Company secretaries are the guardians of behavioural risks

'Company secretaries are the guardians of behavioural risks at the top of the company,’ says Wieke Scholten, social and organisational psychologist and lecturer in Psychology in the Boardroom at the Irish Institute of Banking and Directors. 'They are, consciously or unconsciously, everyday monitoring and influencing undesirable behaviour within the board of directors and supervisory board. And in doing so, they fulfil an essential role.' says Scholten. 'It is well established concept in behavioural psychology that the way in which a group behaves determines the performance of that group. These insights have existed since the seventies but have only been applied in the business world since the beginning of this century.' As an organisational psychologist, Scholten has assisted many companies with issues concerning the dynamics within management teams, boards of directors and supervisory boards, notably in the financial sector. She has four points of advice for company secretaries on how to more effectively control behavioural risks and thus improve decision-making.

1. Distinguish between behaviour and personality
Strained relationships often arise and then tend to persist because behaviour is linked to personality. Scholten gives the example of an organisation she worked with where two directors could not get along. 'They did not want to sit opposite each other and refused to talk to each other. The situation had a paralysing effect on the decision-making. Although the chairman of the supervisory board was palpably aware of this problem - as was the rest of the board - he did not intervene. The reason? He attributed the behaviour of both directors to their personalities: 'That is just the way they are.’ According to Scholten this often happens, even though this is an incorrect assumption. 'Behaviour is context-dependent and can change, while personality is fixed.' Scholten finds it important for a company secretary to understand this nuance. 'With difficult people, focus on the observable behaviour, and not on the alleged nature of the person. Do not say: ‘He is difficult,’ but rather ‘He exhibits behaviour which complicates decision-making.’ By distinguishing between behaviour and someone's character, situations become less personal and defensive. That opens the door to change and cooperation.'

2. Discover the causes of undesirable behaviour
Behaviour arises from a combination of factors. First there are the personal aspects, i.e. personality, previous experiences and convictions of executives or members of the supervisory board. Often the emphasis is on what is wrong with personal behaviour. But many times, there is more at play. Organisational factors, for example, also contribute to determining the dynamics in the boardroom. Consider here how the governance code is drafted, how tasks and responsibilities are recorded and how the strategy is formulated. In addition, social aspects play a role, i.e. the interaction between people. Is there a collective agreement about where the organisation is heading? Is there agreement on social norms: on what makes someone a good director? 'It is important for company secretaries to be aware of all these factors. Why does a group behave in a certain way? Why are critical questions not asked, or why is there always a rush to decision-making? Perhaps there is an unspoken norm that 'giving criticism' is seen as disruptive, or there is fear of damage to reputation. Perhaps there is pressure from the head office for rapid decisions. To be truly effective, one needs to look beyond the visible behaviour,' says Scholten. 'Investigate what is going wrong underneath. This requires open conversations, reflection and sometimes naming discomfort. Only by exposing underlying patterns can problematic behaviour be addressed.'

3. Ask questions about emotions
Emotions are usually not appreciated in the boardroom - they are perceived as unprofessional. People prefer to rather look away and not talk about it. 'But no matter how experienced a leader is, feelings such as uncertainty, frustration or pride do also play a role in his or her decisions.' According to Scholten, ignoring emotions is therefore a missed opportunity. 'Precisely by making emotions discussable, you can prevent escalations and improve the quality of decisions. As a company secretary, you can build a bridge by occasionally reflecting on what you notice: ‘I saw that the previous point caused some tension, is that right?’ or ‘How do you look back on that conversation just now?’ By asking these questions, you offer space to air feelings before they can have an impact on decision-making. This strengthens mutual trust and promotes an open culture.’
But how do you do that with directors who are not open to a discussion about behaviour? Scholten advises to not link behaviour to personal feelings, but to the effectiveness of decision-making. 'By talking about how certain behaviour influences the outcomes, you make it task-oriented instead of personal or 'soft'. That often reduces resistance.' In addition, it can help to invest in the relationship with the person outside the formal setting. Connecting on a human level in time creates room for openness about tensions and emotions.'

