{"id":504,"date":"2025-11-24T10:10:41","date_gmt":"2025-11-24T10:10:41","guid":{"rendered":"https:\/\/ruthfinch.com\/website\/?p=504"},"modified":"2025-11-24T10:10:41","modified_gmt":"2025-11-24T10:10:41","slug":"boards-in-conflict","status":"publish","type":"post","link":"https:\/\/ruthfinch.com\/website\/boards-in-conflict\/","title":{"rendered":"Boards in conflict"},"content":{"rendered":"<p>It happens: relationships on a board can break down. Sometimes, they can be fixed; sometimes, differences linger and result in one or more of the directors leaving. Here are some thoughts.<\/p>\n<p>1\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <strong>Pretending the problem doesn\u2019t exist <em>might<\/em> work but it probably won\u2019t over the longer term<\/strong> \u2013 it depends what the problem is and the characters of those involved. A perceived slight (for instance, that a director hasn\u2019t been given as much time to speak as other directors) can generally be addressed. A fundamental difference of view about a firm\u2019s strategic direction would generally be harder to address.<\/p>\n<p>2\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <strong>Challenge by a NED shouldn\u2019t result in conflict<\/strong> \u2013 two points are relevant here:<\/p>\n<ul>\n<li>Challenge should be polite but firm and there\u2019s no need for bad manners.<\/li>\n<li>Regardless of how challenge is presented, it can sometimes be seen as breaking ranks, not being a team player or not toeing the party line. All boards should accept challenge; non-executive directors \u2013 particularly INEDs \u2013 should provide appropriate challenge to management and the Chair should foster a culture in which this is accepted.<\/li>\n<\/ul>\n<p>3\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <strong>Crisis situations can be a breeding ground for conflict<\/strong> \u2013 different views can emerge about the reasons for the crisis and\/or how to address it. If there\u2019s even a hint of blame or resentment, divisions can appear on the board and it\u2019s essential to restore a solid working relationship.<\/p>\n<p>4\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <strong>The Chair of the board plays a crucial role in addressing any conflict<\/strong> \u2013 the Chair (ideally, supported by the senior independent director) should be the best-placed person to address perceived slights, resolve differences and restore a solid working relationship to the board. Any fundamental differences of view \u2013 linked to strategy, risk appetite, relationships with shareholders\/investors or financial difficulties experienced by a firm \u2013 should be aired with a view to re-establishing a working relationship in spite of the differences.<\/p>\n<p>5\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <strong>The position is trickier where the Chair is one of the directors in conflict<\/strong> \u2013 the SID will generally need to play a part in trying to resolve difficulties.<\/p>\n<p>6\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <strong>It\u2019s important to consider if there\u2019s loss of confidence in a director as a result of the conflict<\/strong> \u2013 if the rest of the board loses confidence in a director (including the Chair) as a result of conflict on the board or how the conflict is handled, it might be appropriate for one or more of the directors involved to leave the board. And regulators don\u2019t like to see a board in conflict.<\/p>\n<p>7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <strong>A conflict on the board should be sorted quickly; it shouldn\u2019t fester<\/strong> \u2013 in extreme cases, a board in conflict can lead to board paralysis; at the very least, it will be unpleasant and is likely to impact board effectiveness. If a conflict lingers, it might be appropriate for a director to leave the board but there should be considerable effort \u2013 by all involved \u2013 to put things right before that.<\/p>\n<p>8\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <strong>Firms should sort the problems themselves, rather than taking the problem to regulators<\/strong> \u2013 neither the PRA nor the FCA wants to be asked to sort problems for firms and this shouldn\u2019t be an approach the board takes.<\/p>\n<p>9\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <strong>Depending on the extent of the problem, it might be appropriate to notify regulators about the issue<\/strong> \u2013 this might be necessary and I\u2019ve seen cases where it\u2019s happened, always setting out for regulators how the board will be dealing with this (usually, by one or more directors leaving the board).<\/p>\n<p>10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <strong>Don\u2019t get to a position where regulators tell the Chair there\u2019s a problem<\/strong> \u2013 regulators telling a firm there\u2019s an issue is never a comfortable place to be. It\u2019s rare that matters would reach a stage where regulators direct a firm to sort the problem but I\u2019ve seen regulators intervene where a board is no longer effective, including situations where the underlying issues involve a conflict, in some form, between directors.<\/p>\n<p>11\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <strong>A key test is whether the board remains effective<\/strong> \u2013 if it doesn\u2019t, action will need to be taken. It will be important to have agreed criteria for what makes the particular board \u2018effective\u2019, bearing in mind that there\u2019s a high chance of \u2018X said; Y said\u2019 conversations about what happened and who\u2019s responsible<\/p>\n<p>12\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <strong>Consider whether everyone involved remains fit and proper and whether any senior manager or general conduct rules have been breached<\/strong> \u2013 these points all arise under the senior managers regime and the overlay it provides to wider corporate governance requirements.<\/p>\n<p>&nbsp;<\/p>\n<p><em>This note is intended to provide general information about current and expected topics and perspectives that might be of interest. It does not provide or constitute, or purport to provide or constitute, advice relevant to any particular circumstances. Legal or other professional advice relevant to any particular circumstances should always be sought.<\/em><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>It happens: relationships on a board can break down. Sometimes, they can be fixed; sometimes, differences linger and result in one or more of the directors leaving. Here are some thoughts. 1\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Pretending the problem doesn\u2019t exist might work but it probably won\u2019t over the longer term \u2013 it depends what the problem is and [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[163],"tags":[145,92,167,187,188,191,16,189,190],"class_list":["post-504","post","type-post","status-publish","format-standard","hentry","category-governance-reframed","tag-board","tag-board-of-directors","tag-chair","tag-conflict","tag-crisis","tag-ned","tag-regulators","tag-senior-independent-director","tag-sid"],"_links":{"self":[{"href":"https:\/\/ruthfinch.com\/website\/wp-json\/wp\/v2\/posts\/504","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ruthfinch.com\/website\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ruthfinch.com\/website\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ruthfinch.com\/website\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/ruthfinch.com\/website\/wp-json\/wp\/v2\/comments?post=504"}],"version-history":[{"count":1,"href":"https:\/\/ruthfinch.com\/website\/wp-json\/wp\/v2\/posts\/504\/revisions"}],"predecessor-version":[{"id":505,"href":"https:\/\/ruthfinch.com\/website\/wp-json\/wp\/v2\/posts\/504\/revisions\/505"}],"wp:attachment":[{"href":"https:\/\/ruthfinch.com\/website\/wp-json\/wp\/v2\/media?parent=504"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ruthfinch.com\/website\/wp-json\/wp\/v2\/categories?post=504"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ruthfinch.com\/website\/wp-json\/wp\/v2\/tags?post=504"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}