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Good Governance: Be Friendly, but not Friends


June 2014 – Vol: 37 No. 6
by Les Wallace, Ph.D.

Valuable professional dialog and fruitful differences of opinion get lost when board-executive relationships become too close

June 24, 2014

Credit Union Management magazine’s Web-only “Good Governance” column runs the fourth Tuesday of the month.

Illustrations of executives shake hands across red lineIt’s frequently stated that credit unions are a family. We have a passion for our model and its place in the financial services industry. We care about each other, and despite some competition in our locales, we are friendly supporters. We proudly refer to our boards as “volunteers” rather than trustees, as is common in the corporate world. We celebrate board members who have extensive years of service to the CU.

Family. Close knit. Anthropological clans.

It is little wonder then that many a board member can struggle with the balance between being a corporate officer and a friend of other directors, the CEO and other CU executives. We spend several hours together each month and frequently days in local, regional and national industry meetings. All are important.

Most of these engagements also have board dinners and joint events that take us—boards, CEOs and other executives—in tandem to experiences, learning, testimony and networking. Propinquity leads to closeness.

Unfortunately, this feeling of closeness can lead to impaired judgment, deference, and—at times—feelings of outright betrayal between board and executive team. Working so closely together can also lead to tension around differences of opinion and the tough decisions a board has to make. Psychology clearly tells us close friendships can distort perceptions and restrain proper due diligence even in the august climate of the board room.

In the corporate literature it’s referred to as “fraternization.” Fraternization—from the Latin meaning turning people into brothers—includes close social and friendship ties with one another where different levels of oversight and supervision are mingling in a close relationship.

We are not talking romantic relationships here, but I’ve seen that also be a problem with CU boards and executives. Fraternization in business is a dilemma leaders have to manage carefully. The military has rules against fraternization between ranks. In the corporate world, fraternization has led to scandals and fractious dissolutions.

Professional Relationships

It’s commonly agreed that leaders should be friendly—but not friends—with those they oversee or by whom they are overseen. The definition of professional relationship does not rule out a dinner invitation or cocktail party. Its does suggest that when we become so intimate with each other’s lives that we are attending family events and reunions, we may be overly connected to such an extent that professional dialogue and differences of opinion at the board level may be compromised.

I’ve seen this in numerous instances in my work with over 300 boards and thousands of executives. When the CEO and board officers frequently ski, golf, dine and drink together, the CEO becomes more reticent to promote his or her ideas to the board and certainly to disagree with them.

I’m not talking about the annual CU fundraising golf tournament. I’m talking about regular and patterned contact around these and other social engagements. I’ve seen CEOs uncomfortable with having to squire around the board chair and his or her spouse at national meetings and learning events, rather than taking a night off to be with their own spouse. It’s an obligation. And it can set up unwanted expectations on both sides that they will use the social connections they’ve made to defer candid and honest communication.

Unfortunately there is no textbook for guidance here. Total distance is unrealistic and not human. As well, frequent weekend barbeques and other events may be problematic. So what should the CEO, board officers and others do to manage the potential for contamination of the professional relationship members expect of their trustees?

First, socializing at CU events is healthy and expected. It builds an interpersonal comfortableness. That is, assuming that alcohol is kept in moderation—but that is another article. Getting to know the person behind the position is a long valued leadership investment. Getting intimate into each other’s lives is not.

If you’re regularly visiting the chair’s summer home (or vice versa), you beg the question of whether you’re too invested to remain objective. Of course, those who commonly partake of this behavior are the last ones to see this, while all the rest of us—other board members, your executive team, who knows who else—do.

Taking Your own Counsel

I tell CEOS and directors the following:

  • Have those board and executive dinners, but don’t have those late hours drinking in the bar.
  • Take a team skiing or golfing here and there, but don’t make it a habit—the conversation doesn’t stay social the more you interact.
  • Give feedback in formal one-on-one meetings, not on the golf course or in the bar.
  • Carefully accept those invitations into each others' private domains. A dinner a year is little risk unless there is an unspoken secret agenda—and you’ll discover that soon enough.
  • Keep your distance socially, but don’t be a prude. Closer contact breeds a familiarity that can interfere with business. The business school case studies are full of these.
  • Do inquire about the new grandchild, son-in-law and college graduate. Do visit someone in the hospital. Attend the wedding. Do send a note of condolence and go to a funeral.
  • Be human but not BFFs.


Les Wallace, Ph.D.
,
the 9Minute Mentor, is president of Signature Resources Inc. He is co-author of A Legacy of 21st Century Leadership and author of Principles of 21st Century Governance (Oct. 2013). He is a frequent speaker and consultant on governance leadership.

Photocredit: Dollarphotoclub.com/ 47872724

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