The Board Was in the Room: When Corporate Governance Fails

Boards are often blamed when companies fail, but approval does not always mean directors were properly informed or free to challenge management. This article examines when boards are deceived, when they become too close to executives, and when ignorance itself becomes a governance failure.

By

Edwin Arkoh

18 July 2026

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9 minutes

“Fake it till you make it” is usually harmless advice. A nervous professional is encouraged to project confidence until it becomes real.

In business, however, the same mentality can become dangerous.

Companies can behave as though growth has already happened. Management may present ambitious forecasts as realistic plans, celebrate revenue without examining its quality and play down risks that do not fit the preferred story.

For a while, the appearance may hold. Directors approve another strategy, investors remain hopeful, and a government announces another turnaround plan for a state-owned enterprise.

Then reality becomes impossible to hide.

Management says the board approved the strategy, directors say important information was withheld, auditors say they relied on the evidence provided, and political leaders blame the previous administration.

Everyone participated, but nobody wants to own the outcome.

The board, however, was in the room.

That does not mean directors should be blamed for everything that goes wrong. Board approval also does not necessarily mean they were given a fair opportunity to govern.

The real questions are what they knew, what they challenged and whether they were making decisions or merely approving decisions already made elsewhere.

Greed rarely calls itself greed

Corporate misconduct often begins with a target.

Management wants growth, shareholders want higher returns and executives may have bonuses tied to performance.

The danger begins when an organisation rewards the result but stops asking how it was achieved.

Wells Fargo became known for selling several products to each customer. The numbers were presented as proof of strong customer relationships. Behind them, employees were working under intense sales pressure, and some opened accounts customers had not requested.

The US Securities and Exchange Commission later found that the bank had misled investors about the success of its sales strategy. Wells Fargo agreed to pay $500 million as part of a wider $3 billion settlement.

Employees carried out the misconduct, but they did not set the targets or decide which results would be presented to investors.

When directors reward exceptional results without asking what produced them, they may help create an environment in which misconduct becomes predictable.

Familiarity can quietly weaken independence

Boards need to trust the chief executive and senior management, but there is a difficult line between trust and familiarity.

I have served on the finance and audit committee of a board. One lesson from that experience is that governance is shaped not only by policies and reporting structures, but also by ordinary human relationships.

Over time, directors get to know the chief executive. That relationship can be useful, but it can also make challenge harder.

A director may hesitate to push a question because it could embarrass the chief executive. A concern may be postponed after management promises to deal with it. The board member who keeps returning to an uncomfortable issue may be seen as difficult rather than diligent.

Nothing improper may have happened, yet practical independence can disappear long before formal independence does.

Board capture does not always involve corruption. Sometimes it develops through loyalty, politeness and the desire to preserve a good working relationship.

A functioning board must be able to respect management and still say: we have heard the explanation, but we are not convinced.

Once directors become reluctant to say that, the board risks becoming an audience.

Being given information is not the same as being informed

Non-executive directors depend on management to explain performance, risks and major decisions.

Management largely controls what appears in the board pack, how it is presented and when directors receive it.

A director may receive several hundred pages only days before a meeting. Somewhere inside may be a new borrowing arrangement, a serious risk or a forecast based on doubtful assumptions.

The documents may have been provided, but that does not mean the board was properly informed.

A warning may be buried in a long report, while a weak assumption may appear in a footnote. A transaction that management and advisers have worked on for months may reach directors only days before approval.

By then, consultants have been engaged, negotiations have taken place and money may already have been spent. The board is no longer being invited to shape the decision; it is being asked to endorse it.

Wells Fargo’s independent investigation found that reports given to the board did not accurately communicate the scale of the bank’s sales-practice problems. The report did not excuse the board. It concluded that directors should have acted more forcefully. Directors had not been given the same picture as management, but they had seen enough warning signs to push harder.

Approval proves that a board voted. It does not always prove that directors understood what they were approving.

When ignorance becomes failure

Management should not overwhelm directors with information and then use board approval as protection when something goes wrong, but directors cannot simply accept what they are told and later present themselves as victims.

