Boardroom dilemma - a grim fairytale? - Business Works
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Boardroom dilemma - a grim fairytale?

by Dr Bengt Skarstam, Reshape Sverige and Ivor Hopkins, Responsibility3 Ltd In the new business world, the responsible business is the one that not only clearly states its values and ethics, but also visibly uses them in its daily actions. This new business will lead the way to a stakeholder oriented capitalism, a new form of capitalism that is very much needed before our current business behaviour - vampire capitalism - actually destroys the engine of progress it wants to fuel. Key to this change is the board: they are perfectly placed between the stakeholders, and the CEO and his or her leadership team, to ensure the narrative of the company is strong and true.

Dr Bengt Skarstam and Ivor Hopkins tell a 'fairytale' to illustrate how it is possible to overcome some of the dilemmas that can face Boards today.

Once upon a time, in a land not so far away, there was a company called ArchCompliance Ltd, a Contract Research Company (CRO) with an international customer base of Big Pharmas. The company was a listed company and the CEO, Sir Hoax Poser (GB) held 55% of the shares. The leadership team reflected the business' international touch and consisted of CTO Dr Para Meter (India), CFO Mr Botto M Line (US), VP HR Ms Eye Queue (France) and COO Mrs Inter Mitto (Japan), all located at their head office in Hastings (UK).

The market situation for CRO's was under strong price pressure since the Big Pharmas were growing ever larger with more and more negotiating power. As a consequence for ArchCompliance, the price pressure was on and this was critically straining the company's finances.

Sir Hoax instructed his team in the measures each of them had to take in order to attain a better profit margin in a 'creative' way and, as he put it, 'slay the dragon of poor market performance'. His message was brutally simple: cook the books, fake the test results, cut employees' salaries by 30% and put the proposed ISO certifications on long-term hold.

This really angered the team since it was completely out of kilter with the espoused company values (honesty, curiosity, creativity and perseverance), as well as being against their personal values. This they fed back to Sir Hoax, but he threw down the gauntlet in no uncertain terms, to follow the company purpose (which was increased shareholder wealth) or consider their positions in the company. Part of this aggression was also caused by the fact that his partner of many years standing had walked out of his life and was demanding a huge settlement to make up for the years of investment in his career.

They found these peremptory orders very hard to stomach, but they did not feel like resigning. Fortunately, they had an important source of advice, a kind of wise grey-bearded wizard, and so they contacted him in their dilemma. He was the Chairman of the Board, Mag. I 'Indy' Pendent (AUS), who chaired a very competent Board of sage souls where all board-members (two women and three men) had been unanimously chosen (and named Business Stewards) by the shareholders. Unlike most of their peers, these sages had no shares and bonuses, simply a fair and sensible remuneration, paid out annually for the term of their office. Each Board member was not a member of any other Board and none of them were CEOs in another company. They were a brilliant collection of minds, eager to guide what they felt was a very worthwhile company to a promising future.

The timing of the Executive Team's approach for an urgent consultation was not surprising, as, in a recent shareholder meeting there had been heated exchanges with Sir Hoax about the company purpose and some major shareholders were considering selling off their shares. Sir Hoax's leadership style had also been up for discussion with Indy.

The previous year had also been especially turbulent, since Sir Hoax had gone into full micro-management mode. The fall-out had reached the Board members as well as some of the shareholders. Further, these tremors in the company had led to an exodus of many key employees, so the situation had reached a state of life or death for ArchCompliance Ltd.

The Chairman therefore decided to host a weekend retreat for the Board members - but expressly without Sir Hoax - to discuss what needed to be done. Each Board member had to take the hot seat and be open about her / his thinking on the current situation.

The CEO had certainly set the stage for a collapse of the company, with severe effects for all stakeholders, but the board was (collectively and as individuals) responsible for any actions taken by the company, legal ... and illegal.

The simple facts were that Sir Hoax could block everything, since he owned the majority of the shares in the company and the Board members were hostages to Sir Hoax since he had approved and supported their membership to the Board.

Their first reactions to this dilemma were two fold:

  1. fire Sir Hoax
  2. collectively say farewell to ArchCompliance Ltd by resigning their positions
Both options seemed to betray their values and their ethical considerations: on their way home they all pondered on the situation and its consequences. At the emergency Board meeting they come up with a solution.

Can you find a third way of solving the dilemma?

How often have you been presented with a real dilemma? In solving the dilemma, your personal responsibility is challenged and you are sometimes forced both to consider and apply your ethics and values to the situation at hand.

If you have not taken the time at some point to think through your ethics and values, the chances are that more things can, and will, go wrong.

In our dilemma with Sir Hoax, his personal problems, company difficulties and his demand for 'creative' solutions there is a potential third way which is for the Board to initiate stakeholder involvement in a special, crisis meeting to discuss the situation. This would take the heat out of the confrontation and potentially bring some creative thinking.

This could be truly magical.

For more information, the authors can be contacted via their web sites:

Dr Bengt Skarstam, Reshape Sverige at

Ivor Hopkins, Responsibility3 Ltd at

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