Boardroom disputes – causes, effect and the role of the accountant

Regrettably for many firms a boardroom dispute is all too familiar, whether incorporated or trading as partnerships. When debate and disagreement moves from being healthy within the normal course of business and resurfaces as a rift, it often inflicts damage beyond repair.

  • Common causes of rifts are:
  • Breakdown in relationship outside of the business. This could be due to divorce, split with an unmarried partner or politics at the golf club.
  • Irreconcilable differences in strategy. A shift in direction is needed but the directors have polar opposite views of the future.
  • Felling of unfairness. A director who believes he or she is working harder than the rest of the board but not being remunerated to reflect this, bringing in more clients or driving most of the new sales.
  • Sleeping partners. The business now stands on its two feet and the person with the money is surplus to requirements.
  • Part-time or non-executive director only there for advice. Although it may have worked out well “back in the day”, now that profits are picking up the working partner or director has picked up enough knowledge and experience to manage on their own.
  • Issues like these usually fester over time and often go unaddressed which means they can burst onto   the scene without warning, at least in the eyes of some and certainly for the company’s accountant.
  • This element of surprise exacerbates the effect of the dispute which turns it rapidly into a rift, which is where you as the trusted business adviser has to walk a very fine line, but as a neutral 3rdparty the solution could well lie in your hands by recommending mediation .
  • Fallout can take on a variety of formats, from not talking to one another all the way through to sabotaging the client base.
  • Prevention is better than cure and mitigation can lie with having the proper paperwork in place at the outset of the business relationship, such as shareholder and partnership agreements. However, these usually address how to deal with a problem especially if it is the end of the road, and it is impossible to legislate for every eventuality, especially when it boils down to perceptions of fairness. Watch our short video on avoiding boardroom disputes.
  • Find out more on our FAQ page or contact us if you’re involved in a dispute professionally

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