Bill Fitzwater Cooperative Chair
Oklahoma State University
One of the trickiest issues in a cooperative is that of an underperforming board member. Fortunately, underperformance is a rare occurrence. When it does occur, it creates a situation with no simple solution. In some cases it is productive to suggest additional training. For example, a director who is not contributing to monitoring finances or risk management may become engaged once their comfort level with the subject increases. In other cases an over-extended director may have to be asked to trim other time commitments. In rare cases it might be appropriate to ask the underperforming director to resign or not stand for re-election. There is no easy way to ask an underperforming director to step down, but the board chair is typically the best person to address the issue.
Electing board members is a member responsibility. This creates a delicate balancing act for a board that is trying to address an internal issue. There is policy and structural components that can help prevent the situation. Every cooperative should have a clear policy on code of conduct for board members. The bylaws should contain provisions for automatic removal of a board member for extreme underperformance, for example missing three consecutive board meetings. While board member selection is a member responsibility the CEO and board can establish a culture and strong nomination committee that results in at least two strong candidates for every board seat.
Too many cooperative rely on term limits as sole control for an underperforming member. The pros and cons of term limits are another issue, but they are clearly a very slow method of replacing an underperforming director and come at the cost of periodically removing highly effective team members. A better tool for avoiding the situation, and perhaps assisting the board with continuous improvement, is board evaluation. Only a minority of cooperative boards systematically evaluate their own performance. The majority of boards that have implemented evaluations are pleased with the impact of the process. Board evaluations typically begin with directors rating overall board performance. The evaluation can be expanded to the directors rating their individual performance. Some cooperatives eventually transition to peer to peer or “360 degree: evaluations. An ongoing evaluation process, provides a subtle check against underperforming directors.
If you have a perspective on the issue of an underperforming board member and the appropriate response of the board chair, board and CEO, drop me an email or post a blog comment.