Why when companies come crashing down, do we hear of boards who have failed in their fiduciary duties? Or that they have been ignorant, complacent or downright complicit in these scandals and downfalls?
Of course, corporate scandals are nothing new, nor are they limited to any one geography. They are a damning indictment of our systems of corporate governance around the world. And yet, despite this frequency, little or nothing changes. We shrug and move on, accepting they are an unavoidable part of the system that produces incredible wealth for economies and societies. But it should not be that way. Disaster in the Boardroom shows how boards can be better. Looking at why these scandals happen, authors Peterson and Brown present in-depth case studies of major global corporations – including recent contemporary scandals associated with companies such as BP, Facebook and Uber – using the optic of their unique, original and compelling ‘six dysfunctions of the board’ analysis to reveal their particularities but also how they can be overcome.
In this book, Brown and Peterson explore common attributes of scandals such as lack of independence from management, missing key voices, cultural amplification, diffusion of responsibility, rule-bound cultures and groupthink. They also identify ways to strengthen boards, improve their culture and competence, and give directors and others the power to take action and ultimately prevent disasters from happening.
Disaster in the Boardroom is essential reading for every executive in every boardroom, those aspiring to board positions as well as anyone interested in why boards fail. It has never been more important to pre-identify and eradicate these boardroom dysfunctions – not least so that their impacts upon society can better seen, understood, mitigated, and avoided.
Author(s): Gerry Brown, Randall S. Peterson
Publisher: Palgrave Macmillan
Year: 2022
Language: English
Pages: 289
City: Cham
Acknowledgements
Contents
List of Figures
Part I
1: Where Was the Board?
Moments in a History of Scandals and Disasters
Land Grab
Railways and Ruin
Cash for Influence
The Rise of the False Prospectus
Rise and Fall
Shocked and Appalled
The Tip of the Iceberg
The Cost of Failure
The Pandemic Reality
Dysfunctional Boards
The Impact of CEO Personality
Board Culture
Designed to Fail
Types of Board Dysfunction
The Subordinated Board
The Imbalanced Board
The Distended Board
The Bystander Board
The Bureaucratic Board
The Conforming Board
The Need for Independence
The Structure of This Book
2: The Faces of Disaster
Behaviours and Dysfunctions
Robbing the Till
Other Forms of Fraud
Bribery
Fiddling the Books
Cutting Corners
Abuses of Power
Errors and Blunders
Blind Ambition
Just About Legal
Consequences of Dysfunction
3: Dealing with the Consequences
Human Costs
Social Damage
Environmental Damage
Financial and Reputational Brand Damage
A Stakeholder Perspective
4: Causes of Dysfunctional Culture
The Subordinated Board
The Imbalanced Board
The Distended Board
The Bystander Board
The Bureaucratic Board
Rules-Bound Cultures
The Conforming Board
Distorting Forces: Cognitive Bias and Risk
Distorting Forces: Ineffectiveness and Complacency
Distorting Forces: Constraints on Independence
Distorting Forces: Lack of Diversity
Part II
5: The Subordinated Board: Facebook
Cambridge Analytica
Facebook’s Response
Government Investigations, Penalties and ‘Board Reform’
Challenges to the Corporate Governance Structure
Asymmetries of Power
Lack of Independence
6: The Imbalanced Board: Google
Protecting the Powerful
The Workers Walk Out in an Attempt to Be Heard
Further Fallout for the Board
Failures to Speak, Failures to Listen
Missing Voices
7: The Distended Board: Uber
Aggression and Harassment at Uber
The Greyball Scandal
Data Breach Cover-Up
Arrogance and Aggression
When the Board (Finally) Asserted Itself
Amplification of Culture
8: The Bystander Board: BP and Deepwater Horizon
The Myth of the ‘culture of safety’
BP’s Response to Deepwater Horizon: Missing the Mark
‘Culture of safety’ Revisited
The Board’s Response
Lack of Inquiry and Scrutiny
Diffusion of Responsibility
9: The Bureaucratic Board: The Big Four
Rules-Bound Cultures
10: The Conforming Board: Royal Bank of Scotland
Dramatically Negative
What Happened?
Where Was the Board?
Herd Behaviour
Over-Mighty Executives
Groupthink
Part III
11: Changing Board Culture
Defining Board Culture
Strategies for Changing Board Culture
Equity Culture
Equality Culture
Explicit Rules Culture
Adhocracy Culture
Effective Boardroom Culture
Managing and Changing Board Culture
Board Culture and Independent Directors
Getting the Right People with the Right Mindsets Onto Boards
12: Stakeholder Engagement
Stakeholder Engagement and Value
Adding Value
Moves Towards Stakeholder Engagement
Stakeholder Groups
Institutional Ownership
Private Ownership
Employees
Other Groups
What Next?
Stakeholder Engagement and the Six Dysfunctions
Greater Independence
Providing Missing Voices
Overcoming Cultural Amplification
Greater Responsibility
Addressing Rule-Bound Culture
Overcoming Groupthink
Board Actions Towards Greater Stakeholder Engagement
Independent Directors and Stakeholder Engagement
13: Improving Board Effectiveness: Practical Steps
Providing Board Leadership
Improving the Quality of Independent Directors
Improving the Function of the Board
Improving Board Evaluation
Strengthening Board Culture
Strengthening Independence
Environment
Values
Attitudes
Relationships
Practices and Disciplines
A Role for Both Regulators and Investors
Collective Responsibility: Directors, Executives, Regulators, Shareholders, Workers, Customers and Taxpayers
Appendix A: Corporate Scandals and Disasters
Theft, Fraud and Bribery
Theft: Tyco
Fraud: Takata
Fraud: Kobe Steel
Bribery: Rio Tinto
Bribery: Compass
Privacy and Data Violations
Equifax
Sexual Discrimination and Harassment
Fox News
Weinstein Company
Tax Evasion
HSBC
Accounting Irregularities
Tesco
Satyam
Toshiba
Mis-selling and Price-Fixing
Payment Protection Insurance
Wells Fargo
Abuse of Market Power
Health and Safety Failures
BHP Billiton
Union Carbide
Labour Abuses
Sports Direct
Nike
Pollution
Volkswagen
Glencore
Bankruptcies
Lehman Brothers
Executive Pay Abuses
Appendix B: Directors’ Checklist
Lack of Independence
Missing Key Voices
Cultural Amplification
Rules-Bound Culture
Groupthink
Diffusion of Responsibility
Board Culture
Board Effectiveness
Independent Directors
Stakeholder Engagement
Board Evaluation
Select Bibliography
Index
