Where does governance actually live in your organisation?
Governance does not live in the boardroom. It lives in the behavioural space between the executive team and the board. And that space — more often than not — is where it quietly fails. Most boards believe they have governance covered. They have the papers, the policies, the process. What they often do not have is honest information. This distinction matters more than any compliance checklist ever will.
The Behavioural Governance Gap
Governance failures rarely start with missing information. They start with a “behavioural governance gap” — the space between what management knows, what it is willing to share, and what directors are willing to challenge. The problem is not a lack of process. It is a lack of courage.
In too many organisations, management filters information before it reaches the board. Proposals are socially tidied up. Risks are softened. By the time a paper lands in front of directors, the momentum behind it makes it costly for anyone to say no. This is sometimes called the Mushroom Theory of Management: keep the board in the dark and feed it highly curated information. It is dangerous. And it is far more common than most boards admit.
Think about aviation. Cockpit accidents often happen not because pilots lack information, but because a junior pilot notices something is wrong and stays quiet. They assume the senior pilot knows best. The result: a plane flying into a mountain with a full crew on board. Boardrooms suffer from exactly the same fatal silence. Crises do not create governance failures. They simply expose whether governance was real in the first place.
Where Accountability Actually Sits
The executive team carries clear accountability for day-to-day operations. They surface risk early. They escalate difficult issues. They break down silos between legal, finance, HR, and risk. They give the board honest visibility — not a polished version of it. But ultimate accountability cannot be delegated. It rests with the board. A board cannot outsource the job of overseeing the executive team to the executive team itself. That is not governance. That is abdication.
Two corporate collapses make this vivid. At Wirecard and NMC Health, executive teams built deliberately complex webs of offshore accounts and acquisitions to hide billions in missing funds or debt. The executives were responsible for the fraud. But the boards failed in their ultimate duty because the organisational architecture defeated their oversight. Governance failures are leading indicators. Financial distress is just the lagging indicator. By the time the numbers fell apart, governance had already been broken for years.
The executive drives the car. The board is accountable for whether the car is heading in the right direction — and whether it stays on the road.
What Good Boards Actually Do
If the executive team is the engine, the board is the architect and the inspector. Not the mechanic. Not the driver. The architect and the inspector. The guiding principle is “noses in, fingers out.” The board oversees, evaluates, and asks hard strategic questions. It does not manage operations. The moment a board steps into the operational gearbox, governance breaks down from the other direction. But passivity is equally dangerous.
Three Real-World Governance Failures
Mid Staffordshire NHS Foundation Trust was too detached from operational reality. The board took good news at face value and allowed executives to explain away bad news. The result was a culture that put financial targets above patient safety. Hundreds of people died unnecessarily. The board had not engaged in misconduct. It had simply stopped being curious.
The University of Dundee saw executive leadership centralise decision-making, control information flows, and actively discourage questioning. The governing body accepted optimistic narratives without demanding full financial visibility. Governance existed on paper. It did not exist in practice. The institution collapsed financially.
The Post Office Horizon IT scandal is perhaps the starkest example. Over 17 years, the board deferred to a flawed executive narrative. Directors failed to probe the IT system’s problems. They prioritised protecting the brand over finding the truth. Innocent sub-postmasters were prosecuted. The board did not ask the right questions. It did not demand proper evidence. It did not hold the executive to account.
Pumpkin Patch in New Zealand is equally instructive. The board relied too heavily on the CEO’s optimistic feedback as the company pursued a debt-fuelled international expansion. Management sent the same seasonal clothing ranges to sub-zero New York as they sent to California. The board failed to challenge the underlying assumptions. The business collapsed. Not because the executives were dishonest. Because the board stopped being rigorous.
How Boards Actually Fail: A Comparison
| Effective Board Practice | Behavioural Governance Gap |
|---|---|
| Directors demand evidence and assurance, not reassurance | Board accepts the executive’s word that everything is fine |
| Bad news travels fast; the chair treats it as a governance strength | Bad news is delayed, softened, or reframed before it reaches the board |
| Chair builds direct relationships with key executives outside the CEO | Chair only hears from the executive team through the CEO |
| Board investigates weak signals and silence as potential risks | Board takes an all-green dashboard as reassurance rather than probing why there are no red flags |
| Chair-CEO relationship is candid and clear on boundaries | Chair-CEO relationship becomes polite, cautious, and increasingly comfortable |
| Structural safeguards exist: reporting channels outside CEO control, direct audit/risk access | All critical information flows through the CEO before reaching the board |
The Chair’s Role in Creating Psychological Safety
All of the governance failures above share a common thread. People inside these organisations knew something was wrong. Some of them knew for years. But the conditions did not exist for them to say so. This is where the chair’s role becomes critical — and where psychological safety is not a soft cultural concept but a hard governance control.
