I’ve served on and worked with boards for decades. Although a healthy, well-functioning board is an enormous asset to an organization, these boards are rare.

Most organizations can paddle along pretty well without a high-functioning board for a long time. As a result, most do. Board meetings are friendly, quiet, a little sleepy, and unchallenging.

Either way, directors are usually unsure of how to contribute – until a problem appears that only the board can solve. More often than not, it was the kind of problem only a board could have prevented.

Every Board Will Face Challenges At Some Point

Personally, I’ve served on or advised boards dealing with:

• CEO transitions
• Regulatory shifts
• Federal Investigations
• Public scrutiny and PR issues
• Internal conflicts
• Strategic missteps
• Financial missteps
• Mergers
• Lawsuits

Challenges are normal. They are inevitable. But they usually aren’t frequent. And few directors are prepared.

If you serve in a governance role, you should be.

Challenges Don’t Create Weakness. They Reveal It

When any of the issues above emerged, it was apparent if the board understood its role and was prepared – or not:

• Boards with weak governance become reactive. They often make shortsighted decisions that only address symptoms and ultimately expand or prolong the challenge.
• Boards with strong governance become disciplined. They meet the challenge. They grow individually, as a body, and as an organization through experience.

The real questions are:

• Do they attempt to anticipate and prepare for foreseeable challenges?
• How well did they address and grow from past challenges?

Clarifying Terms

Two board terms are commonly used but usually not understood:

Governance: The disciplined oversight of strategy, leadership, and risk to protect the long-term health of the organization. Governance provides high-level direction and accountability. It isn’t management. It doesn’t execute the goals.

Fiduciary Duty: This is a legal and moral term. Board directors have a legal and moral duty to be faithful stewards of the organization on behalf of shareholders of for-profits and for the community (especially donors and beneficiaries) for non-profits. This term derives from the Latin root fide, meaning ‘faithfulness’ or ‘loyalty.’ We see it in the US Marine Corps slogan “Semper Fi”: “Always faithful.”

There are three specific duties board directors are expected to be faithful to:

• Duty of Care: Be informed. Be diligent. Show up prepared. Anticipate risk or challenges.
• Duty of Loyalty: The interests of the organization come first, before personal or other business interests.
• Duty of Obedience: Ensure compliance with laws, bylaws, regulations, and so on.

Problems in boards nearly always come down to a failure to be faithful to one or more of these duties.

There Are Four Risk Zones Every Board Must Monitor

Most boards focus only on financial risk. That is only part of the four areas of risk you should be aware of:

1. Structural Risk

Where governance systems are weak or absent. Examples include:

• No clear conflict of interest policy
• No ethics policies
• No emergency CEO succession plan
• No board evaluation process
• No formal CEO evaluation
• No risk oversight framework

Most boards underappreciate the value of these policies and processes. Until they are stuck with a challenge that could have been avoided.

I’ve worked with many boards that had no structural solution to their problems – for example, a CEO who, without consulting the board, added significant debt that appeared to be largely for personal benefit. A simple (and common) policy regarding debt would have prevented this.

One corporation hired its board chair as president of a subsidiary while retaining his board role. This conflicted scenario allowed him to bypass accountability to the CEO of the parent company. The board lacked a mechanism to remove him as a director or as president of the subsidiary. An ethics policy or bylaw addressing dual roles, conflicts of interest, and self-dealing, along with enforcement mechanisms, would have addressed this.

2. Capacity Risk

Where directors as individuals lack governance literacy.

• Inability to read financials confidently
• Unclear about governance vs. management
• Weak understanding of the regulatory environment
• Limited understanding of the work or issues facing the staff
• Limited risk assessment capability

Longevity does not equal competence. A strong board includes knowledgeable directors who can speak to these issues.

I recommend that for larger or complex organizations, there should be more than one director who can speak to major topics (financials, legal – if in a legally complicated space, subject matter experts in your line of work or service, etc.) so that there can be meaningful deliberation and accountability. Boards must grow. This means that directors, individually and collectively, should grow in their capacity to provide governance.

3. Cultural Risk

More powerful than laws, best practices, or bylaws is the culture of the board. How does the board relate to:

• Hard conversations?
• Factions or ‘sides’?
• Conflicts of interest?
• Emotional entanglement with the CEO?
• Dissent?

Board culture determines whether and how problems are prevented or challenges are addressed.

One of the first boards I advised had a toxic CEO. He had a reputation for abusive behavior towards others, poor safety practices, and self-dealing. For the stated purpose of being ‘nice’ and ‘respectful,’ board directors refused to confront him. He was terminally ill – they literally chose to wait until he died.

There was a relatively simple path to correcting most of this and rehabilitating his (and the organization’s) reputation. But it required the board to provide accountability. The board was too conflict-avoidant to confront. So, he died and is remembered as I’ve described him above.

That didn’t strike me as respectful or nice. It felt like cowardice.

4. Succession Risk

Succession is an ongoing governance responsibility.

Boards must plan for:

• Emergency CEO succession
• Planned succession
• Leadership pipeline

Most boards mistakenly believe they have the biggest say in whether or for how long the CEO stays. They don’t. The CEO does. And most CEOs depart sooner and with less notice than boards expect. Failure to prepare for succession creates organizational fragility.

Eight Questions Every Director Should Be Asking and Answering

Structural Risk: Do we have the governance systems that prevent predictable problems?

1. If our CEO were gone tomorrow, what specifically happens next?
2. Do we formally evaluate our CEO and our board annually—and does the process actually work?

Capacity Risk: Does the board have the knowledge needed to govern responsibly?

3. Does this board have the expertise to evaluate financial, legal, and operational risks—or are we relying on management to interpret everything for us?
4. Do we truly understand the organization’s financial engine—how it actually generates and sustains revenue?

Cultural Risk: Is the board capable of confronting difficult issues?

5. Is our board culture safe enough for constructive disagreement?
6. Are conflicts of interest clearly disclosed, discussed, and managed?

Succession & Strategic Risk: Are we governing for the organization’s future or reacting to the present?

7. What is the single largest strategic risk facing this organization right now?
8. Are we governing for long-term sustainability or short-term comfort?

What an Individual Director Can Do

Even if the board as a whole isn’t stepping up, individual directors aren’t powerless. Culture shifts through modeling. This isn’t easy. And it isn’t always popular.

I once served on a board where, over time, it became quieter and quieter. Eventually, I was the only one who asked questions in meetings. Everyone else was silent.

A classic example of this occurred when a committee suggested we vote on it. The assumption is that we would just accept the committee’s recommendation, regardless of whether we understood it or agreed with it.

That’s irresponsible. It’s appropriate to extend trust to a committee. But I didn’t lose my fiduciary responsibility just because we asked a committee to look at a question. I needed to ensure that my questions were answered and my vote was justified.

I politely, but firmly, stood my ground. It was uncomfortable for everyone. Later, directors came to me privately and thanked me for being willing to address these issues. I appreciated that, but I wish they had spoken up in the meetings.

You don’t need the whole board to change. You need to keep showing up and fulfilling your duty. And, to be frank, you need to be okay with being uncomfortable. But that’s part of leadership.

Governance Under Strain: The Final Distinction

Weak boards tend to stall under strain and either don’t make decisions or abdicate their authority to the CEO or a strong director. This weakens the organization and the board.

Strong boards mature under strain. Governance is not about control or polishing your resume. It is about stewardship. The true measure of governance is not performance in calm conditions. It is the ability to exercise judgment under pressure.

Take good care,

Christian