A board can postpone a decision, demand clearer papers, seek independent advice, speak directly to the internal auditor or chief risk officer, and refuse to approve a proposal.

Carillion is a useful example. Before the British construction and outsourcing company collapsed in 2018, it continued to project confidence while its financial position deteriorated. A parliamentary inquiry concluded that directors were either “negligently ignorant” of the company’s culture or complicit in it.

Sometimes directors genuinely do not know, but when warning signs appear repeatedly, ignorance may cease to be a defence. It may show that the board failed to understand the business or had become too comfortable with management’s explanations.

Directors are not expected to know everything. They are expected to recognise when they do not know enough to decide.

Famous names do not necessarily make a capable board

Theranos exposed another weakness in corporate governance: the belief that a board filled with famous and accomplished people must be a strong board.

The blood-testing company attracted powerful supporters. Its founder, Elizabeth Holmes, built a board that included prominent figures from politics, diplomacy and the military. Their presence gave the young company credibility. It created the impression that serious and experienced people had examined what was happening. Stanford Graduate School of Business described the Theranos board as a “who’s who” of prominent names whose presence strengthened the company’s reputation.

Prestige is not the same as relevant competence.

Governing a medical technology company requires more than general intelligence, public service or an impressive career. It requires directors who can question scientific claims, examine clinical evidence and understand whether the technology works reliably in practice.

The SEC later charged Theranos, Holmes and former president Ramesh Balwani with raising more than $700 million through false or exaggerated claims about the company’s technology, business and financial performance.

The lesson is not that prominent people should be excluded from boards. It is that board composition must reflect the risks of the business.

A bank needs directors who understand credit, liquidity and financial risk; an airline needs expertise in safety, engineering and complex operations; and a medical technology company needs people capable of questioning technical and clinical evidence.

A distinguished biography may improve the appearance of governance. It does not automatically improve governance itself.

The question should not be whether a proposed director is impressive. It should be whether that person has the knowledge, independence and courage needed to challenge management.

The lessons from Ghana’s banking sector

Ghana’s financial-sector clean-up also raised questions about board independence, related-party transactions, risk management and the influence of dominant shareholders.

This subject requires care. Regulatory findings should not automatically be treated as final judicial conclusions, especially where allegations remain contested.

The broader governance lesson is still important.

A bank board must be able to challenge a powerful shareholder. It must examine related-party transactions, test the quality of reported assets and protect depositors rather than simply approve the ambitions of owners or executives.

A board may hold meetings and pass resolutions while exercising little real authority. Where one owner, chief executive or political sponsor controls both the information and the decision, the board can become little more than a formal stamp.

The same problem can arise in state-owned enterprises, where commercial and political objectives overlap. The real question is whether the board has enough authority and independence to govern.

What boards must do

Not every company failure is caused by greed, fraud or weak governance.

Businesses also fail because technology changes, economies weaken, or management makes a reasonable decision that proves unsuccessful.

A capable board cannot guarantee commercial success. Directors should not try to manage the organisation themselves, but oversight must involve more than attending meetings and reading reports.

Directors should question the assumptions behind rapid growth, understand how employees are rewarded, and examine whether reported profits are supported by cash and sustainable operations. They should receive major proposals early enough to study them properly.

Management, in turn, should stop treating the board as the final administrative stage in a decision already made.

After a company collapses, it is not enough to ask whether the board approved the transaction.

We should ask what directors knew, what they were not told, when they received the information and what they did when the explanations did not add up.

Some boards are deceived, some are overwhelmed, and some become too close to management. Others are dominated by shareholders or political sponsors, lack the expertise needed to understand the business, or recognise that something is wrong but decide that challenging it would be uncomfortable.

Those situations are not the same. Responsibility should reflect the circumstances.

Directors cannot rely on their presence at meetings as proof that they governed. Nor should management rely on a board resolution as proof that directors were properly informed.

“Fake it till you make it” may be useful advice before a difficult presentation. It is a dangerous philosophy for an institution.

The board was in the room. The question is whether it was there to decide or simply to approve.