In 1999, Coca-Cola Co.’s CEO, Douglas Ivester, handpicked successor to popular Roberto Goizueta, was surprised in a Chicago airport by two members of the flagging company’s board of directors. According to the directors, Ivester’s hardhanded tactics with local bottlers and European regulators had alienated business partners and shareholders and left him with a reputation for not listening to the board. Mistakenly believing that the two directors spoke for the entire board, Ivester abruptly resigned. Shares of Coke fell 12% in two days as the board and investors struggled to make sense of what had happened. The incident would affect the company for years, and Coca-Cola would have three CEOs from 1997 to 2004.1 Certainly conflict is inevitable in any organization, but, with the right approach in place, boards can greatly increase the opportunity to resolve disagreements before they get a chance to get out of control.
Given the high stakes involved, it is important that boards use a comprehensive approach to specify roles, policies and procedures for resolving the routine disagreements that arise in the course of providing oversight. Boards using a systemic approach may find that not only will they resolve disputes more effectively, but they will also enhance their collaborative problem-solving and decision-making capabilities.2 Most of the time, boards do a pretty good job of talking things out. However, they can be far more effective if they establish a broad range of internal and external resources to assist them in uncovering and resolving problems. Additionally, organizations might want to consider adopting a new role: the board ombudsman. If the role were implemented, the board ombudsman could become a powerful resource for senior management and for the board as well, empowered with the capability to resolve disputes quickly, quietly and efficiently.
A Range of Skills Is Needed
Of course, any effective conflict-management plan must begin with the board itself. (See “A Comprehensive Board Approach.”) Ira Millstein has advised that when boards are selecting new directors they should consider the capacity of potential board members to respond constructively to trouble and to help the company prevent it.3 Best practices in conflict management and corporate governance alike call for directors and boards to take the lead in addressing their own problems and disagreements related to oversight responsibilities, using the most constructive approaches possible.
1. B. Morris with P. Sellers et. al., “The Real Story: How Did Coca-Cola’s Management Go From First-Rate to Farcical in Six Short Years? Tommy the Barber Knows,” Fortune, May 31, 2004, 84–98. See also C.H. Deutsch, “Coca-Cola Reaches Into Past for New Chief,” The New York Times, May 5, 2004, sec. C, p. 1.
2. K.A. Slaikeu and R.H. Hasson, “Controlling the Costs of Conflict: How to Design a System for Your Organization” (San Francisco: Jossey-Bass, 1998).
3. I.M. Millstein, “‘Trouble’— A Factor in Selecting Directors,” Directors Monthly (June 2000): 1–4.
4. L.M. Holson and C. Hulse, “For a Diplomat, Task Is Quelling Disney’s Unrest,” The New York Times, March 5, 2004.
5. C. Elson, interview with author, Sept. 28, 2004.
6. The Code of Ethics and the Standards of Practice of the International Ombudsman Association are available at www.ombuds-toa.org.
7. T. Landon Jr., “Counselor for All Reasons,” The New York Times, July 28, 2005, sec. C, p. 1.
8. M. Gunther, “The Mosquito in the Tent: A Pesky Environmental Group Called the Rainforest Action Network Is Getting Under the Skin of Corporate America,” Fortune, May 31, 2004, 158–165; Y. Trofimov and H. Cooper, “Globalization Protestors Plan to Target Companies,” The Wall Street Journal Online, July 23, 2001; G. Winter, “Timber Company Reduces Cutting of Old-Growth Trees,” The New York Times, March 27, 2002; J. Carlton, “Boise Cascade Turns Green,” The Wall Street Journal Online, Sept. 3, 2003.
9. C. Hymowitz, “Changing the Rules,” The Wall Street Journal Online, Feb. 23, 2003; P. Pryzant and V. Caracio, “Overcoming Warren Buffett’s ‘Boardroom Atmosphere,’” Directors Monthly (December 2003): 9.