Governance Dilemma Newsletter

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Read the latest February 2025 dilemma here.

For an example of a previous Governance Dilemma, see below:

Governance Dilemma

Henry chairs a charity and usually finds it a gratifying experience. Recently the charity has been through hard times as the government ceased funding some activities although the community still needs them. Henry and his board worked hard to develop new income streams to support continuing the company’s work. They achieved some success, but not enough to avoid having to discontinue some work and reduce headcount. All directors regretted having to make long-serving and loyal staff redundant. However, they had to find a balance of activity and income that would be sustainable; this was a necessary part of the strategy for success. One director was vehemently opposed to the changes, preferring to run at a loss, eat into reserves, and hope for a change of heart from the government. When it was clear that this director would never agree, Henry took the matter to a vote and the cuts were approved with only one dissenter. Henry reminded the board that board decisions were ‘board decisions’ and all agreed that they would publicly support the approved course of action.

Since then the CEO has complained to Henry that the dissenting director has spoken to staff suggesting they ‘lawyer up’ to protect themselves from redundancies, oppose the closure of the unsustainable activities, and start a Facebook campaign to ‘shame the government into resuming funding’. Henry has also heard from friends that his dissenter is complaining publicly about the decision even though board policy is that the CEO or Chair are the two authorised spokesmen.

How can Henry handle this dissident director?

Senan Turnbull’s Response: 

Matters have gotten seriously out-of-hand with the dissenting director and the actions Henry should undertake might not limit the damage caused by the director acting in the way they have.

All Boards should have a detailed Code of Conduct including elements such as conflicts of interest and loyalty, confidentiality and collective responsibility for Board decisions. This should be explained in induction training, signed by all directors and as he did in this particular emphasised at the end of what clearly was a divided meeting, by Henry.

At this stage Henry should seek a one-to-one with the director to remind them of their responsibilities to the company and ask that they desist from breaching the Code further.

If the director apologises for their actions and indicates that they will attempt to put things right then all might be well, but with probably some residual negative impact. Henry might subsequently decide, notwithstanding such an agreement with the director, that he has no confidence in them and he might seek their removal as director.

However, if the director refuses to rein in their approach, Henry would have no option but to invoke the clause which exists in most constitutions to ask the Board to remove the director provided that is done in accordance with the constitution, the laws of natural justice and fair procedures. This will be difficult and maybe divisive but the better interests of the organisation would require it to be done.

Boards can only be successful in leading and overseeing the work of their organisations if all directors and others in critical positions work within the agreed structures, policies and procedures the Board has adopted. When any director, member of staff or other volunteer deliberately goes outside the agreed processes there will always be negative consequences for an organisation’s reputation and impact. Thankfully few organisations encounter wilful actions like this director has engaged in. The more usual challenge is under-performance which chairs should be equally diligent in challenging.

Monika Vikander-Hegarty’s Response:

Henry, the board, and the organisation are navigating a challenging period, making sensitivity to how the new strategy is impacting on staff essential.

Given this context, Henry, as chair, must take immediate action to investigate the CEO’s complaint. Review any relevant documents, processes, policies of the organisation which should be followed. Below I have outlined a general overview of how a process could work.

Initiate an Investigation: Invite the director in question to a face-to-face meeting with the chair at the earliest opportunity.

Conduct the Meeting: Outline the information presented. Ask the director to comment, share their thoughts, and provide relevant details. Ascertain what was said, and to whom/how many for necessary follow-up actions.

Discuss the Code of Conduct: After listening to the director refer to the relevant parts of the Code of Conduct for board directors/trustees. Highlight expected standards of behaviour, these could be:

• Responsibility to act in the organisation’s best interests.
• Shared responsibility for board decisions.
• Promotion and preservation of confidentiality regarding sensitive matters.
• Respect for management processes concerning staff communications.
• Adherence to the spokesperson policy.

Address Breaches: If the director has breached the ‘Code of Conduct’, issue a formal warning specifying the behaviour, and outline consequences for further breaches, including an assessment of their suitability for the role and their potential tenure as a director/trustee being terminated. Obtain the director’s assurance and commitment to adhere to the code going forward.

Document the Meeting: Keep notes and share them with the director via email.

Seek Legal Advice: Given the serious nature of the complaint, it may be appropriate to seek legal advice ahead of the meeting.

By following these steps, Henry can ensure a thorough and fair investigation of the CEO’s complaint, reinforcing the expected standards of behaviour and maintaining the board’s integrity. In the following months bring the board through a session that reaffirms their commitment to the Code of Conduct for charity trustees/directors.