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Reader Profile

William R. Dill
President Emeritus
Babson College

Editor's note: Each month, we ask a Directors & Boards reader to comment on critical issues facing directors today. If you'd like to participate in this section in the future, please email Scott Chase.

How has the corporate climate changed in recent years regarding the wisdom and ability of employees to speak out about questionable business practices or activities at their firms?

Mao’s China and IBM, cultures with a fondness for company songs and blue suits, both featured “speak-out” programs. China’s – as the factory managers whom I taught there in 1980 admitted – were set up to insure loyalty and encourage informers to help suppress dissident thought. It was a challenge to get across that IBM’s policies and W. Edwards Deming’s lessons to the Japanese about quality control had the opposite goal of countering inevitable temptations for managers to dictate from the top and pressures among employees to “go along.” Watson and Deming believed in opening safe avenues for any employee to suggest, question, and complain, and most important to be listened to and get responses.

Openness does not come easily in business. Hard-driving leaders want loyalty. Even in good times but especially when things begin to go badly, “speak up” can turn to “shut up,” and open doors lead to closed minds. Some corporate train wrecks may be prevented by tougher, more independent boards, better internal control and compliance systems, and deeper probing by auditors, analysts, and the press. But directors remain at risk if the hundreds or thousands of employees with whom they never come in contact do not feel comfortable about making suggestions and do not feel protected, when economic prospects or ethical values are at risk, about pressing questions. Safe opportunities to speak out and to blow the whistle need to be guaranteed.

How can board members achieve these goals?

Boards should start by frankly assessing what tone that the executives they work with are really setting. Make reasonable allowances for large egos and take-charge attitudes. But are these men and women who seek feedback readily? Who, as IBM really tried to do, value “wild ducks” as well as blue suits? Who don’t have reputations for answering criticism by shooting the messengers? Whose own presentations to the board show that doubts, challenges, and competing ideas have been heard and taken into account?

The second part of board responsibility is to ask what is being done to strengthen climates that will allow questioning and dissent. Warnings of responsibility to report ethical violations and descriptions of protections for whistle-blowers in company handbooks are not enough. You cannot overestimate the timidity that employees have about speaking up. They know that loyalty and teamwork matter. Should they say anything about mistakes or wrongdoing that seems to be condoned by people around them? They fear looking stupid and they fear consequences. They will not casually put their jobs at risk.

Skills to assess must be developed along with the will to question. Neither executives nor directors want speak-up systems clogged with off-target communications. We need to do with ethics and company values what Deming did in teaching workers statistical tools as a key element of his quality control drives. Ask what management is doing about training -- not just initial orientation but repetitive, developmental exposure that builds employee understanding of issues and risks, and enlarges capacities to analyze and to frame relevant suggestions and questions. Ask management what kinds of support they give for trainers to draw frankly on unhappy company experiences to create examples for learning.

Good programs emerge only from overt and continuing commitments. There must be credible personal messages from higher levels of management that give a sense of safety and trust. No one need be happy with whistle-blowing legislation that mandates jackpot-sized rewards. But we will surely be pushed further in that direction if boards and top executives do not emphasize throughout organizations the dual responsibilities of questioning and listening.

How do board members assess corporate readiness to change and grow?

A few questions are for boards to ask themselves. First, do directors themselves value what employees have to say? One reason for getting on top of compensation policies is symbolic. Pay plans with disproportional growth at the top tell contributors further down that they do not matter. The more executive pay looks disconnected from performance the more employees will ask if directors care about either business results or ethical values.

Then, how quietly should directors accept new laws and regulations and acquiesce in attorneys’ advice about how to avoid penalties? Some new structures for compliance threaten to create still higher barriers to open communication about problems and issues. Hospitals have documented how efforts to get physicians to admit errors and share in learning from mistakes have been hampered by things done close to the vest to avoid getting sued. Psychologists, economists, historians, and lawyers often have opposing ideas about how to keep people and companies on the straight and narrow. Are boards engaged enough in public debate about the kinds of balance in approach to guidance and control that make sense?

Last, are directors themselves open to criticism and fresh inputs? More directors are independent, but will directors be more informed? Beyond the shareholder and public perspectives they arrive with, how do they stay independently attuned to what shareholders and various significant publics care about? Down the line, regulators are likely to say more about “open door” and “speak up” initiatives for shareholders and programs that will press directors to become more active in seeking outside appraisals of how well they are doing their jobs.

Life in glass houses is not easy, but it is the way of the future. We all have a stake in making it work.

William R. Dill is a former dean of the School of Business at NYU and is president emeritus of Babson College. Currently he is interim president of Maine College of Art. As the leader of a U.S. team setting up an early western-based management development in Dalian, China, more than 20 years ago, Dill became acquainted with that nation’s views on corporate accountability and leadership in vogue at that time.

Dill is a member of the board of the Salomon Brothers equity funds, and previously was a director of the Unum and the Savin Corporations, as well as on boards of various colleges and of the Carnegie Foundation for the Advancement of Teaching. His governance interests go back more than 30 years when he chaired an American Assembly on Corporate Governance, resulting in the book Running the American Corporation.