A chair who reacts to bad news with frustration signals, very quickly, that bad news is unwelcome. Executives learn to delay it, minimise it, or reframe it. The board then operates on incomplete information and calls it governance. The standard to set is simple: bad news must travel fast. Good news can wait. The sin is concealment, not the problem itself. Chairs who establish this norm upfront — and who protect the people who deliver difficult truths — create the conditions for governance to actually work.
Structural and Relational Approaches
Several practical approaches make this real. Structural mechanisms matter: formal reporting channels that sit outside the CEO’s control, direct board access for audit and risk functions, and the explicit authority for executives to escalate critical risks directly to the board. These are not bureaucratic additions. They are the architecture of honest information flow.
Relational approaches matter just as much. A chair who visits the business without the CEO present, who builds direct relationships with key executives over time, signals that contact with the board is normal — not subversive. The “Trifecta of Trust” is relevant here: build genuine relationships, demonstrate real understanding of the business, and be consistent in how you behave. Trust is not claimed. It is demonstrated, repeatedly, over time.
Behavioural signals from the chair set the tone for everything else. When bad news arrives, the response should be: “You are not the problem. The problem is the problem. How can we help?” That single response, delivered consistently, does more for honest governance than most formal policies ever will. Equally, when a chair sees someone being shut down for raising an uncomfortable issue, they must intervene. Protecting the person who spoke up signals clearly that the boardroom is a safe space for truth.
One further warning: treat silence as a problem, not as reassurance. An all-green dashboard is not always good news. It sometimes means people are afraid to surface the red. Chairs who investigate senior departures directly, who ask reframing questions like “what would have to be true for this not to work?” and who follow up on weak signals rather than letting them die — these chairs are the ones whose boards get real information.
The Chair-CEO Relationship: The Hinge of Everything
One relationship carries disproportionate weight in all of this. The relationship between the chair and the chief executive is the hinge on which governance performance turns. When that relationship is candid and clear on boundaries, governance tends to hold. When it is deferential or politicised, governance tends to drift.
The “Collaboration Contract” is a useful tool here. Define explicitly what trust means between chair and CEO from the outset. Make clear what each party needs, what direct communication looks like, and where the boundaries of operations and oversight sit. Clarity exposes bad behaviour. Ambiguity enables it.
Two Examples of Chair-CEO Governance in Action
Novo Nordisk in 2004 shows this clearly. The listed board and CEO proposed a merger and relocation to Switzerland. It was strategically tidy, financially rational, and well-supported by management. Then the Foundation Board, chaired by Palle Marcus, stepped in and said no. By reversing the burden of proof, the board shifted the discussion from strategic elegance to existential necessity. The proposal died. The company remained in Denmark. Today, Novo Nordisk is one of the most valuable companies in Europe. Governance is about judgment and protecting long-term options, not rubber-stamping management’s data.
Microsoft’s shift to a cloud-first model tells a parallel story. Board Chairman John Thompson partnered with incoming CEO Satya Nadella but deliberately avoided overstepping into management. The board supported the bold vision. It demanded disciplined execution. It stayed on the right side of “noses in, fingers out.” The transition succeeded.
Three Questions Every Executive and Board Should Answer Now
First: does your executive team surface bad news early, or does it arrive at the board pre-packaged and politically safe?
Second: does your board demand assurance — evidence-based proof that risks are managed — or does it accept reassurance, meaning simply the executive’s word that everything is fine?
Third: is your chair-CEO relationship genuinely candid, or has it become polite, cautious, and increasingly comfortable?
None of these questions require a governance overhaul. They require honesty. And a board or executive team willing to sit with discomfort long enough to act on what they find.
The Bottom Line
Build governance well, and the business becomes more resilient, more trusted, and better positioned for growth. Build it badly, and the financial distress that follows is just the last symptom of a problem that started years earlier in a meeting where nobody asked the hard question.
Need help closing the behavioural governance gap?
Seerden Board Partners works with boards and executive teams to build the psychological safety, structural clarity, and honest accountability that makes real governance possible. If you want an independent advisor who asks the right questions and sits alongside your board or executive team, get in touch.
Contact Andrew Seerden: [email protected]
Andrew Seerden is a commercial strategist and board advisor with over 30 years of B2B leadership experience, including senior roles at IBM, Compaq, and Hewlett-Packard. He works with boards and executive teams across New Zealand to strengthen governance, improve board effectiveness, and build the conditions for honest oversight. Seerden Board Partners provides governance advisory, board composition strategy, and chair coaching.
This article was originally published on LinkedIn.
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