Conflicts of interest in the boardroom go beyond giving a job to a family member or hiring a company they own for a gig, and some of the most dangerous ones can actually be pretty deceiving.
Authority and credibility are two of the most important assets that governance bodies must have. And nothing can undermine those quite as easily as letting in (or keeping) members with conflicts of interest.
Here’s the thing: conflicts of interest are tricky because one or two types tend to come up and occupy all discussions. But there are numerous issues that can skew decision-making on a board and cause one or several members to vote with the wrong interests in mind.
Conflict 1: Other boards as competition for focus
While it can be healthy to have board members that sit on boards for different, non-competing, companies, there’s a limit to how much they can read, learn and analyze in a certain amount of time.
If one of your members is not able to devote the necessary time to learn about your company’s issues because they’re trying to keep up with those of others, their decisions will not be as informed as they should.
Conflict 2: The board as a stakeholder
Board members like the prestige and financial benefits that come with being board members. But some things that may benefit the company –i.e. mergers, downsizing, or going private– might take that away from them.
This one is particularly difficult to handle because it will probably affect most board members at the same time, and it’s unlikely that they’ll keep each other in check.
Conflict 3: Personal relationships inside the company
Because they’ve moved in similar circles, independent board members may have relationships with different people inside the company. This can mean being close amongst them, thankful to a CEO that later became Chair and whom they owe their job to, or care about people in senior company positions that have a stake in the choices the board makes.
Those relationships may affect decision-making on a very subtle level, and members themselves may not realize that’s why they’re voting the way they are.
All of these types of conflicts of interest can happen on different levels, and be anything from harmless to very serious.
Whatever the case, and whatever you may choose to do if you recognize one on your boards, just keep an eye out. Identifying them is the first step to correcting them.