Table Of ContentDISASTER in
the BOARDROOM
Six Dysfunctions Everyone Should Understand
GERRY BROWN
RANDALL S. PETERSON
Disaster in the Boardroom
Gerry Brown • Randall S. Peterson
Disaster in the
Boardroom
Six Dysfunctions Everyone Should
Understand
Gerry Brown Randall S. Peterson
READING, UK 1-26
London Business School
London, UK
ISBN 978-3-030-91657-2 ISBN 978-3-030-91658-9 (eBook)
https://doi.org/10.1007/978-3-030-91658-9
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‘To my sisters and brothers for their encouragement throughout my life.’
Gerry Brown
‘To my mother the person who taught me to value ideas and use critical
thinking skills.’
Randall Peterson
Acknowledgements
Our thanks go to many contributors who have all made significant efforts in
getting this book published.
To Carrie Fletcher for researching and writing so many case studies.
To Morgen Witzel for his total commitment to help our ideas become the
reality of a manuscript.
To Marilyn Livingstone for creating the index.
To Graham Russel for some final edits.
To Jeff Scott of Platypus, a very professional publicist.
To Gerry’s son Mario and granddaughter Aurora for assisting in designing
the book cover.
To Gerry’s daughter Cayetana and Stray Cat for organizing the book launch.
To Simon Osborne, Nuala Walsh, Vyla Rollins and Michael Payne for their
critical appraisal of the manuscript.
To Michael Clegg-Butt for supporting Randall through late-night and
weekend editing.
To all of those who have endorsed the book.
vii
Praise for Disaster in the Boardroom
“This powerful book fuses story-telling with rigorous research to present a highly
readable, compelling analysis of corporate boards’ influence—and failures. The juicy
examples and case studies, ranging across time and around the globe, paint a picture
of what goes wrong, why the different types of board dysfunction arise, and why we
should all care. This important book should (!) appeal to a wide variety of readers well
beyond the boards themselves—taxpayers, managers, lawyers, investors and ordinary
citizens whom all have a stake in how boards perform. Perhaps, most importantly,
Brown and Peterson bring together their unique strengths and experiences to outline
practical strategies and tactics to strengthen board effectiveness. Disaster in the
Boardroom is fascinating, well-researched, and a more important read than ever.”
—Heidi K. Gardner, Distinguished Fellow, Harvard Law School
& author of Smart Collaboration
“Boards continue to let us down. Brown and Peterson carefully and comprehensively
tell us why but also what can be done about it. They diagnose and document an array
of scandals and board pathologies—ranging from the subordinated board to the
bureaucratic board—to learn valuable lessons as well as present a compelling case for
a concerted emphasis on board culture, complete with many highly tangible recom-
mendations. Anyone reading Disaster in the Boardroom: Six Dysfunctions Everyone
Should Understand—whether you’re a director, company stakeholder or casual
reader—will greatly benefit from this engaging, thoughtful and timely book.”
—Donald C Hambrick, Evan Pugh University Professor & Smeal Chaired
Professor of Management at Penn State University
“In Disaster in the Boardroom Peterson and Brown go beyond standard narratives on
board performance to offer evidence-based insights on the drivers of behaviour on
boards, and of the individuals who serve on them. Using real-life case studies, they
provide illuminating examples of how such dynamics manifest, the impact that they
can have, and offer practical suggestions on how to increase board effectiveness. This
book is a must-read for board members, Chairs, charity trustees, board evaluators,
aspiring board members and all stakeholders who engage with boards.”
—Vyla Rollins, Executive Director, London Business School, Leadership Institute
“Disaster in the Boardroom is an exceptionally well written, authoritative and impres-
sively accessible book which addresses key questions in corporate governance. How
can we make boards more accountable to their stakeholders? How can we avoid disas-
ters which happen under the watch of the board? How do we train board members
to be more vigilant? Gerry Brown and Randall Peterson do a wonderful job in speci-
fying the six dysfunctions of a board as well as identify over seventy board failures in
this evidence based and highly insightful book. Disaster in the Boardroom is a must
read for all board chairs, non-executive directors, financial journalists, policy makers
and students of governance.”
—Patrick C. Flood, Professor of Organisational Behaviour,
Dublin City University Business School
“Disaster in the Boardroom makes an impassioned plea for people to consider the
extensive ramifications of corporate failures from shareholders, to the human cost
and impact on the broader society. Importantly authors Peterson and Brown provide
concrete tools towards building a successful board. They combine academic rigour
with practitioner insight as well as provide coherent theoretical foundations, empiri-
cal evidence, and compelling case studies. Eminently readable, Disaster in the
Boardroom is a must for any student of business, aspiring executives along with board
directors seeking to build better boards. This book should, obviously, be compulsory
reading for all board directors too.”
