Blog: The Dissenting Director

Directors' Blog: Mark Chambers

We live in times of dissent where the only consensus seems to be that we can’t agree on the biggest issues facing the country. We have seen senior leaders resign on principle rather than support proposals that they find unpalatable. 

Do we have similar pressures building for boards?

Most of the time boards reach big decisions by discussion, debate and refinement of a proposal, resulting in a consensus that every director is willing to support. Differences of opinion around the board table help shape that consensus and compromises are made to find a middle ground. Diversity of thought and experience amongst the directors is vital to refining and improving the proposal. At the end, even if individual directors would each have preferred a slightly different outcome, they are prepared to live with the final consensus. 

Sometimes, however, consensus is not enough.  A good Chair will sense those big decisions which require unqualified, unanimous support around the table and may even call for a formal vote of the directors. These decisions are usually on major matters of strategy, where the outcome will shape the future agenda for the board and where any subsequent reopening or questioning of the decision would be damaging for the board going forward. Often it will be difficult, if not impossible, for a dissenting director to stay on the board to implement a major decision that they have fundamentally disagreed with and voted against. 

However, the same tensions can also arise for a dissenting director who has an ethical objection to a proposal, even if that proposal does not relate to a major aspect of strategy. 

We are in the midst of a refreshing debate about a company’s purpose beyond maximising short-term profits and have seen a heightened focus on the factors which a board is required to take into account in its decision making under section 172 of the UK Companies Act. This means that the compromises involved for stakeholders will be more visible for boards, and ethical dilemmas for individual directors are likely to arise more frequently. Ethical matters are rarely crystal clear and it is quite possible for two directors with equally high standards of personal integrity to fundamentally disagree on the actions that should be taken. Given the role of the board in setting the ethical tone for a company, resolving those differences is of enormous cultural significance. Dissenting directors should not feel that resigning is their only option.

Individual directors will need to frame their objections carefully and be clear when they are dissenting to a proposal on ethical grounds. Without compromising their authority, Chairs will also need to be more sensitive to these situations and judge when unqualified unanimity is required from the board. Chairs should be prepared to push back for reconsideration proposals where a dissenting director cannot be convinced through debate, ensuring that the re-worked proposal is one which can earn the unanimous support of the board.

Posted: 10/09/2019

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