Boardroom disputes – causes, effects and hidden messages

The vital role accountants play in resolution

Guest blog by Norman Younger, Maximiti

Arguments between the people at the top of a company regularly make headlines in the financial press or mainstream media.

We love to watch big egos square up to each other, particularly when there are millions at stake. And just look how incredibly popular the TV series Succession has been!

But it’s not so entertaining when a boardroom dispute happens to one of your clients (or even in your own accountancy practice).

Unfortunately for many smaller firms, whether limited companies or partnerships, boardroom disputes are all too familiar. These may not make it to the news, but the effects are usually more devastating for those involved.

No big payoffs, no golden handshakes – just misery and financial distress.

It’s one thing to know what the causes and effects are but often there is an underlying message for the business, hidden within the context of the argument.

Why do boardroom disputes happen?

Debate and disagreement are normal and healthy in a business, with decision-makers needing to be challenged regularly. But there’s a problem when this moves from being part of the normal cut and thrust of business and morphs into a dispute that becomes a rift. It often inflicts damage beyond repair, both in the operation and in the lives of the people involved.

Common causes of disputes between directors and / or shareholders are:

* Breakdown in relationship outside of the business. This could be due to family relationships, social circle hierarchies or politics at the church.

* Irreconcilable differences in strategy. Businesses need to shift their direction every now and then and the directors may have polar opposite views of the future. Or they may agree but the shareholders do not.

* Feeling of unfairness. A director who believes they are working harder than the rest of the board, bringing in more clients, coming up with the most innovative ideas or driving most of the new sales. But they feel they aren’t being adequately recognised or remunerated to reflect this.

* Sleeping partners. The person with the money who enabled the business to get going or kept it afloat in difficult times is now surplus to requirements. The business now stands on its two feet but the sleeping partner has no inclination to sell their shares.

* Part-time or non-executive director only there for advice. Although it worked well in the past, things have changed. The working partner or director has picked up enough knowledge and experience to manage on their own.

The role of the accountant

Issues like these usually fester over time and often go unaddressed, which means they can burst onto the scene with little or no warning. Some of the players may have seen it coming or had an inkling that all is not well, but it usually catches stakeholders unawares, which can make it all the more difficult to deal with.

People do not like unpleasant surprises.

It is this element of surprise that magnifies and exacerbates the effect of a dispute and turns it rapidly into a rift. Even the company’s trusted business adviser – you, their accountant – has to walk a very fine line given that they deal with all or most of the parties involved. But as a neutral 3rd party, the solution could well lie in your hands. You are well placed to support everybody in a mediation, given your wide business experience and ability. And mediation is almost certainly far better than going to law.

The hidden message in boardroom disputes

The message hidden within the dispute is telling you that things have moved on since agreements were first drawn up. If you think about it, it makes perfect sense. What held true 10 or 20 years ago doesn’t necessarily do so today – markets change and people change.

Perhaps it’s time to sell the business and let everybody go their own separate ways. Selling up while things are going well and everyone can go and do their own thing is surely preferable to a prolonged damaging dispute. A dispute that might well bring about a forced sale at a much reduced price.

Maybe the message is “time’s up everybody” – and why should that be a problem, if it’s the truth?

The fallout can be devastating

Fallout from boardroom disputes can take on a variety of formats, from not talking to one another all the way through to sabotaging the client base. You may be surprised to learn that when people stop talking to one another in a financial dispute, they can cut off their noses to spite their faces. They act in haste and inflict irreparable damage on everybody, including themselves.

Just stop and think what could happen if you have guaranteed a business loan against your house and your colleague in the boardroom engineers the implosion of the firm to get even with you!

Prevention is better than cure. Mitigation can lie with having the proper paperwork in place at the outset of the business relationship, such as shareholder and partnership agreements. However, it’s impossible to legislate for every eventuality, especially when it boils down to perceptions of fairness.

The best way to avoid disputes getting out of control is for those involved to review the relationships regularly. At the first sign of a problem, they should consult with a neutral external party who knows the business and personalities well enough to see through the fog and get to the crux of the matter. Typically, this is the company’s accountant, somebody who can bring about a common sense-based agreement. Input from an experienced and skilled mediator with boardroom experience is also highly valuable.

Somebody may have to come off their high horse, but it’s worth it.

Find out more at

Norman Younger will be speaking on the accountant’s role in boardroom disputes on the Accountants Helping Accountants webinar on 31st August.



Photo by Christina Morillo