Employees complained to board of directors about abusive president
Question: The president of our company looks over the shoulder of employees every day. He has yelled at the office manager, berated her in front of staff and undermined her authority. The office manager has written three letters to the Board of Directors but nothing has been done. Other staff members are starting to complain as well. What steps should the board take to deal with this situation? What liability could arise if the Board does nothing?
Answer: Members of a board of directors have fiduciary obligations, which include acting honestly and in good faith in the best interests of the organization. It can be challenging for a board to deal with complaints about the president’s behaviour or work performance. The board’s role is usually one of governance. Ordinarily, board members should avoid getting involved in issues pertaining to the day-to-day running of the business, including human resources matters.
However, the failure by a board of directors to deal with improper behaviour by the organization’s president can have significant negative consequences. Morale and productivity are bound to decline, and this will typically lead to such things as missed targets, poor financial results, the departure of valuable personnel, union organizing and declines in reputation and market share.
Legal liabilities can also arise if a president behaves improperly. In this situation, the office manager may have grounds to claim she has been constructively dismissed because the president has made her continued employment untenable. Other staff members may have grounds for similar claims, depending on how pervasive the problem is. More serious forms of executive misconduct could expose an organization to tort claims, aggravated and punitive damages, human rights complaints and even occupational health and safety liabilities.
Board members must be careful not to involve themselves in every complaint by disgruntled employees. In most cases, these issues should be dealt with by the organization’s management and human resources department. Where the board has grounds to believe there has been improper conduct by the president, however, action should be taken.
In some situations, initiating a performance evaluation may be the best way to get to the bottom of performance or behaviour concerns. There should be a mechanism in place for the periodic evaluation of the organization’s president. If one does not exist, complaints about the president may provide a good reason to design one. A properly conducted evaluation, involving feedback from a variety of sources, will give the board a much clearer picture of the president’s strengths and weaknesses, and provide the ability to communicate expectations and work on improving any identified deficiencies.
Where serious misconduct is alleged, the board may need to take a different approach and commence an investigation. A person or committee delegated by the board would gather information pertaining to the alleged misconduct, and then meet with the president to outline the allegations and obtain the president’s response before making any recommendation or decision.
It may turn out the president acted properly and the problems lie elsewhere. If the president is the problem, the board will then be able to take appropriate steps to deal with the matter, through measures such as communicating expectations, providing a warning or, if necessary, parting company.
Directors of an organization can be held personally liable for unpaid wages in certain circumstances in some Canadian jurisdictions — see, for example, section 96 of British Columbia’s Employment Standards Act. Otherwise, directors will not usually be liable personally for employment-related acts or omissions, unless a director deliberately acted outside the scope of her authority.
