The Dissent Dilemma: Decoding the Quiet in Corporate Governance

Do we embrace a tranquil boardroom? Or strive for more divergent viewpoints?

Corporate boardrooms, where people make significant decisions shaping the future of organizations, are meant to be hubs of intellectual discourse, diverse opinions and, most importantly, constructive dissent. However, business researchers and corporate experts alike are sometimes baffled by the conspicuous lack of diverging views encountered in these boardrooms, while the public and media seem aghast at the consequences.

It has become accepted wisdom that a diverse board will be more effective in overseeing an organization's welfare than a sole CEO. Diversity implies both a variety of skills and experiences, and a multiplicity of perspectives - a rich cognitive lode that can be expected to spark dissenting views.

However, boardrooms often echo with unanimous voices. The evidence is that this lack of dissent, which suggests that diversity doesn't necessarily translate to effectiveness, can fuel harmful groupthink and thwart challenges, from there, potentially leading to corporate failures. Consequently, we risk our major organisations falling prey to group tendencies like conformity.

While the importance of encouraging challenging and dissenting views is recognized and even encouraged in principle, the research is yet to fully explore the antecedents for open dissent. How can we cultivate a culture that promotes openness? How can we build trust where there are divergent views? How can we balance our need to support management with the imperative to challenge them?

And, importantly, how can we achieve harmony between dissent and cohesion in the boardroom?

Given the increasing complexity that directors must navigate, it seems time to examine the mindsets of board members, to understand how they perceive their roles and responsibilities. And it is time to unravel the individual level differences that influence boardroom behaviours. What is the best way to uncover the implicit dissent theories and the dynamics that lead to a lack of dissent even amongst motivated and diligent directors?

In an ever-evolving, volatile corporate landscape, diverse and dissenting views serve as an essential compass, navigating through ambiguity and uncertainty. Leaders and directors, educated and socialized into norms of open dissent, will be better equipped to harness this diversity and to contribute meaningfully to strategic decision-making. At the same time, a community and media who understand, report and interpret debate as a search for ‘truth’ and ‘shared wisdom’ rather than as conflict and scandal will encourage intelligent and informed people to debate openly in the search for good outcomes.

Amidst the myriad of studies on the utility of dissent, a consistent thread emerges: the realm of strategic decision-making is one of the few areas where dissent unequivocally adds value. This challenges us to reconsider our perception of dissent as a potential disruptor, and instead view it as a catalyst for constructive dialogue and innovative solutions.

For those in a director's chair, this underscores the importance of cultivating an environment that not only accommodates, but actively encourages divergent views. This is particularly crucial when facing strategic decisions that can pivot the direction of an organization.

Pointers from a recent study

One insightful study (Eirola, A. 2023) observed dissenting interactions in SME boards that were primarily composed of outside directors. The findings revealed how most boardroom interactions revolve around expert input, with dissent being applied as an emergency brake when directors' experiences cause them to doubt the management's course of action.

These findings highlight how group-level norms may not be sufficient predictors of actual behaviours and suggest that the absence of dissenting views might be a more fundamental issue. The authors posed a pivotal question: “Should we re-evaluate our understanding of dissent and diversity and their roles in corporate governance?”

The researchers observed board meetings, read related documents, interviewed participants, and then analysed their findings. Their goal was to understand why dissenting views were scarce even when there was an open and trusting atmosphere.

One reported comment by a director caught my attention - “I just keep repeating this point about interaction. If you can’t get your mouth open, you don’t have a reason to be in a boardroom”.

This statement emphasizes the importance of interaction and open communication within the boardroom. However, it also suggests that a more nuanced understanding of participation may be needed.

Overall, the conclusions of the study provide numerous insights for directors interested in fostering constructive dissent in boardroom discussions. Here are key takeaways.

Dissent isn't always necessary: Lack of dissent in the boardroom doesn't always signify a problem. Directors, in their role, may not find any conflicting viewpoints with management's material based on their experiences, and hence, may agree and approve management's actions. This highlights that directors may not always have strong opinions on all matters, and that they trust management to make sound decisions based on the information they receive.

The ’not my business’ approach: The absence of dissent isn't always a case of conformity. In some boards, directors may feel that it's not their role to engage in matters outside their area of expertise unless asked. This also extends to not expecting other directors to participate in conversations outside their areas of expertise. This practice allows for a very specialized discussion where directors focus on areas where they can provide valuable insights based on their experience and expertise.

Dissent requires backing: When directors do dissent, it's generally because the issue relates to their area of expertise or experience. Such dissent requires robust arguments to back it up and to invite management to engage in the discussion.

Combating ‘group think’: While dissent can serve as a check against group think and faulty decisions, it should not be forced. If genuine dissent based on personal knowledge and experience is the main source of differing views, it might be scarce. Directors should consider whether their board role involves active analysis and seeking diverse judgements across domains, or whether it's enough to voice dissent only when they genuinely have concerns.

Interpreting agreement: Agreement in the boardroom isn't always a sign of complacency or negligence. It can sometimes be the result of active judgement or lack of strong opinions. Distinguishing between these two scenarios can help understand if the agreement indicates a ‘rubber-stamp’ board or well-justified decisions.

Need for specific expectations: A culture of open discussion and the possibility to participate are not sufficient for active use of diverse views as constructive dissent. Directors need clear expectations on how and when to contribute with dissent. Furthermore, fully engaged directors can provide more nuanced and insightful dissent in board discussions, especially when it's related to their areas of expertise.

Board Mindfulness – A foundation for success

In essence, fostering constructive dissent was found to be more nuanced than simply encouraging alternative viewpoints. It involves creating an environment where dissent is:

• based on expertise,
• backed by robust arguments, and
• invoked when genuinely needed.

It also means understanding that agreement isn't always a sign of complacency and can indicate well-judged decisions.

This research encouraged me in my ongoing interest in Board Mindfulness. In a boardroom setting, mindfulness can encourage directors to be more engaged, attentive, and present during discussions, leading to deeper understanding, attention ot dissent, and more thoughtful contributions.

References:

Nuances of boardroom dissent: When and on what grounds do directors disagree?

Aira Eirola, Linnaeus University School of Business and Economics [email protected] Conference Full Paper Submission 39th EGOS C

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