The Dynamics of Boards of Directors in Failing Organizations

There is a swell of opinion in the business media and academic literature that believes that boards of directors are partly to blame for recent failures. This article addresses two key questions: why do often boards of directors fail to detect warning signals during the early stages of failure; and when they do detect warning signals, why do they tend to remain passive? The article aims to answer these questions through an in depth study of the collapse of HIH. It examines board dynamics over the different stages of failure. It identifies the special challenges that directors confront at each stage of failure and suggests initiatives the board should use to prevent or reverse failure.