It’s not structures, rules or regulations that make effective boards, but people. Given this, how the CEO and board members understand and interact with each other is pivotal to whether a board thrives or descends into dysfunction. In this episode of INSEAD Explains Governance, Affiliate Professor of Organisational Behaviour Erik van de Loo examines the psychological factors and thorny relational dynamics that can make or break a board. 

It all starts with the chemistry and relationship between the CEO and chairperson, which is largely based on two dimensions: a shared approach to sensemaking, and the strength of the friendship or affective bond between the two. “However, it would be a trap if the CEO and chairperson like one another so much that it comes at the expense of being critical, challenging and thinking independently,” van de Loo cautions.

He adds that should relations between the CEO, chairperson and other board members become fraught, it’s imperative to course correct as soon as possible before a board “malfunctions”. The longer boards wait to address the issue, “the more deeply ingrained a vicious pattern, and the more difficult [it will be] to change that”.

Fixing this starts with identifying and acknowledging that there’s a problem. Often, van de Loo says, the reasons for malfunction are interpersonal in nature and linger beneath the surface. Instead of applying structural solutions, which are ill-suited to address these dynamics, boards should focus on the individual and interpersonal micro-dynamics that impact relations.

It’s also critical for executive and non-executive board members to be clear about their roles – something that the CEO and chairperson are responsible for. According to van de Loo, how individuals perceive their roles can be very different from what’s described in legal documents or regulatory frameworks. 

“There’s a link between how one understands the role, how one feels in the role and how one behaves in the role towards others,” he states. “This can be unconsciously influenced by past successes or failures, and clarifying this requires mature and in-depth conversations.”

Additionally, van de Loo outlines four well-known boundary conditions for creating effective boards. First is reflexivity; the extent to which a board can reflect on its actions and adapt how it functions accordingly. The second is trust, or psychological safety, which allows for interpersonal risk-taking, so that the CEO and board members can challenge each other constructively.

“The third factor is humility… and the fourth is parrhesia, a concept from the old Greeks that refers to the courage to speak independently and to speak the truth, even when you fear or think that nobody might agree with you,” van de Loo says. “Without these four conditions, it’s very hard, if not impossible, to harvest the collective wisdom and experience in boards.”