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Boards are supposed to be vigilant monitors of management and stewards of long-term strategy. But, as Franklin Gevurtz, a law professor at University of the Pacific, has shown in a recent article, there have always been complaints about the supine nature of boards and the unwillingness (or inability) of directors to actually direct. In “The Way We Live Now,” published in 1875, Anthony Trollope describes a board meeting at the company run by the fraudster Melmotte: “Melmotte himself would speak a few slow words . . . always indicative of triumph, and then everybody would agree to everything, somebody would sign something, and the ‘Board’ . . . would be over.” Not much had changed by 1971, when the Harvard Business School professor Myles Mace said that most directors were little more than “ornaments on a corporate Christmas tree.” And, historically, boards were often packed with corporate insiders and cronies of management. (When Michael Eisner was the C.E.O. of Disney, his board for years included his personal attorney and the architect who designed his house.)
Over the past two decades, though, and especially after the major corporate scandals of 2001 and 2002, much effort has gone into improving board performance. A checklist of good board characteristics—not having the C.E.O. also serve as chairman of the board, increasing the number of outside directors, and so on—has been put to use. Since 2001, the number of new independent directors appointed at major corporations has risen sharply, and more than eighty per cent of all directors now qualify as independent.
These are welcome improvements, but they’re not enough to reform boards. (Enron’s board, after all, was full of independent directors.) Successful boards require what Jeffrey Sonnenfeld, a professor at the Yale School of Management, calls “a culture of open dissent,” where members are free to criticize the C.E.O. and each other, and where there is no artificial attempt to impose consensus on the group. This is hard to achieve, because dissenting opinions often get interpreted as personal attacks. Social scientists like to say that good decision-making groups engage in “task conflict,” fighting over the best solutions to particular problems, while bad ones engage in “relationship conflict,” interpreting differences of opinion as differences of character. But, as Tony Simons and Randall Peterson, of Cornell, mention in a study of seventy top management teams, groups that engage in “task conflict” also often suffer from “relationship conflict.” In other words, it seems you can be collegial and friendly and make bad decisions, or you can be locked in a room with people who can’t stand each other and make better decisions.
Simons and Peterson identified a surprisingly simple way out of this dilemma: trust. They found that groups whose members trusted one another’s competence and integrity were more likely to engage in task conflict without succumbing to relationship conflict. Paradoxically, the more people trust one another, the more willing they are to fight with each other.
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