Boards contain inherent biases that can be acknowledged and mitigated but not eliminated. Getting this aspect of governance right makes it more likely that material risks and opportunities will be well managed. It follows that an effective board is best placed to secure a company’s long-term success.
In recent years there has been an industry-wide push for more standardised disclosure related to governance. Investors can now see how many board meetings were held, how many meetings each director attended, and other easily quantifiable aspects.
Unfortunately, such disclosures can also create a risk of governance by numbers, with a focus on aspects that are not the most important contributors to board effectiveness. Board culture, the degree of engagement from individual directors, and the quality of relationships are also vital aspects that should not be ignored just because they are difficult to quantify.
Weaknesses in board‑level culture, including impaired information flow, weak escalation norms, lack of independent oversight, and blurred accountability, can translate into financially material investor losses or below market returns. These weaknesses may be driven by low trust, a lack of openness or poor psychological safety within the boardroom.
Boards that fail to allow real challenge of dominant personalities, or that lack the skills to steer a company through the challenges it faces, may find themselves unable to grapple with deep-seated cultural problems. Unaddressed issues that manifest themselves as major compliance or public safety crises may lead to unplanned cash outlays in the form of fines, legal fees, and remediation expenses. Further, revenues can be immediately halted, or curtailed in future periods, via the company’s loss of its licence to operate, acute brand damage, and explicit market restrictions.
Boards that fail to allow real challenge of dominant personalities, or that lack the skills to steer a company through the challenges it faces, may find themselves unable to grapple with deep-seated cultural problems.
Our engagement approach
In 2020, we published our white paper, Guiding Principles for an Effective Board, laying out five principles that underpin effective boards. These cover genuine independence and representation, the role of the chair, how the board allocates its time, the board’s relationship with the CEO, and a commitment to continuous improvement.
These dimensions cannot be assessed through governance ‘hardware’ indicators alone – such as board structure, formal roles, committee arrangements, or independence metrics. They must be evaluated through a diagnostic lens that considers qualitative ‘software’ elements. These include culture, behaviours, relationships and decision-making dynamics, that determine whether the board’s structures work in practice.
Identifying strengths or weaknesses in the application of each of the five principles can lead to practical engagement objectives around board evaluation, succession planning, establishing a lead independent director role or disclosure of a board skills matrix. We have also been able to evolve and refine our approach using insights from our board engagements, particularly around the software aspects of board culture.
Board culture as a high-performance team sport
Serving on a company’s board can be compared to a team sport. Some teams have a better collective decision-making culture, which allows them to outperform, while others have sub-optimal dynamics, or are more dysfunctional. We engage to assess whether boards are fostering a healthy culture of critical thinking and collaborative decision-making that best serves long-term shareholder needs, rather than just rubber-stamping the decisions of the CEO, chair or lead independent director (LID).
We also try to evaluate if the board is shaping strategy and risk oversight through informed and psychologically-safe dialogue with a team of directors that is constantly improving itself. To increase our visibility into the cultural dynamics impacting decision-making quality, we have translated our five principles into a board effectiveness diagnostic tool that relies on interpreting non-quantifiable information that only skilled engagement can elicit.
To find out more, read the full article in our Q2 2026 Public Engagement Report.
Assessing board culture and dynamics
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