—Christine de Largy, Impact Performance and ex-Chair
of Board Services, Harvey Nash
“Gerry Brown and Randall S. Peterson take us on a well-argued, fair-minded and
very readable journey of corporate corruption, greed, crass mistakes and mis-judg-
ments in Disaster in the Boardroom: Six Dysfunctions Everyone Should Understand.
Corporate Governance is failing too often. Usually via fraud, bribery, industrial acci-
dents and deaths, sexual harassment, tax evasion and gross mis-selling amongst other
boardroom blunders.
Though scandal causes and consequences vary, the thread common to the South
Sea Bubble, Lehman Brothers, BP’s Deepwater Horizon, Facebook, Uber or
Miramax’s Harvey Weinstein is the need for much better corporate governance. The
authors not only eloquently describe and investigate these scandals but are just as
analytical, considered and detailed in their proposals to rectify them. One of the solu-
tions to these various corporate governance problems are better trained, more diverse,
powerful and plentiful Independent Directors.
Disaster in the Boardroom is essential reading not only for new directors but also for
existing directors, many of whom—on this evidence—need to substantially raise
their game.”
—Barry Bateman, Former CEO and Vice-Chair of Fidelity International
“Finally there is a business book on the market that is a practical, thought-provoking
and useful read for existing and aspiring board directors and executives. Better still,
Disaster in the Boardroom identifies six types of board failing that should become the
essential metrics by which anyone who wishes to accurately judge any business any-
where in the world needs to understand and use. There is little doubt that every busi-
ness needs to be assessed to see if they exhibit or fall into one of the six types of failing
board the authors Brown and Peterson so persuasively identify.”
—John Allan, Chairman Tesco and former President of the CBI
“There have been many corporate scandals and collapses over the last few decades.
Disaster in the Boardroom: Six Dysfunctions Everyone Should Understand not only sum-
marises them in an interesting manner but also places them into an historical context
and demonstrates that very little has changed! Despite the apparent advance of tech-
nology and governance principles, there remains an almost unlimited capacity for
boards to get things wrong. Of course, the common thread across the historical scope
of this book is human beings—whose behaviour the authors analyse and explain in a
compelling manner. With case-studies on Facebook, Google and Uber amongst oth-
ers, authors Brown and Peterson also provide possible solutions and best practices.
Disaster in the Boardroom is a really good read! It takes in the drama of real business
situations and places them within a useful and insightful framework of explanation.
It’s a real pager turner—a rare achievement in a non-fiction volume!”
—Dr Roger Barker, Director of Policy and Corporate Governance,
Institute of Directors
“Disaster in the Boardroom highlights why and how things have gone wrong in board-
rooms across the corporate world. The authors provide thoughtful analyses and many
great insights into how to ensure boards develop and provide the right balance of
support, challenge and oversight. Disaster in the Boardroom shines a light on the
many ways boards can use the lessons of the past and present, to predict and avoid
executive suite scandals and corporate governance mis-steps in the future.”
—Dame Inga Beale, Portfolio Director
“Disaster in the Boardroom is a fascinating must read about boards, their long history,
responsibilities, critical skills and high profile inadequacies. Through careful presen-
tation and stimulating examples, this superlative book shows how necessary it is to be
constantly diligent so as to maintain institutional integrity, cultural excellence and
long term competitive edge. Authors Brown and Peterson’s research finds six carefully
constructed dangers that we should all think about, discuss and apply.
Balanced navigation across independence, management and technology in today’s
fast changing world will demand more skills, wisdom and courage from boards. A
thorough reading of Disaster in the Boardroom bridges gaps for those with experience
and also provides an important framework for executive managers, aspiring board
members, professionals, other advisors and students alike to understand more fully
the critical role of oversight and governance. I recommend this book
wholeheartedly.”
—Sir Dennis Gillings, CBE, FMedSci, Chairman and CEO,
GF Management
Contents
Part I 1
1 Where Was the Board? 3
Moments in a History of Scandals and Disasters 5
Land Grab 6
Railways and Ruin 6
Cash for Influence 7
The Rise of the False Prospectus 8
Rise and Fall 9
Shocked and Appalled 10
The Tip of the Iceberg 11
The Cost of Failure 13
The Pandemic Reality 15
Dysfunctional Boards 16
The Impact of CEO Personality 17
Board Culture 18
Designed to Fail 20
Types of Board Dysfunction 21
The Subordinated Board 22
The Imbalanced Board 22
The Distended Board 22
The Bystander Board 23
The Bureaucratic Board 23
The Conforming Board 23
The Need for Independence 24
The Structure of This Book 25
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