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The ugly, the bad and the good

31 December 2023

Reflections on how executive teams share bad news with the board.

Kieran Moynihan
Managing Partner, Board Excellence

I was once in a situation where, about 40 minutes into a board meeting I was observing, a sharp NED asked a probing question about a sales performance problem. As the Sales Director started to explain the issue, he inadvertently mentioned that it was the result of the loss of a key customer. This fact was not mentioned in the board pack, so the NED started to probe more deeply, asking whether any other key customers had been lost recently. At this stage, the Sales Director was visibly uncomfortable, but answered truthfully that this was one of several key customers lost recently due to product quality problems. At this pronouncement, I saw the colour drain from the CEO’s face. All of the NEDs got quite animated and a literal Pandora’s box was opened as this serious material issue took over the whole board meeting.

At the end of the meeting, the chair and every NED expressed, in no uncertain terms, how upset they were that the executive team had deliberately sat on quite a serious issue, remarking how this had damaged their trust that had been nurtured over many years. Thankfully the CEO took responsibility, admitting to the adoption of a ‘hope is a strategy mode’ to try and fix the problem, which had actually only got worse.

This anecdote serves to highlight how the current difficult market and economic conditions are putting a lot of executive teams and their boards under serious stress and testing bonds of trust.

Over the years, I have seen huge variation in how executive teams handle the sharing of materially negative developments and problems with the board. This goes right to the heart of board dynamics, board effectiveness and the trust that underpins highperforming boards and executive teams. It can also be a key factor in company or organisational scandals, as there is often a missed window of opportunity when, if the executive team had been brutally honest with the board earlier, collectively they would have had a far greater opportunity to address the issues and take concrete action to avoid a problem spiralling out of control.

The full article is available to read here.

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