Causes of Dysfunctional Culture

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Disaster in the Boardroom

Abstract

Understanding the cultural dynamics of boards is critical to understanding why crises emerge and how to make boards more effective at preventing them. Board culture, like any culture, is based on the beliefs and values that board members hold in common and manifests itself in how board members behave towards each other, how they communicate with each other and, perhaps most importantly, how they make decisions. This chapter identifies six different types of board dysfunction—lack of independence from management, missing key voices, cultural amplification, diffusion of responsibility, rule-bound cultures and groupthink—but also clearly identifies how each of these in turn manifests in a particular type of dysfunction in boardroom behaviours over and over again in the present (and also in the past).

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Notes

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  2. 2.

    Gerry Brown, The Independent Director: The Non-Executive Director’s Guide to Effective Board Presence, Basingstoke: Palgrave Macmillan, 2015, p. 2.

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  7. 7.

    Adrian Wilkinson, Jimmy Donaghey, Tony Dundon and Richard B. Freeman (eds), Handbook of Research on Employee Voice, Cheltenham: Edward Elgar, 2020.

  8. 8.

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    Laura Tyson, ‘The Tyson Report on the Recruitment and Development of Non-Executive Directors’, London Business School/Department of Trade and Industry 2003, p. 6.

  11. 11.

    https://www.goldmansachs.com/what-we-do/investing-and-lending/launch-with-gs/pages/commitment-to-diversity.html.

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  17. 17.

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  19. 19.

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  20. 20.

    https://www.bloomberg.com/news/articles/2020-07-06/u-k-asks-big-four-firms-to-separate-auditing-units-by-june-2024.

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  23. 23.

    Alvin Zander, Making Boards Effective, San Francisco: Jossey Bass, 1993.

  24. 24.

    Irving L. Janis, Victims of Groupthink, Boston: Houghton Mifflin, 1982.

  25. 25.

    Norman Dixon, On the Psychology of Military Incompetence, London: Cape, 1976.

  26. 26.

    Stanley Milgram, Obedience to Authority: An Experimental View, New York: HarperCollins, 2009.

  27. 27.

    https://www.ted.com/talks/david_dunning_why_incompetent_people_think_they_re_amazing.

  28. 28.

    Heidi K. Gardner and Randall S. Peterson, ‘Executives and Boards, Avoid These Missteps in a Crisis’, Harvard Business Review, 24 April 2020, p. 2.

  29. 29.

    Ibid.; see also Barry M. Staw, Lance E. Sandelands and Jane E. Dutton, ‘Threat Rigidity Effects in Organizational Behavior: A Multilevel Analysis’, Administrative Science Quarterly 26 (4), 1981.

  30. 30.

    Brown et al., 2020.

  31. 31.

    Harvey Nash/LBS Leadership Institute report, 2019; Deloitte/Wall Street Journal, ‘Women and Minorities on Fortune 500 Boards: More Room to Grow.’

  32. 32.

    https://deloitte.wsj.com/cfo/2019/03/21/women-and-minorities-on-fortune-500-boards-more-room-to-grow/; https://timesofindia.indiatimes.com/business/india-business/india-lags-in-female-board-members/articleshow/71532170.cms.

  33. 33.

    https://www.ey.com/en_uk/news/2020/02/new-parker-review-report-reveals-slow-progress-on-ethnic-diversity-of-ftse-boards.

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Correspondence to Gerry Brown .

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Brown, G., Peterson, R.S. (2022). Causes of Dysfunctional Culture. In: Disaster in the Boardroom. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-91658-9_4

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