A company’s MOI, also known as articles of association in some jurisdictions, is crucial for effective board governance, particularly concerning the ability to manage and remove directors. As a new chairman, Prof. King would review the MOI and wouldn’t take the appointment if it didn’t include a clause granting the board the power to remove a director. This power is essential to address disruptive behaviour and discordance on the board without the lengthy and potentially uncertain process of convening an extraordinary general meeting, especially if a discordant director has a strong link to a major shareholder. Writing this power into the MOI is considered very important for many companies worldwide.

A new chairman facing board discord should take a structured approach. Initially, during the meeting, the chairman should insist that directors address their comments through the chair, preventing disruptive cross-table arguments. Offline, the chairman should speak to the discordant individuals to understand the root of their disagreements and assess if the board has a unified understanding of the company’s purpose. A critical step is to facilitate an offsite meeting to discuss and agree upon the company’s purpose, key performance indicators (KPIs), and key risk indicators. The aim is to encourage the board to think and act collectively, “singing from the same hymn sheet,” which is essential for quality decision-making and avoiding discord.

The chairman plays a vital role in ensuring directors fulfil their duty of diligence. This involves receiving board packs at least a week before meetings to allow sufficient time for preparation. The chairman should make it clear that they will test directors’ understanding of the material presented, including management reports and additional research. In a meeting, after a decision is reached, the chairman might ask a director, especially one who has been discordant, to explain their vote in detail. An inability to do so indicates a lack of diligence and a failure to understand the business, which is considered a breach of their duty and potentially a “fraud on the company” as guardians of its assets and business affairs. This practice encourages thorough preparation and improves the overall level of homework within the board.

Conciliation, as described by Prof. King, is a distinct process from mediation in resolving board conflict. In mediation, a third party facilitates discussion between discordant individuals to help them find their own resolution. Conciliation, on the other hand, involves the conciliator (in this case, the chairman) actively suggesting a potential resolution after hearing both sides. The chairman, as conciliator, presents a proposed solution that aligns with the board’s collective mind and the company’s purpose, reminding the discordant parties of the need for unity. This approach aims to guide the directors towards an agreement, sometimes by suggesting a resolution they might not have reached independently, and is often presented with the implicit understanding of the chairman’s authority if the discord persists.

If conciliation efforts fail and discordance among board members continues to disrupt meetings, the chairman has the power to escalate the situation. This power is derived from the company’s MOI, which should ideally grant the board the authority to remove a director. The chairman would inform the discordant directors that the board intends to exercise this power at the next board meeting. Before doing so, it is also advisable for the chairman to communicate with major shareholders to inform them of the situation and the planned action under the company’s governing documents. This process highlights the importance of the board’s ability to remove directors as a necessary tool for maintaining effective governance when other methods fail.

The appointment of a lead independent non-executive director (NED) is a crucial aspect of good board governance, particularly in situations where the chairman may be conflicted or unable to perform their duties. This independent director is specifically positioned to take over leadership in such instances, whether it’s due to a conflict of interest involving the chairman or other unforeseen circumstances that prevent the chairman from effectively leading. Their independence and designated role provide a mechanism for continuity and impartial oversight, ensuring that critical board functions can continue without disruption and maintaining the integrity of the decision-making process.

A significant challenge in current corporate governance is the “eaten mess” or “mixed trifle” of sustainability reporting standards across different jurisdictions. There are several major standard-setting bodies (like the CSRD, ISSB, and GRI), each with potentially different foundations and audiences. Some focus on how the company’s activities impact the environment and society (inside-out), while others focus on how external environmental and social factors impact the company’s value (outside-in). This lack of alignment leads to “compliance panic” for multinational companies with subsidiaries in various countries, as they face differing reporting requirements. Consolidating these reports becomes complex, and the different standards can create discord within multinational boards with directors from diverse regulatory environments. There is a pressing need for these standard-setting bodies to align their approaches to facilitate a global comprehensive corporate reporting system.

An effective board chairman possesses several crucial attributes and employs specific practices. Primarily, a chairman must be a good listener and should be the last person to speak on an issue to avoid unduly influencing the opinions of other directors. The chairman is responsible for ensuring board meetings are efficient and focused, which includes working with management and the company secretary beforehand to clarify the purpose and key aspects of agenda items. It’s also vital for the chairman to maintain a degree of professional distance (“arm’s length”) from individual directors, even while being collegiate, to be able to address difficult situations impartially. Furthermore, in today’s environment, a diligent chairman should encourage the board to leverage available resources, such as AI tools like ChatGPT, for research to ensure all relevant factors are considered when making significant business judgments.