I have often written about ‘Board Amnesia’ which describes how busy board members seem to forget what was discussed and decided at prior meetings. It usually is a result of sitting on multiple boards, and only focusing on this board when it is time to meet. If the board only meets quarterly, then during the intervening ninety days the company is out of sight and unfortunately out of mind. While the problem largely rests with the individual board members who are experiencing amnesia, the cure is largely in the hands of the CEO. At the conclusion of every meeting, the CEO needs to document the important decisions, and the reasoning underlying them, and send it to every board member. For mild-amnesia, members often remember the decisions, but not the rationale, so it is important to capture the reasoning and remind them. Putting the summary in their hands provides enough of a memory jog for them to come up to speed before the next meeting. For more pronounced board amnesia, the CEO will need to re-send the summary from the prior meeting a second time, as the next meeting is approaching, and will need to make it a point to contact these board members to refresh their memories one-on-one in advance of the next meeting. The last category are the hard-core hit-and-run board members. For them, the board meeting is a performance put on by the company to tell them what is going on with their investment. They seem as though they cannot be bothered to clutter their minds with past decisions and discussions. My recommendation to CEOs that encounter this type of amnesia is to call them out, and find another board member.
More challenging than Board Amnesia is Board Apathy. This is the situation where the board members cannot be bothered to participate, or demonstrate that they simply do not care to contribute. It commonly surfaces in three situations. The first is following a capital raise where a new investor has taken a substantial lead position. Earlier, smaller investors are still in the cap table and have a contractural right to their board seat, but these investors are ‘along for the ride’ with the new lead, and recognize that they have little influence. If the new lead acts like they own the whole thing, the earlier investors tend to check out and display Board Apathy.
The second scenario is when the company is struggling and has little chance of success. Investor board members realize that they will not get their desired return on investment. They value their time, and choose to spend it on potential winners, not hopeless causes, so they lose interest in participating even though this is a time when the company has to make hard decisions and really needs board guidance. Unfortunately, institutional investors contractually hold their board seats, so even if they have little interest in spending time with the company, they do not relinquish their seat at the table. They just continue to take up space.
The third situation is when a company decides it is time to go to market to sell the business. This is typically not a time when the company makes plans to change strategy or direction or make significant long-term investments. The business is basically on a glide-slope toward the sale, so there is little strategic contribution the board can make. Once an investment banker has been selected and the process kicks off, most of the board interaction is limited to hearing progress reports on the sale process, and checking in to make sure the business continues to execute. The investor board members are already moving on to their next investment. Board apathy is manifest in missed meetings. Even though the board meetings were scheduled well in advance, suddenly a different board meeting pops up and takes precedence over the earlier commitment. It is a clear message that “I will commit to your meeting unless something more interesting comes along.” It also says “you are on your own.” However, implicit in the message is “don’t screw anything up that will impact the deal.”
Board Apathy seems unavoidable, but really unfortunate. In a healthy environment, the board and the CEO are partners working together to achieve success. They are a team, but when apathy creeps in, it is as if one of the members of the team just stopped playing, even though they still want the trophy if the team wins. As an independent board member and chair, I am particularly disappointed when I see this behavior. I see my role, and that of my fellow board members as running alongside the CEO all the way to the finish line. Having been in the CEO position multiple times as we moved through corporate sale processes, I know the challenges that arise during the process, and the value of having an engaged board to help work through them. I also know the sense of abandonment when board members suddenly bail on meetings and clearly lose interest.
From a practical perspective, things do not always go as planned. Just because a company is on the path toward a sale of the business does not necessarily mean the business will be sold, or just because things are bleak and the company looks headed for failure, there may still be a pivot or blue-bird deal that provides a runway to the future. Board members who check out with Board Apathy are failing to help the CEO and the company to prepare for, and grab onto a potential next opportunity. They are doing a disservice to the shareholders by not running the race to the end.