Leave the Seat, Take the Cannoli

How To Remove Problematic Board Members

(Originally appeared in the July 24th, 2024 'Across the Board' digital publication, a Board Director, Board Advisor, C-Level, and Business Leader publication reaching 48,000+ exceptional business leaders in over 70 countries with articles focused on leadership, strategy, and governance topics - sign up here)

It's a fact. Demands of Boards and Board Directors are increasing. This is true of CEOs, too. The simultaneity of an increasingly connected world, accelerating technology advances, shortened innovation cycles, and ability of startups to upset established companies' business models overnight forces even the savviest Boards to challenge themselves. The implications are clear - the days of one, or just a few, dedicated Board Members carrying the rest of the Board are no longer possible - a trend that has become painfully clear to many private, public, private equity (PE)?and nonprofit Boards alike. Now, every Board Member counts in both the success of the collective Board as well as the relevance of the organizations they serve. Slightly changing the famous line from the classic movie The Godfather, how do you get an ineffective?Director to gracefully?leave the seat and take the cannoli?

Your 'Board Architecture' matters and every Board Member should have a specific role. With this in mind, what do you do when your Board has one or more duds causing noticeable gaps in effectiveness? It is absolutely time to make changes. ...But how? How do you get rid of ineffective Board Members? This is not an easy undertaking, but many situations require exactly this course of action.

Removing ineffective Board members is admittedly one of the most dreaded actions of Board Directors. It can be messy, cause unwanted publicity, and damage professional relationships. Navigating these treacherous waters should be done with caution ...and with the point of arrival defined as ensuring an effective Board as the paramount consideration. A great way to look at this is to define the 'end goals,' outcomes that the Board is steadfast in achieving, vs. 'means goals,' the defining of various paths to reach the end goals.

Typically, in my articles I prefer to offer a best way to accomplish goals along with additional options for consideration and thought. For this topic, I am not sure there is a best way to remove a Director due to limitless scenarios, but I have ordered the following options from 'most amicable' to 'path of high resistance.'

1) Term Limits: Ensuring that your Board's bylaws include clearly defined term limits is a proactive way to stave off potential long-term issues with disruptive or ineffective Board Members. At the end of the term, this Board Member simply rolls off the Board. The option to 'renew' a Board Member's term can be included, but this option creatively allows for ineffective Board Members to leave gracefully. Of course, actual Board terms (typically in years) along with classified /?staggered Board?considerations need to be weighed.

2) Resignation Opportunity: Initiate a 1:1 discussion, led by the Board Chair or designated Board Member, and take the opportunity to pose the question of motivation, performance, and fit to the challenged Board Member ...then listen. Intently. I have personally experienced situations where a Board Member feels frustrated and marginalized due to concerns with Board operations, Board decorum, and other valid points. In some cases, these deficiencies can be addressed by the collective Board and the situation righted - saving a potentially great Board Member while simultaneously correcting situations that help the overall Board become more effective. When this approach is not an option, allowing for a Board Member to resign and exit the Board on their own terms is in the interest of all parties.

3) Removal by Leave of Absence: This is an opportunity to infuse 'mindfulness' into the discussion. During the 1:1 discussion, it may be discovered that the challenged Board Member has personal issues causing undue changes in behavior, attitude, and involvement. Defining a predetermined period of time for a voluntary leave of absence may relieve and correct the situation. As defined in the leave of absence agreement, time needed in addition to the decided term can be considered a resignation. (Note: the Board bylaws need to clearly state the voting and involvement rights of a Board Member on a leave of absence along with quorum considerations).

4) Removal by Impeachment: This is the messiest way to accomplish your goal, but is sometimes the only way forward. Impeachment should be considered a last resort for only the most serious offenses by a Board Member. An impeachment is simply a vote by the Board to remove the Director in question from the Board. Board bylaws should clearly call out the process of impeachment as well as the scenarios in which impeachment is warranted. Detailed documentation of all aspects of the impeachment process (incidents, responses, etc.) are in the best interest of the Board.

With all of the above-mentioned options, ensuring very specific job descriptions for all Board Members from the onset, including termination clauses, can help in eliminating justification for a Board's removal actions in potential court cases. Further to this proactive approach reference, proper and in-depth due diligence to lower the risk of seating ineffective or poor-performance-prone Board Members should be undertaken.

So, what does the data say about the need for removing ineffective Directors? PwC's 2018 Annual Corporate Directors Survey was quite telling. Surprisingly, it showed?that "45% of Directors think at least one Director on their Board should be replaced. More than one in five (21%) think two or more Directors should go." With this level of dissatisfaction, it seems like more Boards should be enacting their removal clauses in the near future.

PWC's 2023 Annual Corporate Directors Survey was equally?telling. According to this survey of over 600 C-suite executives, most assess their Boards' overall effectiveness as "middle of the road," with 56% saying their Boards are doing a fair job and only 29% saying it is good or excellent. Also, executives remain eager to restructure their Boards, with 45% feeling that at least one of their Directors should be changed, and 57% believing that two or more Directors should be replaced!

All of the mentioned Director removal approaches, with slight nuances when applying to either private, public, PE?or nonprofit Boards, can be quite successful in ensuring the future and ongoing effectiveness of your Board. It's just the initiation of the process that is hard for most Boards to swallow. In best case scenarios, a Director should exit with grace and dignity via resignation - leave the seat, take the cannoli.

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About the Author: Mark A. Pfister is CEO & Chief Board Consultant of M. A. Pfister Strategy Group, an executive advisory firm that serves as a strategic advisory council for executives and Boards in the public, private, nonprofit, and private equity (PE) sectors. He is also the Founder & CEO of the International Board Director Competency Designation (IBDC.D) education and certification program, a Board Director certification course recognized globally. Mr. Pfister is a 'Board Macro-Influencer' and his success has been repeated across a wide range of business situations and environments. He prides himself on being a coach and mentor to senior executives and directors. In Board Director circles, Mr. Pfister has earned the nickname "The Board Architect."?Connect with Mark?on LinkedIn.

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