Toxic secret alliances between board members and management

Dr Newton Demba

THE relationship between board members and management is fundamental to an organisation’s governance structure, ideally fostering accountability, strategic oversight and ethical leadership.

However, when these relationships become overly familiar or self-serving, they can evolve into “toxic secret alliances” that compromise transparency, erode governance principles and threaten organisational integrity.

Such collusion disrupts the balance between oversight and executive decision-making, leading to governance failures that prioritise personal or mutual interests over those of the organisation. The consequences can be severe, including reputational damage, financial loss and long-term instability.

Warning signs of toxic secret alliances

Unholy alliances often manifest through warning signs that indicate a compromised governance structure.

Excessive socialising between board members and management, such as frequent personal interactions, gift exchanges, romantic relationships, favours or undisclosed business dealings, may signal undue influence.

For instance, board members and executives may engage in exclusive luxury retreats funded by the organisation, frequent informal dinners at high-end restaurants or personal holidays disguised as business trips.

Additionally, receiving expensive gifts such as designer accessories, private club memberships, or lavish entertainment experiences can create conflicts of interest.

Board members offering personal loans, facilitating job placements for executives’ relatives, or securing lucrative consultancy contracts for friends without transparency are further indications of compromised governance.

Forms of alliances

These alliances can take many forms, each posing unique risks to organisational integrity and governance.

Some of these forms are overt and easily recognisable, while others operate subtly, gradually undermining the effectiveness of governance structures.

There are not limited to the following:

1. Mutual protection pacts

In this form of toxic alliance, board members and executives form an implicit or explicit agreement to shield each other from scrutiny or challenge.

Rather than holding each other accountable, both sides prioritise mutual protection, often to the detriment of the organisation’s interests.

This alliance can manifest when executives rely on the board to approve questionable decisions, such as excessive compensation packages in exchange for the board’s own benefits. In return, board members avoid challenging executives’ decisions, even when they may not align with the organisation’s best interests.

Additionally, there may be instances where non-executive directors share confidential board information with executives or where directors gain access to sensitive organisational data through informal channels, such as personal contacts within the company.

2. Cronyism and favouritism

Cronyism and favouritism occur when board members recruit personal acquaintances or close friends for executive positions.

This creates a network of individuals with aligned interests and mutual obligations, undermining the independence and objectivity of the board.

Instead of appointing individuals based on merit or expertise, priority is given to personal relationships, ensuring that those in executive positions support board decisions without question.

This lack of diverse perspectives and unbiased judgment leads to an echo chamber where groupthink prevails over healthy, critical debate.

As a result, the board functions as a rubber-stamping entity rather than an independent oversight body.

3. Financial collusion

Financial collusion occurs when board members approve excessive executive compensation, bonuses or golden parachutes without justification, while executives ensure that board members receive lucrative benefits in return.

These benefits may include unwarranted overseas conference trips where members receive large travel and subsistence allowances, extravagant gifts, access to company assets or undisclosed business dealings.

4. Hostile takeover prevention alliances

Boards can form alliances to shield underperforming executives from replacement, prioritising leadership continuity over necessary change and improvement.

These defensive strategies may include adopting restrictive bylaws, resisting shareholder activism or manipulating governance mechanisms to block leadership transitions.

While leadership stability can sometimes be beneficial, protecting ineffective executives for the sake of continuity results in stagnation, declining performance and missed opportunities for innovation. Such alliances also discourage fresh perspectives, prevent merit-based leadership succession and weaken accountability.

To uphold governance integrity, boards must ensure that leadership decisions are based on performance, organisational needs and long-term strategic goals rather than personal loyalties or self-preservation tactics.

5. Suppressing dissent

Board members and executives may conspire to suppress dissent by silencing whistleblowers, discouraging independent audits or retaliating against employees and directors who raise concerns about unethical behaviour.

This suppression creates a culture of fear, where individuals hesitate to speak out due to the risk of job loss, demotion, legal threats or professional blacklisting.

Without independent voices challenging misconduct, unethical practices persist unchecked, leading to financial fraud, regulatory violations and reputational damage.

When audits are discouraged or manipulated, governance failures remain hidden, enabling corruption and mismanagement to thrive.

Retaliation against those who question unethical decisions not only erodes morale but also deters future accountability efforts, fostering a toxic organisational culture where wrongdoing is normalised.

6. Opaque decision-making

Opaque decision-making occurs when critical discussions and major decisions take place in informal settings or secret meetings, circumventing proper governance structures and leaving no documented record of deliberations.

The absence of records raises concerns about accountability and creates opportunities for unethical practices to flourish unchecked.

Without proper oversight, influential individuals may manipulate outcomes to serve personal or political interests rather than the organisation’s best interests.

7. Conflicts of interest in contracting

Conflicts of interest arise when executives manipulate procurement and business agreements to favour companies owned by board members, family members or close associates.

Instead of prioritising the organisation’s best interests, these executives steer contracts toward preferred entities in exchange for undisclosed benefits, such as financial kickbacks, favours or future career opportunities.

Such unethical practices compromise the integrity of the organisation, leading to inflated costs, subpar services and diminished stakeholder trust.

Conclusion

Toxic secret alliances pose a significant threat to organisational integrity, eroding governance principles, weakening accountability and fostering a culture of unethical decision-making. When board members and executives prioritise personal interests over transparency and good governance, the consequences can be devastating —ranging from financial mismanagement and reputational damage to long-term instability and regulatory scrutiny.

Dismantling these alliances requires a commitment to ethical leadership, rigorous oversight and a governance framework that prioritises integrity over convenience.

Only by fostering a culture of transparency and accountability can organisations protect their long-term success and uphold stakeholder trust.

Newton Demba is a management consultant, non-executive director and adjunct lecturer at the University of Zimbabwe in the Faculty of Business Management Sciences and Economics. He writes in his personal capacity. For feedback, please contact: [email protected] or +263784166296.