When the honeymoon is over

Dr Marcia Hewitt investigates the lessons learnt from dealing with the disappointment of leaving a board when you don’t want to go.

Directors are provided with plenty of guidance on how to secure a board position but less is said about leaving a board involuntarily. The Corporations Act 2001, ASX listing rules and a company’s constitution outline reasons and processes for removing a director. But it can still be an awkward situation. For directors with a passion and deep commitment to the organisation’s mission, losing a directorship can be extra tough. A dysfunctional board, election defeat, company buyout or unhappy shareholders are some of the scenarios directors have discussed as reasons for leaving boards. Whatever the reason, the aim should be to leave with “no regrets and no grudges” – as sacked Carlton Football Club coach Mick Malthouse told media in May.

Understandably some directors approached by Company Director declined to talk about their career disappointments. These aren’t the domain of a LinkedIn profile: discretion and an eye on future directorships are important – particularly if the exit is due to poor performance or a government change. There’s also the stigma and secrecy associated with failure, says Dr Niki Vincent MAICD, chief executive officer of the Leaders Institute of South Australia. “This can limit our learning, self-understanding and the complexity of our thinking and reasoning capacity,” she says. “Of course failure is disappointing – no one wants to invest time and not have it work. In all our leadership programs, we help people grow by accepting failure as a normal part of life and that it is how we learn – and it’s nothing to be ashamed of. If we fail and hide it and no-one knows about it then we don’t learn.”

Learning from failure

Dr Vincent’s research with almost 400 leaders has identified that people equipped with a high level of openness, flexibility and emotional intelligence are more able to learn from failure. “But people who are less evolved in these areas, not necessarily in intelligence – they can be absolutely brilliant intellectually – but within a narrow range of technical expertise, are less able to deal with a disappointment. Their identity is wrapped up in their expertise and for them a failure challenges them as a person so they will often ‘shift the blame’ to someone else or hide it,” she says.

Dr Vincent’s reflection on a career disappointment shows how the adaptive leadership approach helped her to understand what she could have done differently.

“My first experience reporting to a board was as chief executive of a national charity made up of state-based organisations. I was passionate about the work. I jumped into the job, assuming that board members would be on the same page as me without doing any due diligence. It was a nightmare, with the board divided along state lines, an inexperienced chair, Machiavellian directors, politicisation and completely different ethical and moral points of view.

“During a very public crisis that arose from allegations about a high profile public figure associated with our organisation, less than a year after my recruitment, the board fell apart and the organisation disbanded soon after.”

Vincent continues: “I did not have the adaptive capacity, nor had I developed this at an organisational level, to help us stay the course during such an incredibly challenging time. After studying adaptive leadership at Harvard, I became aware of my blind spots and understood what I could have done differently. I’d now interview each of the board directors and understand their world views and motivations. I might then be able to work with them collaboratively to resolve the issue, instead of thinking I needed to have all the answers. I would have understood that evolving a more adaptive culture at board level was a crucial part of the work that needed to be done – instead of just running the organisation.”

Vincent recommends that directors, no matter how experienced, have people who can act as mentors. “Mentors can be formal or informal – as long as they care about you, you trust them, they are prepared to offer you perspectives that you might not want to hear (and you are prepared to listen). If I was asked to leave due to poor performance I would want to understand why – these things don’t come out of the blue, so understand yourself and treat a failure as a learning experience.”

Kate Costello FAICD, managing director of Governance Matters, recalls the disappointment of losing an election at Australian Central Credit Union, a member-based organisation. “When I got the call to say that I hadn’t been successful I was pretty devastated. I did front up at the AGM because it related to the previous 12 months where I had been on the board.

“This took a bit of courage. It was serendipity that within 24 hours I had a call from SAAB Systems asking if I would be interested in joining their board. So my disappointment didn’t last long.”

Costello says that in a merger, no matter what you have done for the company, you have to be prepared for leaving the board as the new owners will want to put their stamp on the entity. This is the case with Keith de Lacy AM FAICD who chaired Macarthur Coal, taking it from a $128 million public float in 2001 to a $4.9 billion buyout by Peabody Resources 10 years later. “It was inestimably good for shareholders, right at the peak of the boom,” says de Lacy. “But leaving McArthur Coal left a big hole in my life – in work, relationships and personal fulfilment. There is no way you can have a career without issues, problems and even failures. Most important is how you respond.”

Know your limits

A director who knows the numbers are against them will resign before a board challenge.  This mindset provides the mental strength to ride out a tense situation. In May, prominent South Australian company director Robert Kennedy FAICD succumbed to a board challenge by unhappy shareholders who sought to unseat him as chairman of Marmota Energy. Kennedy resigned on the eve of the general meeting after assuring himself that this is what the majority of shareholders wanted. “Corporate democracy has spoken and I wish the company all the best in the future,” Kennedy said at the time. “This company was formed by me and others,” he told Company Director. “You have to take the emotion out of these situations and realise there is nothing personal.”

Kennedy cautions that the Director’s Deed should provide as much indemnity as possible so that when leaving, whatever the circumstances, the maximum legal protection is provided. “A person who is able to handle change usually gains the respect of those around them and can be borne in mind for future opportunities,” he adds. “Work with trusted fellow board members and know whether you will have their support (and if you would be prepared to give them yours) when the difficult issues arise. Their track record is as important as yours.”