Recent developments at BP – culminating with the ouster of its chairman of the board of directors for ‘serious concerns’ tied to governance, oversight and conduct following a whistleblower reported clashes with internal leadership, including the corporate secretary – underscore a recurring and often overlooked reality in corporate governance: that breakdowns at the highest levels of corporations are rarely sudden. Rather, they are the result of untenable behavior that goes unaddressed until it becomes a crisis. Specifically, according to The Wall Street Journal, concerns about Manifold’s abusive behavior related to conduct toward both junior and senior employees, the people familiar with the matter said. And this behavior had been going on for an extended period of time before it was finally addressed by the board.
For boards, this moment should serve as a governance wake-up call.
At its core, effective governance depends on a system of checks, balances and clearly defined roles. Among these, the relationship between the board, its chair and key governance actors – such as the corporate secretary, the CEO, the CFO or the COO – is critical. When these relationships function collaboratively and with candor, they promote transparency and trust, reinforce accountability and ensure that governance processes operate as intended.
When they deteriorate, they often reveal deeper institutional weaknesses.
When executives instill a culture of fear in an organization, exemplified by bullying and coercive behavior, a ripple effect occurs. Fear-based leadership causes employees to ‘hunker down’ and avoid risk, stifling the collaborative environment required to brainstorm ideas. And brainstorming requires psychological safety—the sense that individuals can speak up without fear of embarrassment or retaliation. Bullying (e.g., ridicule, dismissive comments, intimidation) creates fear, leading employees to:
Withhold ideas to avoid being mocked or criticized
Self-censor unconventional or creative thoughts
Participate minimally or remain silent
This, in turn, results in fewer ideas and lower-quality contributions. Employees may also become afraid to deliver bad news, leading to covered-up mistakes, unaddressed financial risks and strategic blind spots.
The American Psychological Association estimates that bullying costs US businesses roughly $300 bn annually in indirect effects, lost productivity, healthcare claims and costly lawsuits.
The BP situation offers several practical lessons for boards and governance professionals: prioritize governance culture, address early warning signs and regularly evaluate board leadership dynamics. When a board acts quickly to address bullying and coercive behavior by leadership, it shows employees and officers that the tone at the top will not allow bad behavior. Effective oversight requires vigilance not only over strategy and performance, but over the governance system itself.
Tonya Mitchem Grindon
Tonya Mitchem Grindon is chair of Baker Donelson's Business Department and concentrates her practice in securities and corporate finance, corporate governance, and business transactions.
