When Resigning, Keep Board Discord Confidental

Former Boeing director Nikki Haley’s focus on the disagreement with the company shined an unwanted light on the entire Boeing board.

Former U.S. ambassador and former South Carolina governor Nikki Haley’s decision to resign her board position at Boeing this month is a reminder to corporate directors that there are consequences for publicly disagreeing with a board on the way out the door.

A high-profile board member, Haley broke from Boeing in a disagreement over whether the company should lobby for corona virus bailout assistance from the federal government. Upon her resignation the rift became public.

As reported by multiple news outlets, in a letter to Boeing’s CEO, Haley wrote, “I cannot support a move to lean on the federal government for a stimulus or bailout that prioritizes our company over others and relies on taxpayers to guarantee our financial position. I have long held strong convictions that this is not the role of government.”

Boeing responded with a statement saying, “We appreciate her service on the board and wish her well.” Such boilerplate statements are typical when directors leave a board.

Working with board members requires debate over very sensitive matters, and directors know that there will be major disagreements. However, since boards rely on discretion and confidentially, there is a general understanding that any disagreements should be kept “in-house.”  Something went wrong in Boeing’s case.

While it’s perfectly fine that Haley resigned because of her “strong convictions,” her focus on the disagreement while leaving shined an unwanted light on the entire Boeing board. The board was already under fire for its handling of two crashes of its 737 Max aircraft last year, a situation some thought Haley was recruited to help them fix. Here are some potential consequences that could result when a director exits a board in a public dispute:

• By publicly focusing on the disagreement, it calls the decision to resign into question. When the public hears the reason for the resignation, people may ask, “Who was right and who was wrong?” There is significant risk that the resigning director will be viewed as being wrong, petty, or having some other personal motive to draw attention to the board. This could have a significantly negative impact on a director’s reputation.

Surely, every director has something that they would be willing to resign over. And knowledge of unethical behavior or corruption might warrant resignation and public disclosure. So now might be a good time for every director to ask themselves, “What issues would I consider resigning over?” Then directors should determine if they currently sit on a board that is aligned with their business ethics and values. If the board and their values aren’t aligned, it might be wise to decline to stand for re-election once their current board term ends and seek a more compatible match elsewhere.

• Invitations to join other boards may end or be limited. Once a director has publicly disagreed with a board, other boards may be reluctant to recruit them for fear the same thing might happen to them. Also, stating unwillingness to compromise on a specific issue can limit a director to invitations from boards that only agree with that specific point of view.

• The ability to be a good team member may be questioned. Making disagreements public reflects poorly on a board’s ability to function as a cohesive unit. That’s a major embarrassment for a board. Directors who make disagreements public could earn a reputation as the cause of board dysfunction.

Additionally, part of being an effective board member is being able to persuade other directors to see your point of view on issues that are important to the company’s growth and sustainability. Since more than one business strategy can be successful, directors are expected to move forward in a positive way once the group makes a decision. Resigning because the majority of the board disagrees with a certain approach might be viewed as shortsighted.

• Other board members may feel betrayed and disrespected.  Publicly chastising the board for making decisions as fiduciaries of the company could be viewed as disrespecting the ability and judgement of fellow corporate directors.

By leaving her board position with an emphasis on what they disagreed on, any positive achievements that were accomplished during Haley’s tenure have been discounted and overshadowed. No director should want to leave a board like that.