial world.

Let’s take a look at a few examples in these three areas and see where the pitfalls loom large.

With government boards, it’s not unheard of for Ministers to appoint members from the departments within their portfolios. It’s comforting, and they often do so with the best intentions of having someone close to the ground to keep an eye on things. The risk, though, is that these people can find it very hard to remove their primary employment hat – their departmental hat – and don the board hat when required to do so.

Worse still, politicians have a propensity to treat board positions as some crude reward for those deemed to have helped the ruling party while showing scant regard for expertise and governance best practice research.

A good example in the NFP space is sporting bodies boasting both state and territory set-ups and a national body. The national body then has ‘representatives’ from the state and territory bodies and therein lies the challenge. These poor people are expected to represent their patch – indeed many national body constitutions use the language of ‘representative’ – AND adopt a national position.

Immediately there’s potential for colossal tension. They do the right thing and think nationally only to be crucified for ‘not supporting the state’ when returning home. It threatens their very future on the state board, they fear being voted off for ‘disloyalty’ at the next election and we wonder why they struggle for neutrality.

Finally, let’s take an example in the commercial world where a venture capitalist has invested in the company. It’s human nature for them to look to protect their investment…and they deem appointing one of their own to the board as the best way to go.

This is mostly okay but when things don’t go to plan or money is tight, there’s a real danger that they’ll chase decisions that best advantage the venture capitalist rather than the company they serve on the board of.

I guess the take-out message is this: while vested interests certainly do not belong in the board selection process, they can be accommodated by good boards. These boards are happy to be advised in their decision-making by representative groups (advisory committees) before taking the final decision.

Until next time,

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