Serving on a board comes with serious responsibility. One of the more difficult aspects of the role is managing conflict effectively. Not all conflict is bad. Healthy tension, when channelled constructively, can strengthen decision-making. But unmanaged conflict, particularly around personal dynamics, poor disclosure, or clashing values, can severely undermine governance. I have witnessed this in boardrooms I’ve chaired and served on. When conflict arises, the key is to handle it with clarity, integrity, and process.
This article unpacks what directors can do to minimise conflict, when to speak up, how to manage conflicts of interest, and what the shades of grey are that frequently catch boards off guard.
Establish the Right Foundations
Good governance begins with strong structures. The Australian Institute of Company Directors (AICD) outlines that every board must implement a formal conflict of interest policy, backed by regular declarations and an active interest register. In their publication Managing Conflicts of Interest (AICD, 2021), the Institute states:
“Directors have a duty to avoid actual and perceived conflicts of interest. This is not simply a matter of complying with the law, but about maintaining stakeholder trust and the integrity of the board.”
Kevin Dwyer of Change Factory agrees, noting in an article for Effective Governance that:
“Identification of conflicts requires discussion, clarifying questions and a strong sense of integrity… Each organisation should have a conflict of interest policy. Each meeting should include a standing agenda item to declare conflicts.”
From experience, boards that do this well create a culture where disclosure becomes second nature, not something to be embarrassed about. It’s a sign of professionalism, not a liability.
Know the Types of Conflict That Matter
The Corporations Act 2001 (Cth) and common law impose strict duties on directors, particularly around the avoidance of conflicts between personal interests and the interests of the organisation. These fall into three categories:
- Actual conflict, where a director stands to benefit directly from a decision.
- Perceived conflict, where a reasonable person might believe the director’s judgment is compromised.
- Potential conflict, where a conflict may arise in future if circumstances change.
As explained by AICD governance commentator Suzy Cairney, these distinctions are not academic:
“Directors should be alert to ‘ethical fading’, where decisions start to drift from a values base. Often it’s not the actual conflict that causes reputational damage, but the perception that something was hidden or poorly managed.”
This is where grey areas become dangerous. For example, a director with a close personal relationship to a potential supplier may feel their judgment is intact, but others may not agree. If in doubt, declare it. If still in doubt, leave the room.
Creating a Culture Where It’s Safe to Speak Up
A strong board knows how to disagree well. Conflict becomes destructive when it turns personal or when directors feel unable to raise concerns.
Stacey Daniel, writing for AICD in How to Deal with Bad Behaviour in the Boardroom (2022), is clear:
“Disruption from unacceptable behaviour can set a board and its organisation back considerably. Step up and take the action expected of you as a duly appointed director.”
In my board experience, the chair plays a critical role here. If the chair permits aggressive behaviour or sidesteps poor conduct, dysfunction festers. On one board I served, a dominant director created an intimidating environment until another director quietly raised it with the chair. A private conversation was followed by a clear re-setting of expectations. It turned the tide.
Julie Garland McLellan, a widely respected Australian boardroom advisor, recommends being transparent and proactive:
“Say it early. Say it often. Declare any interests and leave the room if necessary. The worst damage comes when directors think the issue is minor and stay silent.”
Best Practices for Managing Conflicts
Based on my experience and governance standards across the AICD and ORIC (Office of the Registrar of Indigenous Corporations), here are practical recommendations for directors:
- Implement a fit-for-purpose conflicts policy that is reviewed annually and understood by all board members.
- Maintain an up-to-date interests register and include declaration of interests as a standing agenda item.
- Encourage peer review and regular board evaluations to detect issues early.
- Allow for safe, informal discussions ahead of board meetings where sensitive matters can be flagged.
- Avoid ambiguity in decision-making processes, especially around related party transactions or director benefits.
- Consider independent governance reviews where the board is dealing with complex or high-risk issues.
The ORIC guidance, which is relevant to not-for-profit and Indigenous corporations, emphasises that:
“It is not just having the policy but ensuring it is followed in practice. Directors should remove themselves from discussions or decisions where they have a conflict, and this should be clearly recorded in the minutes.” (ORIC, Managing Conflicts of Interest, 2019)
The Grey Zones That Catch Directors Out
Despite best intentions, many directors find themselves in murky territory. Common traps include:
- Personal relationships leading to subtle preferential treatment.
- Dual board appointments across industry competitors, funders, and grantees.
- Founders on boards where they maintain operational control or disproportionate influence.
- Social media commentary on sensitive matters that may conflict with board positions.
- Related party transactions involving family members, even if commercially legitimate.
The ASIC’s response to high-profile governance controversies, such as the WiseTech Global affair and the fallout from the Chris Ellison/MinRes board issues, shows that perceptions matter. As reported in The Australian (July 2024), ASIC expressed concern about “unusual governance arrangements” even where no clear law was broken. HESTA and AustralianSuper ultimately sold down stakes, citing governance risk.
These examples demonstrate that directors must think not just legally, but reputationally. What would a regulator, investor, or journalist conclude from this arrangement?
When to Disclose, Step Aside, or Step Down
The professional rule of thumb is simple:
- Disclose early and in writing.
- Leave the room during any discussion where a conflict exists or may exist.
- Abstain from voting on any matter related to the conflict.
- Step down from the board if a recurring or significant conflict cannot be resolved without harming the organisation’s integrity.
Boards that are casual about these expectations put themselves at risk. And it only takes one incident to erode trust built over the years.
Key Takeaways for Directors
Managing conflict in the boardroom is not about avoiding disagreement. It is about ensuring that when disagreements occur, they are navigated with maturity, clarity, and a deep respect for governance principles.
In my experience, the best boards are those where directors are not afraid to challenge, declare, and disclose, but also where they listen deeply and act as guardians of trust. If you are serving on a board today, ask yourself: do we have the policies, the culture, and the courage to deal with conflict the right way?
If not, it might be time to lead that change.
Kylie Hammond LLMEntGov CEO, Tiger Boards
www.tigerboards.com.au | www.kyliehammond.com.au
If you would like a confidential discussion about how to manage boardroom conflict or strengthen your governance skills, feel free to connect.