4. Strengthen psychological safety
In an ideal situation, directors and supervisory board members feel free to ask questions, acknowledge mistakes and express critical opinions. That requires psychological safety. 'The company secretary can raise this to a higher level,' Scholten asserts. 'That means, for example, listening with full attention. Do not be occupied with your own point while someone else is making theirs. Let others finish speaking and avoid interruptions. Also check how present the board or supervisory board members are; are they perhaps scrolling on their phones?' In addition, it helps to take responsibility for the quality of the conversation. Recognize and appreciate someone's contribution, even if you disagree with that person. By setting this example yourself, you lower the threshold for others. Scholten: 'This is not 'soft stuff', but a smart strategy to promote openness. It can be good for a CEO to admit that he or she is not sure about something or has doubts about something. It strengthens cooperation and decision-making.'

Preventing a destructive dynamic
Prosus is a global technology and investment company with investments in more than 100 companies across the world. It has its head office in the Netherlands, with a primary listing on Euronext Amsterdam, and a secondary listing on the Johannesburg Stock Exchange. Multinational internet, technology and multimedia holding company Naspers is the majority owner of Prosus.  The CEO is supportive of behavioural science as a basis for decision-making, and training courses, HR processes and evaluations have been accordingly adjusted. 'It has been a huge cultural pivot but has led to a better decision-making process and a stronger team. An ecosystem works well if it is solid, and there are positive relationships among all stakeholders,’ says Lynelle Bagwandeen, group company secretary of Prosus.
'I believe company secretaries are the custodians of the decision-making process,' says Bagwandeen. According to her not many large companies have embraced behavioural risk management yet. And that is a danger that should not be underestimated. 'It often starts small: people agree to proposals to avoid difficult conversations. They no longer ask difficult, critical questions.' Bagwandeen is convinced this creates a destructive dynamic which does not encourage robust engagement, and the consequences are not insignificant. It leads to subpar decisions, damage to reputation, and can contribute to an exodus of talented people.

Conflicts are not always bad
Bagwandeen finds that company secretaries are optimally positioned to minimize behavioural risks. According to her, this starts with an adequate flow of information. 'Nothing leads to irritations between the board and the supervisory board faster than inadequate information provision. Make sure that the narrative is clear, that decision-making is based on facts, not on emotion or miscommunication.' Bagwandeen emphasizes that a strong supervisory board chairman is crucial for a good decision-making process. 'He or she contributes to constructive discussions that lead to better decisions.' Bagwandeen advises company secretaries to invest in a good relationship with the chairman of the supervisory board and to discuss possible points of tension or sensitive topics before meetings. 'This allows the chairman to be prepared for this and assists him or her to effectively lead a substantive discussion.' Bagwandeen believes - like Scholten - that conflicts, increasing tensions and differences of opinion are not per se negative, provided that they contribute to a qualitatively good conversation.
To manage behavioural risks within the top of the company, it is wise to put the topic on the board agenda. But how to achieve this without formal authority? Directors may not be immediately susceptible to it. It is often seen as a ‘soft topic’. According to Bagwandeen, it is a smart move to weave it into the annual board evaluation process. 'Ask questions about cooperation, mutual dynamics and psychological safety. Questions such as: ‘Do board members and supervisory board members feel free to give their opinion?’ or ‘How do they experience decision-making?’ This way behavioural risks become discussable without it being seen as a separate ‘soft’ topic.'
Bagwandeen advises company secretaries to work closely together with the HR department. 'They can be of support with the development of questionnaires and the development of training courses for the board in conjunction with the CEO and chair’.
Victor Prozesky also emphasizes the importance of a strong supervisory board chairman. 'A good chairman is much more than a discussion leader or agenda manager; he sets the tone for how the team works together and intervenes when personalities or egos negatively influence the discussion.' Prozesky illustrated this with a practical example. 'During a passionate discussion, a board member made a disparaging remark towards a fellow board member. The chairman immediately intervened to say that such behaviour could not be tolerated and insisted that the discussion be kept respectful. Such an intervention immediately reduces the tension and restores confidence in the meeting room.'
During the breakfast session it became clear that behaviour and group dynamics are no longer 'soft issues.' They are real risk factors that can undermine the quality of decision-making. The company secretary is optimally positioned to identify risks and to mitigate them to the best of his or her ability. In this way, the company secretary contributes as a silent force to better governance. And ultimately to the success of the company.

This report was published in Management Scope 03 2025.