Governance – Management Consultants: The Pitfalls and Challenges of Board Membership

By Mildred Royer
President, Royer Thompson Management Consulting Ltd, Halifax, NS
Partner with VF Career Management

It is not uncommon for Management Consultants and Professional Advisors to be a member of a Board of Directors. Many of these individuals are highly sought after, bringing a broad level of expertise to the Boards they serve. But while consultants are encouraged and are to be applauded for lending their expertise and experience to improve Corporate governance and performance, their participation on Boards sometimes raises serious questions about the nature and propriety of that relationship.

Nowhere is that more evident then when consultants sit on Boards of Directors of organizations with which their Consulting Firms do business. Recently, for example, a contract was awarded by a corporation to a Consulting Firm whose Senior Partner sat as Chair of the Board’s Governance and HR Committee. The contract was for the recruitment of the Corporate CEO. While the Partner was excluded from deliberations surrounding the RFP and while there is nothing illegal about such activity, both the appearance of and the potential of conflict or undue influence were raised by observers of the process.

There is no easy way out of this conundrum – management consultants, lawyers, and accountants sit on numerous private, public, and not-for-profit Boards and their membership has been accepted and championed. Organizations create elaborate policies and processes around conflict of interests and go to great lengths to articulate the importance of transparency. Furthermore, they point to the benefit they receive from having a high level of expertise on their Governing Boards arguing that any risk of the appearance of conflict must be balanced by recognition of the positive contributions these members make.

However, in the real world, consumers, customers, clients, and the general public are now demanding greater accountability from the corporations, governments, and agencies that serve them. Increasingly, citizens and consumers are challenging decisions and becoming more skeptical about our institutions and the legal and governance frameworks that are their foundation.

Governance practitioners, who have worked diligently to inform good governance practices, need to address the increasing skepticism around Board membership and the appropriateness of membership when an individual serving on the Board works with a Firm that does business with the organization. Management consultants, accountants, and lawyers should remain vigilant around the potential landmines that they are creating. The essence of good governance is transparency, objectivity, fairness, and accountability. Consultants who are appearing to minimize any one of these factors or who believe that they are insulated from questioning by policies, processes, or excluding themselves from decision-making when their firms are being considered as service providers, may be over confident or are relying on constructs that are quickly losing their viability.

Inevitably, a competitor, procurement officer, customer, client, or consumer will challenge the appropriateness of this behaviour. Pointing to a conflict of interest policy, relying on participation in governance training or long standing practice may not be enough to avoid significant damage to reputation or unexpected liabilities in this increasing changing and complex society.

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