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| Best Practices |
Constructive Contention
Suzanne McGee
06/01/2004
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In his book, Lorsch suggests going
even further, appointing an individual or group of board members to be
responsible for serving as devil’s advocate. They should be charged with
assembling arguments against whatever proposal management is making,
particularly when these are “bet-the-company” decisions such as mergers or
acquisitions. Governance specialists are divided, however, on whether the
approach is useful; some call it cumbersome overkill. Cole recommends that a
director with a question or a concern seek an ally before the board meeting,
then focus dissent not on management’s proposals specifically but rather on the
lack of an environment where debate can take place. “One person dissenting can
be marginalized; it’s hard to dismiss two people as being troublemakers,” Cole
explains. “And the current buzz about governance gives anyone in this position a
great way to frame the discussion in a constructive way.”
If a CEO rejects
repeated efforts to enhance the level of open discussion, Cole warns that we
should muster ourselves for the ultimate step: either resigning or firing the
CEO. He and other directors at a large privately held distribution company opted
for the latter a few years ago. “The CEO would throw a hissy fit whenever
someone challenged him,” Cole says. When he and his fellow independent directors
hired consultants to look at the company’s finances, the CEO refused to show
them the books. That was when the directors fired him. When they did finally
examine the books, they perhaps were not too surprised to find
irregularities that nearly bankrupted the company. “Imagine what would have
happened eventually if we hadn’t disagreed with his views, but just let things
drift on as they were? Just the thought that could happen makes me
shudder.”
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